Real AI Resources For Capital Raisers
I’m frequently asked by VCs, private equity investors, hedge funds and investment bankers, “Hey, I’ve heard a lot about using AI to raise capital and source deals. Where do I begin?” It’s a pretty confusing space, and there’s been a lot written, so, let me give you a short list of all of the stuff that I’ve found to be pretty useful, and also pretty inexpensive.
Courses:
This Udemy course on Chat-GPT and Midjourney is a great and easy-to-use primer on it. It’s easy, and can be broken up into 10-minute chunks.
Email Marketing Powered By AI: For $13, this one’s highly rated
AI in Marketing: This one’s similar, and also low-priced.
Email Service Providers:
Solid Training On How To Write Email Copy That Goes To LPs
If you really want to write your own email copy (this is very time-consuming, but you can do this), here’s how I’d do it. These two google docs are the two frameworks that I would use. They’re connected to a series of about 16 YouTube videos and as long as you work on this method for a couple of months you will eventually come up with a very good bit of copy. (That said if you need it in 14 days, email me and I can have our team do this for you very quickly).
Lead Zeppelin Self-Serve: If you would like to use our team’s infrastructure in order to run your own AI-driven marketing and email campaigns for your investment firm, that’s okay with me. Here’s how to do it. If you’re okay to spend about $583 per month on software and $60 per month on gmail inboxes, we are okay to let you ask us questions over Slack and we will give you an hour of coaching every week over Zoom. Feel free to book a call to chat about that here. Please be aware that this program is full-pay, meaning that investment firms pay for it one year at a time, and we only recommend it if you need 1 LP meeting per week, and if you have at least 2 hours per week to manage it yourself
Lead Zeppelin Full-Service: This is our program for very busy investment firms that only have about 15 minutes per day to work with us, and who need to meet with 1-3 net new LPs per week. These programs begin at $7k per month, and start at 6 months in duration. If you’re raising $10-300M, they’re a good fit. To book an intake meeting, click here.
What About General Solicitation Stuff?
That’s a great question! I get asked about that all the time. You’re going to want to read this over carefully, and then additionally speak with your privacy counsel about how to handle CCPA and GDPR which govern how you treat the data of your investors and prospective investors from the EU and California. Here’s the high-level details:
Venture Capital Funds
- Most VC funds are structured as exempt private funds under SEC Rule 506(b)
- As 506(b) funds, VCs cannot openly advertise or generally solicit investors through public channels like TV ads, billboards, publicly accessible websites, cold calling campaigns, etc.
- However, VCs can market their funds to investors with whom they have a pre-existing relationship or that are referred to them through a trusted network contact. They can send private offering documents and emails soliciting investment to contacts that are accredited investors or qualified purchasers.
- A small number of VCs may use SEC Rule 506(c), which allows openly advertising and generally soliciting investors, but requires verifying all investors are accredited. The tradeoff is giving up some privacy around their investor list.
Private Equity Funds
- Most PE funds are structured as SEC Rule 506(b) exempt funds, similar to VC funds above. Same solicitation rules apply. Cannot openly or broadly advertise fund, but can market to pre-existing networks of accredited investors, qualified purchasers and institutional investors.
- An increasing number of PE funds utilize Rule 506(c) to allow general solicitation while verifying accredited investors. Some larger PE firms also create their own SEC Registered Investment Advisors (RIAs), which face fewer restrictions on marketing.
Hedge Funds
- Hedge funds structured as 3(c)(1) or 3(c)(7) funds cannot advertise or generally solicit investors through public channels. Marketing is restricted to pre-existing networks of accredited investors, qualified clients, institutions, etc. Most hedge funds are 3(c)(1)/(7) funds due to lower reporting requirements.
- Some hedge funds are structured as 3(c)(1)/(7) plus 506(b) funds - this allows slightly greater flexibility to demonstrate pre-existing relationships that may let them contact broader existing networks about the fund. But still no openly public general solicitation.
- A subset of hedge funds utilize 506(c) structures, since 2012 when public advertising was opened up to certain private funds. The tradeoff again is disclosing accredited investor statuses.
