This week we chat with investment banker Brad Gevertz about M&A transactions for tech companies.
This week we chat with Steve Broback and Jason Preston about the Dent Conference, which is coming up from March 19th to the 22nd 2017 in Sun Valley, Idaho. We talk with Steve and Jason about the conference and its mission to discuss how do you put a dent in the universe.
This week we chat with Bob Crimmins of Startup Haven and Startup Poker 2.0. Bob is a huge part of the startup ecosystem here in Seattle and has taken his Startup Poker 2.0 event beyond Seattle and into other startup communities.
This week we chat with Mike Davidson about his work leading the design team at Twitter and what is next for him. We also dive into the role technologists and startup entrepreneurs can take to help bridge the political divide in the US and make positive contributions after our most recent Presidential election.
This week we chat with Marianne Hudson of the Angel Capital Association about startups, angel investment, and some of the policy issues that face angel investors.
This week we chat with Jay Turner, CEO of JeffMont and Redbird Sports, about the business of making golf clubs and how he is using technology to help make golfers play better and enjoy the game more.
This week we talk with M&A Advisor Nat Burgess about the investment banking business and how startups can better groom themselves for acquisition.
This week we chat about marketing for startups with Mark Kurtz, Chief Growth Officer & VP of New Media at, marketing agency, Gage.
This week we chat with JJ McKay (Founder and Publisher) and Al Olson (Cannabis Editor) of the new lifestyle and entertainment website, The Fresh Toast, with a mission that includes helping make the cannabis conversation mainstream.
This week we chat with Yi-Jian Ngo, Managing Director of the Alliance of Angels in Seattle.
Mike Schneider: Welcome to Law of Startups Podcast. I’m Mike Schneider.
Joe Wallin: And I am Joe Wallin. Thank you for being with us today. Today we are lucky to have on the show Yi-Jian. Yi-Jain is the Managing Director of the Alliance of Angels in Seattle. Welcome to the show.
Yi-Jian: Thanks guys. Nice to be on the show and glad to be here.
Joe Wallin: Thank you so much. So Yi-Jian, you've been – the Alliance of Angels is obviously one of the biggest most active angel groups in Seattle. And so in addition to being a big group, which is always helpful, it's also got a sidecar funds, you’re about 140 members right now, so your life must be very busy.
Yi-Jian: You're right, yes. We do have a lot going on and every year we invest about $10 million into 20 startups, and most companies that are fundraising from us are looking for somewhere between $0.5 million and $1.5 million in total, and we are usually some piece of that. We invest as individuals. So most individual angels invest in $25,000, $50,000, $100,000 kind of check sizes. So collectively, we invest in the company, it's maybe four to six of us and it comes up to a few hundred thousand, $0.5 million on average when we participate in the round.
Joe Wallin: Yeah, that’s really good data. A lot of companies will come to Mike or I and they're just wondering about the fundraising process. Mike and I are lucky enough to work with a lot of people who are really super-great technically at something, maybe coding or something, but they haven't been through this process before, and so they have a lot of basic questions about it. So it's helpful to hear the data points like most companies that come are looking for $0.5 million or $1.5 million. You put $10 million into about 20 startups, so how many startups do you look at a month?
Yi-Jian: We look at about 30 startups a month give or take and we are focused on the Pacific Northwest. So pretty much all the companies we look at are in the region and a significant majority are in Seattle, though we also look at companies well in – the secondary satellites tend to be Portland, Oregon and Vancouver, B.C.
Joe Wallin: Okay.
Yi-Jian: Well, of course, we also look at Spokane, Montana, Idaho and companies out there. There’s just few numerically startups out in those regions.
Joe Wallin: Sure. So you have a meeting like a member meeting once a month, is that right? Once a month, at which like three companies present, is that how it works monthly?
Yi-Jian: Yes. So in terms of how our process works, we essentially repeat, we have ongoing recurring monthly process. And as I mentioned earlier, we started 30 companies at the beginning of the month and we invite six of those 30 companies to come meet with a subset …
Mike Schneider: Okay.