Investment Banks
- Investment banks providing advisory services around private securities transactions are usually broker-dealers registered with FINRA and the SEC.
- Registered broker-dealers have strict regulations around communications and marketing, and cannot make false or misleading statements to induce investment. But in general they can openly advertise or cold call accredited investors and institutions to solicit business.
“Saving” Q4 - A Guide For Software Dev Shops and MSPs
I’ve spoken with a lot of software development firms and MSPs in the last 90 days, as well as a lot of larger software companies (mainly product VPs), so I have a pretty good idea of who’s buying I.T. and software development services right now, in the U.S.A. and Canada, and who’s not. As I see a lot of sales leaders and even smaller owner-operators talking about “saving their fourth quarter sales,” I wanted to share a little advice, based on what I’m seeing in the market.
Here are a few trends that I’m noticing in terms of who’s winning deals, and who’s not:
Established sales process: It’s amazing. I run into so many software development firms and MSPs where when you ask them, “What’s your technical procedure for XYZ?,” they’ll give you the most polished, clear 3-step answer. Then, when you ask them, “Describe to me, in under 60 seconds, exactly what happens in one of your sales meetings, and in each section of the meeting,” that same firm will reply with, “Well, every customer is different, and we treat every customer differently!” The firms that I see that aren’t panicking about their pipeline right now have generally adopted one sales methodology (Sandler, Miller-Heiman, Challenger, etc.) and generally script their sales meetings, so that each section of the sales meeting has a clear objective and a clear outcome (generally that the project keeps moving forward or both parties determine there’s not enough of a business case on their side to keep it going).
Highly methodical prospecting: The firms that have a highly methodical prospecting methods are the ones who have been surviving, and, in some cases, thriving, during this pandemic. Having halfway-decent marketing, in times like these, is often not enough, as much of the marketing that many MSPs and software dev shops were doing prior to March 2020 just isn’t relevant right now. For example, MSPs weren’t talking much about key work-from-home issues in February 2020, and software development firms were wildly pursuing travel and restaurant deals six months ago. A lot has changed since then.
The best book I’ve ever read that’s just about prospecting is this one, written by Jeb Blount. His video content and podcast is also pretty darn good. Keep in mind that prospecting does not mean that you need to be cold calling, making 100 calls per day. I’ve seen plenty of MSPs be very successful without doing much cold calling. How? Great web content, great analytics, very fast response times, and marketing across the entire organization to multiple stakeholder personas. The average deal for an MSP or software dev shop will have 5-7 buying influences, so if you’re not simultaneously selling to all off these folks, don’t be surprised if a competitor takes the deal from you.
Quantify the “cost of doing nothing” either before the first meeting or during the first meeting and get agreement on it across the customer’s organization: One of the biggest reasons that customers delay projects (this is the biggest reason I see MSPs and software dev shops lose deals) is that they simply do not understand the cost of “kicking the can down the road.” They will say “Thanks for your great proposal Ms. MSP. We really think you put in some great and creative work. In fact, we thought it was SO good, we’re not going to bid this job out to anyone else. Unfortunately, due to Covid-19 we’re just not ready to move forward right now, but we will be in the future, and when we are, we’re going to reach out immediately.” Generally, from what I’ve seen on managed services and software development projects, if the cost of doing nothing about the customer’s problem is not in the mid-six-figures or greater range, it’s generally not worth having a bunch of meetings over. Here’s why.
There’s this thing called “rule of ten”. Most companies I know are willing to spend about ten cents on the dollar to save money. For example, if I have a problem that’s costing my company $100k a year, I’d generally be willing to spend $10k right now to make it go away, but probably not much more.
So, if you’re on the phone with a prospective customer and they can’t even speak to the cost of what not doing the project would cost the company, you’re speaking to someone who probably does not have the ability to write a check. In cases like that, it doesn’t mean that the deal isn’t qualified, it just means that this person will not be the decision-maker, and you’ll need to spend this meeting determining who your DM (decision-maker) will be.