Yi-Jian: … of the membership. We have 140 members, but about 10 or 15 of the most experienced of those folks form our screening committee. o, every month we invite six of the 30 companies we meet, to come meet our screening committee, and they then select the three companies that present at our member meeting, the one that you just mentioned, Joe, where we all of us, 140 of us show up and we hear presentations from these three companies. And after that presentation, we target to give the entrepreneurs who present an answer on whether or not we are going to invest within six weeks of the presentation. The idea is we want to be efficient; we want to provide a way in which entrepreneurs can meet a lot of angels at once and also get to a decision point in a relatively short period of time.
Joe Wallin: Right. So, so to start, say I have a company and I want to potentially pitch before the Alliance of Angels, but I don’t know for sure if I do or not, but I’m curious about it. How does the process start? Do I fill out a form and send it in to you? Do I pay a fee? What’s the fee amount, those sort of questions?
Yi-Jian: Right. Thanks, Joe. So let me answer the question about the fee first. So The Alliance of Angels is a not for profit and we do not charge entrepreneurs any fees to engage with us. There’s actually something I will caution all entrepreneurs to ask anyone who approaches them about any potential fees that may be charged by entities that represent early-stage investors. By and large, there shouldn't be a need in most cases for entrepreneurs to pay thousands of dollars to engage with any entity. So if you do so, you're probably doing something that's a little unusual and something to think very carefully about. But then again, to go back to the question, no we do not charge fees.
Joe Wallin: Right.
Yi-Jian: In terms of how to engage with us, so there are multiple touch points. If you haven't met any of us before, right, it would be to your benefit to come perhaps visit us at our Office Hours as a start. So we run monthly Office Hours at WeWork, at Galvanize, at Startup Hall and SURF Incubator.
Joe Wallin: Oh, that’s great, all four places, okay, great.
Joe Wallin: Like every week in a different spot?
Yi-Jian: Yes, we essentially rotate between these places. So you can send us an e-mail, the sign-up is on our website, allianceofangles.com. So that’s really a good way to come and have kind of a first touch. Another would be, we also run regular events in the community such as we have our members come and do a panel, or I guess the angel investors in our group will come out and do a panel, whereby you can ask them any questions you want about fundraising and so forth. We do that roughly once a quarter, our next one is actually in Startup Hall, if you're interested, we rotate through the various startup workspaces. So that’s a great way to get to know the members that make up the Alliance of Angels. And we also run workshops like Pitch Clinics, valuation, how to value your company, and these are also education activities that we run in the community as a way for you to get to know us. And once you get to know a few of us and actually have some folks that you connect into, that’s probably the best time to come in and have a fundraising conversation. There is no like formal application or submission or anything like that. It’s really more of a email to myself or to one of the members in the group saying hey, you know, I'm fundraising, we met some time ago and we’d love to get into the Alliance of Angels process and move forward. That tends to be the most effective.
Joe Wallin: Okay, great. Oh, so go ahead, Mike.
Mike Schneider: When’s the best time? So, let's say a company is young, they're getting started, they're thinking about raising money, like when is the time for them to be seriously thinking about participating in the process? Like what’s – how far along do companies have to be before they are sort of fundable in your eyes?
Yi-Jian: Well, I think the question there is what stage of companies do we fund, and the fact of the matter is that we pretty much fund pretty much across the spectrum very, very early, idea stage up to later stage companies as well. So let me tell about the top end of the spectrum. So if your company is raising like a $50 million round or something of that nature, then that's unlikely to be a fit for any angel investors, our groups included. That’s more of a private equity growth equity kind of thing and that will not be in our wheelhouse. On the other hand, if you just have an idea and you’re kind of bouncing that around, that’s certainly a time which you could have – open the conversation with us. That’s something that we are very open to and we have funded quite a lot of idea-stage companies over the years.
Mike Schneider: Oh, that's interesting. Yeah, because I would think that, that’s sort of the question for me, would be somebody who says hey, I'm interested in raising money, a lot of times my advice for them would be, okay, well, why don't you see how far you can get it on your own. You're going to have an easier time raising money if you have something that's working. But it's great that you guys are willing to fund ideas if the ideas are right.