Once you identify the DM (decision-maker) and begin meeting with that person, you can figure out if the cost of doing nothing is high ($500k+) or low ($30k), and once you figure that out, you can determine if it’s a problem worth solving. The way to avoid clients that are not much fun to work with is to look for 3 things: 1) big expensive problems 2) customers who have budgets to solve those problems and 3) nice people.
A Short List of Podcast Interviews on Sales & Marketing
I’ve been interviewed on a lot of podcasts over the years, but I’ve never taken the time to archive them all in one place, so here’s a quick rundown of a few more recent interviews and what they cover:
Monte Clark’s Brilliant LinkedIn Podcast (2019)- 9 mins - This covers recent learnings from my sales role at RSRF, mainly B2B sales focus.
Startup Socials (2016) - 25 mins - part of Get Traction Virtual Summit, focuses on why $100k+ deals go wrong
Startup Socials Podcast (2015) - 27 mins - Silicon Valley Founders Still Need To Learn How To Sell. Focuses on why even technical founders need a fundamental sales background.
How Does VC Work, And Do I Even Need It? Also, What is My Company Worth?
One of the things that I get asked quite often by founders is “How does VC work?” or “Do I even need VC funding?”
The answer is, “Well, you may OR you may not,” and “I’m not certain if your business is something that should be venture-funded - let’s sit down and have a cup of coffee and take out a pad and a pencil and diagram what you’re looking for and what VCs are looking for, and see if those two things overlap.
Today, I chatted with the founder of a SaaS (software-as-a-service) company who told me that he’s going to pitch some VCs (venture capitalists) next week at a conference. I asked him how much money he was looking for (he wasn’t entirely sure) and why he was pitching VCs (as opposed to angel investors) - he wasn’t really sure. It’s times like this that I think founders need to take a few minutes to determine the amount of time that they think needs to go into the crucial tasks of running a business - product development, sales, marketing, hiring, finance, fundraising, etc.
This particular founder is quite good as a technician and a product builder, but he’s having trouble with sales, hiring, marketing and fundraising. Obviously, it would be daunting if I handed him some lengthy book on fundraising. Baby steps, right?
I received a Medium post via email this morning from a couple of years ago that summed it all up very neatly (it’s a short read, about 9 minutes long), and it’s perfect for someone who doesn’t even have the patience to get through, say, the entire Brad Feld venture book (which you can get through in under a day, or the drive from San Francisco to Los Angeles). While that book is a very good level-set for any founder that’s about to do their first round of fundraising, it may be a little daunting for someone who is scared by the word “VC”.
You have to keep in mind, this whole idea of company founders working with venture capital money is a little bit new. Had you started a company in say, 1965, you may have used a traditional bank loan or debt financing vehicle that a company may have used in, say, 1965.
This post is by no means a be-all-end-all on venture capital, but instead a very good 9-minute primer for any high school or college student, or would-be founder who wants to learn more about what venture capital is and what it is not. When I was a junior in high school I took a business law class, and I wish this had been a 50-minute lecture, because it would have been a good one.
The breakdowns of fund timelines are nice and clear and the explanation of how multiple overlapping funds work is also nice. While it’s nice to hear this stuff repeated to you in an audiobook with thoughtful examples, sometimes you just gotta have a diagram.
Then, there’s the entire issue of valuations, like, how does ANYONE tell what a company is worth. Well, here’s a good, concise piece on that, called Understanding Startup Valuation. It’s a 10-minute read, and definitely doesn’t require an MBA.
Bonus Points: I came across one other rather interesting piece on Medium the other day that is worth a read if you’re wondering how VCs tell what a company is worth and how VCs may gauge what a company will be worth, say, 5 years from now, using AI (artificial intelligence). Here’s the link to that one.
4 Quick Resources For Founders Who Hate Selling & Sales Professionals
I was chatting with an engineer friend of mine the other day who founded a payment processing startup about ten years ago. These days he mainly codes, but he was a founder, back in 2010–2011. His startup still has one remaining paying customer, a good local pizza place, because he really disliked selling the product.
Most of the startups that I see fail don’t make it because they do not achieve product-market fit. Simply put, this is that they are not able to sell enough of whatever it is they are making (software, hardware, their service) to enough people, for any number of reasons.
One thing that I often come across in startup founders is that they often dislike not only selling but they people that sell. Heck, I can’t blame them. By the time a person is 25 years old, often their formative “sales” experiences are 1) the person who sold them their first car 2) the university financial aid office and maybe 3) their mortgage broker. None of these three are known for exceptional customer experience or selling value. I can’t blame startup founders for hating sales and people who sell, because most of their sales-related interactions have been sh*tty.
If they’ve set up their company, they’ve perhaps done some basic B2B procurement like setting up payroll software, but these days, that type of thing is generally self-serve. The value set around selling that I typically hear from engineer-type founders is something like:
“I don’t really enjoy selling, I don’t know how sales people do it.”
“Selling is boring and repetitive, the rejection involved would just wear on me after a while.”
“I know that sales people make a lot of money but they do because their job stinks.”
My responses are:
If you’re going to have any great sales professionals ever work *for* you you will need to learn how to sell the product first. If you cannot sell it, no one else will likely be able to either. We might as well have you crash and burn so we don’t have to waste the time and money of having someone else do it.
When you write a line of code that doesn’t work perfectly the first, second or third time, what do you do? What prevents you from simply throwing your keyboard at the wall and walking away?
They do not think their job stinks. They are so sick and crazy that they enjoy it. I have 2 quick final questions for you: (1) Do you like listening to direct feedback from customers (some founders do not)? (2) If not, where do you plan on gathering customer feedback from?
At this point, I usually get a reluctant “yes” from founders. They’re usually willing to put a small amount of time into learning how to sell. At this point, I’m pretty happy, and I want to show them some sort of “quick win” as a payoff for what little amount of time they’re willing to invest in learning the basics of sales.
I divide these resources into two buckets — systems and methodologies, to keep it simple.
Systems:
They’re going to need some sort of customer relationship management software (CRM): I’ve used Pipedrive for years. It’s inexpensive, and very easy to use. It now even has a chat-bot type feature, so you can welcome customers on your website. My philosophy is that if the prospective deal is not in the CRM, it didn’t happen.
Sales Prospecting: I’ve been a big fan of Apollo since its debut. It’s the Tesla of sales prospecting tools. It’s not inexpensive, but if you need to generate millions in revenue, it’s what I’ve used. You can get decent-sized deals using it. It takes 1–2 people, full-time to use that thing.
Methodologies:
I think of sales methodologies, these days, in two buckets: low-dollar and high-dollar. Some sales methodologies are good for selling inexpensive stuff, typically one time. This is usually for items that cost under $10k-20k, that you will sell once. Typically there is 1 to 5 buyers involved in that kind of purchase.
For the high-dollar stuff, it’s usually closer to 5–8 buyers involved, and the ticket price can be $50k-$5M, perhaps more.
Low-Dollar: Nearly fifty years after it was invented, I’m still a very big fan of Sandler Sales. Here’s why. It’s very easy to learn, and it’s especially well-suited for people who dislike selling and sales professionals. It’s under $8, and you can listen to it in less than a day. It’s also reasonably funny. The “up-front contract” alone, is worth the price of admission. The gist of it: be straightforward, be nice to people, and be totally okay with “no,” as long as it’s a good, quick and clear “no.”
High-Dollar: I used to rely nearly exclusively on Miller-Heiman’s green/gold/blue sheets (which I still use) for larger deals, but in the last few years, I’ve been introduced to Richardson, which I really like. Linda Richardson has revised much of her older material. I would start with this one and also read The New Power Base selling. They both address some of the trickier parts of selling into large and politically confusing organizations. If you’re trying to sell something disruptive and expensive into a large company, you’re going to want to hunker down for 3–4 days and learn how to do this stuff.
As always, if you get stuck, email me (first name at first name last name dot com).
4 Quick Resources On Corp Dev For Founders
One of the reasons I’ve written these resource pages on my website is for startups that are either not located in the Bay Area, so it would be difficult for them to work with me in person, or perhaps they work in a vertical market where I lack expertise, so I might not be the best person to advise them.
Many of the founders that I work with initially contact me about sales issues, but eventually, they begin asking me about fundraising, either in the form of “when should I fundraise?,” “how much should I raise?,” “how should I set my valuation?” and “what kinds of people should I take (or not take) money from?”