Yi-Jian: What you say is true that if entrepreneur is able to get traction and make progress on their own, what that generally means is that they will be able to get better terms when they sell, when they fundraise in terms of the stake of the company, they give up the valuation they attain. So yes, if an entrepreneur has the ability to bootstrap and get it further along, we would encourage them to certainly do that, but before they reach that point, they’re all of course welcome to open the conversation with us. In many cases, we've been talking to some companies for one or two years prior to them actually formally coming to us for fundraising.
Mike Schneider: Yeah, that’s good advice. I mean in general, that's sort of – it's never really too early to start reaching out and meeting people even if you're not ready to raise money, like you should start laying the groundwork before you need the money and before you get to that point. So I guess if you're starting a company and you're early and you feel like it might be too early to raise money, I guess the sense is maybe it's never too early to start going to some Office Hours and talk to people because it’ll help lay the groundwork for what you need later.
Joe Wallin: Yeah, I think one of the biggest issues I thought, a lot of big issues in this arena because there's just a lot of variability in sort of investor interest and things and so, but obviously there's a lot of – people have a lot of questions around valuation, people come to me all the time and say, well, I mean, you have – let's say you're an idea stage company, you're pre-revenue, like well you want to raise a million bucks tha – the question, well, at what valuation is always a very, very difficult one. Yi-Jian, I’d love to hear your thoughts, let's just say Mike and I had Software-as-a-Service startup company. We had some early customer adoption, but they were non-paying customers. Let's say it's a sales automation tool or something. We want to raise a million bucks. With that scant information I've given you, kind of how would you think about the valuation question?
Yi-Jian: So valuation certainly is something that many entrepreneurs have less experience with and they often feel it is much more art than a science. So what I – for a very simple example, so I'm just speaking to entrepreneurs who have not raised any money before, so they own the entire company. This is not about follow-ons, right? Follow-ons are different things, right. So the guidance that I share with how to come out with a valuation is to well first of all decide how much money you need to raise, right, and then be cognizant that the majority of entrepreneurs in that first round would sell between 15% and 35% of their company, or to make it simple around 20ish percent of that company. So to Joe’s example earlier on, let's say he's decided that he needs to raise $1 million because let's say that's 18 months of run rate and it allows him to get to operating metrics that will materially increase the valuation of his company, so let's say he has got this model that shows $1 million is the right number and we say he’s going to sell 20% of the company, so that will imply that if we back into the numbers about approximately a $4 million pre-money valuation, because when you invest $1 million the post-money valuation will be $5 million and the investors will own about 20% of the company. So I find that that's usually the tidiest, easiest way for most entrepreneurs to think about how to put a number on their valuation.
And also just stepping back and kind of looking at the – at least within Seattle, right, the observation is that most of the companies that are raising the kinds of rounds that the Alliance of Angels funds, like $0.5 million to $1.5 million, that's the majority, right, most of them tend to come in at valuations or the – if they actually raise money, the valuations usually tend to be somewhere in the $2 million to $5 million pre-money range. This is pre-money, okay, not post-money, this is pre-money and that’s kind of what tends to happen in the Seattle region. And right now, this is a particularly good time to be an entrepreneur because there is a lot of interest from investors and also generally the market dynamics are good. So these days entrepreneurs are much more likely to be able to get to the high end of that range versus the low end of that.