So, I’ve assembled a short list of what I would read if I had to study up rather quickly on corp dev (in 2019 or 2020), especially if I didn’t have an advisor, or a lawyer who was that well-versed in venture deals. I’m trying to deliver, below, what will teach you the most about funding your startup with a minimum time investment.
Most of the founders I meet are under the illusion that corp dev is the hard part. I have found fundraising to be challenging and, at times, difficult, but rarely do I find raising a round an achievement to be cause for great celebration. The real work begins when the wire transfer clears.
Tools: You’re going to need to use a tool to stay organized. I prefer Pipedrive (that code gets you 30 days free, and if you email me [my first name at my first name my last name dot calm] I can usually get it extended to a 90-day free trial). The other one I’ve been testing lately for fundraising is Foundersuite, which is essentially what Pipedrive would look like if it were built explicitly for fundraising. (Promo code RC2019 is good for 30% off a month of their silver or gold plan).
The Startup Playbook: In general, Rajat Bhargava’s and Will Herman’s book is short, inexpensive and rather direct. Part three of this book is a nice, short and direct primer. I like the way Rajat and Will put their book together because you can basically hand it to any smart high school freshman and they’ll get the gist of it in under an hour.
Venture Deals, 3rd Edition: This one, I actually prefer on audiobook. Brad Feld is a funnier guy than most people give him credit for, and as much as I love Eric Ferraro and Perry Narancic (my two go-to attorneys for venture and software I.P.), I love how much Feld makes fun of attorneys. The audio version of this one is a steal at $9.98. It will take 6.5 hours to listen to this.
I don’t think you need to read the entire Angel book by Jason Calacanis as a founder, but it would be really smart to listen to the first 3 episodes of season one. If you want to understand what early-stage angel investors are looking for in your startup, this will be very helpful. They come as the bonus content with the audiobook version of Angel, and they’re very good interviews, and often rather funny. It will take about 90 minutes to listen to these three. That said, if you’re not a founder and you’re doing angel investing, this book is fantastic. Even if you’re an aspiring angel investor who’s supplementing your 401k/IRA doing stuff like eREITs, crowdfunding pseudo-angel stuff like Republic or Seedinvest, it’s a great book.
Bonus: If you get to the point where you end up needing to form a board for your startup, get the Brad Feld Startup Board book. Absolutely great stuff, and even very useful for aspiring or new angel investors who want to understand how to be valuable in their board roles.
On Leaving The Sales And Services “Game”: How To Do It Slowly
Last night I was having drinks with a longtime friend who has been running a successful computer consulting company for 13–14 years. For the last few years he’s been telling me he wished he’d had an extra few hundred thousand dollars in sales. He’s been telling me some variation of this for the last ten years, about 3 or 4 times per year.
For him to have more sales would mean that he would probably have to either stop being the main sales professional for his business and allow another person to do it, which is a bit of a risky proposition, if you’re running an I.T. consultancy with recurring revenue and retainer-based clients.
He asked me how he could increase his annual sales by, say, $300k-500k last night, and I explained how he could hire an account exec based outside of the Bay Area (Philly, Iowa, etc.), and he’ll likely do that in 2020.
Long term, though, the only way out of running a business with, say, 5 employees, who each need to be paid, $75k, and a 25% net profit margin, in one of the most expensive real estate markets in the country, is getting out of providing tech/I.T. consulting services. Even if my buddy is able to increase his annual sales from, say, $575k to $975k, it seems like, long-term, he’s kinda chasing his own tail.
Obviously, he can’t just wake up tomorrow morning and become an angel investor or a V.C., or probably even a founder (he’s in his late 40s, has young kids, not a ton of free time, 5–6 employees, etc.), but there is definitely a path to doing that. Here’s how he can get there.
Here’s what he’s got going for him:
He lives in the best tech and investor market in North America (Bay Area/Silicon Valley)
He knows Mac and PC technology very, very well from running an I.T. consultancy for the better part of two decades. He’s also very well-versed in data security and cloud computing. This lends itself very well to technical diligence.