Joe Wallin: Sure, sure. So this is great information. So the other thing I’m frequently asked by companies is, hey, how do I, you know, what type of equity or what type of security or interest in my company do I sell to raise the money. And I know for a long time, Yi-Jian, the Seattle angel community had, you know, go – rewind like 15 years or something, there was sort of an allergic reaction to convertible notes. I think for the most part people have gotten over that, although there are still some angels in Seattle who don't like convertible notes, who just don't like them. And then we have this new thing that's really popular in the Bay Area right now called a SAFE, and the SAFE is great for companies because there's no interest, there's no maturity date, it’s not debt on your balance sheet, it’s a –
Mike Schneider: Tell me more about the SAFE, I haven't heard about this. So what’s – it’s a new [indiscernible] [00:13:45] so to get --
Joe Wallin: Yes. It's a creation of white, yeah, it’s a creation by, its creation of Y Combinator, the startup school in Silicon Valley, and basically the idea is, hey, convertible notes kind of suck for companies because, one, they have a maturity date. So, usually that's 18 months, sometimes it's 12 months, sometimes it’s 24 months, but it's not like five years, it's usually 12, 18 or 24 months maturity date and they bear interest, 4%, 5% or something like that. And the gist of the sort of the thinking of the problem with the convertible note is, well companies like you and I, Mike, if we started the company, we raised money on a convertible note, we would think about our investors as equity investors, like hey, the investors, they are are equity investors, but the note holders they have the opportunity to potentially say at that maturity date, uh, we’d like our money back, right, which is not what we would be thinking as the company, right? So the SAFE stands for Simple Agreement for Future Equity and basically it's a convertible equity instrument. So it's just like a convertible note, except it is expressly not a note, it's expressly not debt.
Mike Schneider: So it gives you the benefit of – like so one of the things that seems really great about convertible notes to me in the times that I've seen them used is if you're talking with a company and you don't know what the company is worth or what they're going to raise in some future round, you get a convertible note and you can kind of punt on the whole valuation issue because you'll just piggyback on whatever the value is when they actually do their round of financing. But I guess, so you're saying that lots of people want that model where they can punt on the valuation, but they're carrying a lot of extra baggage with that because now they've got a debt instrument that maybe they chose it for reasons unrelated to the fact that it's debt.
Joe Wallin: Yeah, I think the SAFE – I mean I was initially probably somewhat like a lot of people in Seattle like, uh, you know it's a new instrument, it’s – I was a little suspicious about it. I'm like uh, you know? But I’m actually now seeing quite a few of my companies, and granted a lot of these are Bay Area focused clients of mine, but I mean I've seen a lot of people use it, but I think in Seattle, I think in Seattle we're going through the – we don’t – the angels are going through the, uh, we don't like this thing, it's too new, we’re not certain about it, we don't like it. Is my impression correct about that that the SAFE is still kind of an uncertain instrument to try to use in Seattle?
Yi-Jian: So, Joe, to your question about the SAFE, I would agree with you that it is not an instrument that's widely used in Seattle. I'm not aware of very many companies who have successfully raised who are not from Y Combinator, which is where the instrument originated, and have successfully closed rounds from Seattle area investors. I think what's the SAFE is a symptom of the reality right now that the pendulum is very much in the entrepreneur’s favor at this point of time, at the point of this podcast, right? At this point, very entrepreneur friendly documents like the SAFE are more likely to proliferate because they are a way for investors to try and sell themselves and convince entrepreneurs to take their checks versus everyone else's.
No, I’m sorry. I have noticed that SAFEs tend to be most common in the Bay Area, so Joe mentioned some of his clients in the Bay Area have raised on SAFE, also in New York and those are generally the regions at this point of time where there is a surplus of capital and a relative deficit of great startups to back, where else in places like Seattle right now where the equilibrium is I guess more as midpoint, right, hence there hasn't been as much proliferation of the instruments. Another area that I've seen the SAFEs getting some foothold has actually been in Canada in some of the Vancouver companies that we have seen. And this is really mainly because of Canada's tax credit regime, where if you're an angel investor in Canada, you can get a tax credit for investing in startups, but only if you invest in equity or common shares, some flavor of common shares, which is why many Canadian deals are essentially common shares, they sell common shares. And SAFES are similar enough to common shares, but provide some additional rights, they are better I guess for investors than common shares. And hence, there has been some movement towards SAFE transactions in Canada versus doing like straight common.
Joe Wallin: Right. Well, that’s really fascinating. Yeah, I was just talking to somebody this morning about a fundraise and I just – the advice I gave to this founder was, well, if you're going to target predominantly Seattle area angel investors, a convertible note is going to be the right place to start as opposed to a SAFE, simply because if you start with a SAFE, you might just run into a bunch of angels who’d say, well, I really love your company, but I'm not going to invest in that thing, and then you have to flip it to a note or some other instrument. So it's good to get data from you, Yi-Jian. And Mike, I think you might find this interesting. So Yi-Jian is with the law school and never took the bar, but has that background and grew up in Singapore where they didn't have coffee, they had powdered coffee. But anyway, so it’s great to have you in our town and I love what the Alliance of Angles is doing.