He knows the ins and outs of running a small business — running a P&L, selling to small and medium-sized companies, marketing, dealing with lawyers and banks, very experienced with hiring and firing. He also knows what he doesn’t know pretty well — he’s inexperienced at sales development, and is not sophisticated at analyzing startups. We’ll get back to that part
He understands that this kind of transition will be a slow and gradual one and will take 2–4 years and will probably involve the sale or shutdown of the services business
What follows is a “starter” list of what I’d recommend to him, in order to get him oriented and begin his “personal pivot”. This is by no means an exhaustive list, only a jumping-off point, perhaps for his first 50 hours of study. This would be a good place for a senior sales executive or small business owner to begin, who is thinking of making the transition into angel investing or venture.
Angel, Jason Calacanis: This is a great 8-hour primer on angel investing. One of the key points the book puts forward is to never “roll the dice” with more than about 5–6% of one’s personal net worth. The Angel podcast alone is good for hundreds of hours of content. I would be willing to pay $1–2 per episode for this show, it’s that good. Although the production values on the early 2017 episodes is not quite as fancy, I would start at the beginning. If you want a basic who’s who of angel investing, begin here. This is the comic book equivalent of beginning reading comics with Action Comics #1, 1938.
Valley of Genius: This is an 18-hour read, but it’s the best and funniest quick summary of Silicon Valley that I can think of. It wraps up the origin stories of Twitter, Facebook, Apple, General Magic, and all the rest. I had to pull over my car three times while reading this book, because it was so funny.
Zero To One, Peter Thiel — Although I do not agree with all of the points that Thiel makes about monopolies and progress, and I definitely do not agree with a lot of the political or technological things that Thiel has done, I devoured this book the week it came out because it contains a perspective on how to build companies that’s pretty revolutionary. And, if you want to become a really good investor, you need to know what to look for in revolutionary companies (and in crappy/mediocre ones too).
The Hard Thing About Hard Things, Ben Horowitz — Although this book focuses a bit more on the founder side of the story, the history of Ben’s life in Silicon Valley, especially from 1995–2005 is especially instructive. I especially like the parts about his relationships with Marc Andresssen and Mark Cranney (the extraordinary sales leader that accompanied Andresssen and Horowitz through many of their companies).
Venture Deals, 4th Edition: This is where the rubber truly meets the road. I began working with Brad Feld’s startups about 13 years ago, when I was in my late ’20s, working at LaunchSquad, and he’s backed some very good ones. After reading this book, I can understand why so many startups want to work with Brad and his partner Jason. These guys are deeply principled investors, and very good teachers. This is the best book about term sheets that I’ve ever read, and super-clear. If you’re going to be working with lawyers at any point in the future, you’ll probably want not only the audio version of this book, but also a paper copy. This book is updated every 2–3 years, and keep in mind that the laws change, as do best practices in venture capital, so don’t be surprised if there’s a 5th or 6th edition in 2023 or 2026. Also, my brother, brother-in-law and father-in-law are attorneys, and these guys love making fun of lawyers, so that alone is worth the price of admission!
A damn good CRM like Pipedrive: You’re going to need something like this, and it will take an hour to set up. Email me, and I can give you a not-widely-shared 3-month promo code. That will save you $45–100, depending on which plan you use. It’s very difficult to do any kind of angel or investment type dealflow without this.
Learn The Basics Equity Crowdfunding (But Don’t Necessarily Invest): You kinda have to know something about it. There are about a dozen platforms like this nowadays, including Seedinvest, Crowdfunder, and many others. It’s definitely worth spending 15–20 minutes on each of them. That will take 2–3 hours. That said, be careful and keep a watchful eye on the quality of offerings on these sites. You will definitely run into some unsavory types. For example, the anti-Semitic/racist social media platform Gab attempted to raise money on Startengine. Most of these deals do *not* have audited financials. You will find some screwy sh*t on these platforms, so please be very, very careful.
Once all of this stuff is done, this is when my buddy will have a very basic foundation on angel investing and advisory — that’s when I would begin introducing him to startups to slowly begin his advisory practice. And so it begins.