And yeah, I think I would love to help you promote your events just to get word about the mountain of the community more. I send a lot of people to you just by e-mail, but it sounds like I mean I ought to just be encouraging people to go to the Office Hours, you know, sign up for the Office Hours at allianceofangles.com, look out for the investor panels or like I've done in the past just have people email you directly is fine too, but it sounds like the Office Hours are a great opportunity for people to start figuring things out.
Mike Schneider: Yeah, well tell us about what like what types of things you guys typically talk about at the Office Hours. I could see some people saying, well, maybe I don't go to the Office Hours, I don't have a specific question, or is it more just a chance to meet some folks like if somebody shows up to Office Hours and they just say, hey, I'm interested in the fundraising process, I'm early stage working on something, I just thought it'd be nice to meet you guys, is that a good use of the Office Hours time? Should people feel comfortable doing that?
Yi-Jian: Yes, absolutely. I mean the Office Hours are open to all entrepreneurs and an entrepreneur can ask any questions that they want during that time. It's a 30-minute timeslot and he doesn't have to be necessarily Alliance of Angels specific where the entrepreneurs show up and ask about, well, we are thinking about doing angel fundraising in Seattle, could you give us some general ideas on how to go about that? There are some entrepreneurs who show up and say well, you know, I've got a very early version of the product, I'm not ready to fundraise, I just want some feedback on my product, and that's perfectly okay too. So the time is really up to the entrepreneur to decide on how they want to use it. It’s probably a good idea to have an idea what you want to use it for before you come. But to be clear, this Office Hours is not a pitch session or a request for funds or anything like that. It is just an easy, friendly conversation from an angel investor with an angel investor from my group to answer any questions that you may have.
Joe Wallin: So the Alliance of Angels, I'm sure it’s had some great successes over the years in terms of great companies you’ve invested in, great exits you had. That’s got to be really rejuvenating to the angels themselves in terms of like if you get a refresh of your capital, you could put more money in. What are you seeing right now in terms of exits? Are exits becoming more common? Are they more common this year than they were three or four years ago? Kind of how do you see the cycle right now in terms of exits?
Yi-Jian: Well, right now, we are having – right now I would say that the pace of exits has been about the same as to what it was last year. We had our second best exit as a group when Elemental Technologies of Portland was sold for a few hundred million dollars to Amazon. So that was probably our second best return and the folks who invested in that company were very welcome – that was certainly very welcome news.
We’ve had also over the years some—some of our biggest successes have been the Clarisonic, which actually is a consumer technology company, makes a sonic technology device that's useful applying makeup, I'm kind of struggling here. As a guy, it’s not a product that I typically use, but I'm sure lots of ladies, my wife included, find it extremely useful.
Mike Schneider: Yeah, that was David Giuliani's company, right?
Yi-Jian: Yes, it was David Giuliani’s company.
Mike Schneider: It was his second company, right?
Yi-Jian: Yes. So that was one of our best exits ever. We’ve also had companies like Insitu, which was a drone company in the early days.
Joe Wallin: Right, that was a really a drone company bought by Boeing.
Yi-Jian: That's right.
Joe Wallin: Way before drones were really even talked – I mean they weren't really – I mean now they’re talked about all the time, but back then it was sort of a very unique opportunity. I remember that company coming around to pitch in Seattle, and I remember, my recollection was they had kind of a hard time fundraising, but I don't – maybe my recollection is wrong but turned out to be a great investment for people made I think.
Yi-Jian: Well, it was definitely a great exit, Insitu was, for those of us who invested in it.
Joe Wallin: Yeah. One thing, Yi-Jian, that I always try to tell people that I work with is, I mean I guess I'm part cheerleader or something or cheer squad member, but I mean it's easy to get down – if you're a founder, it’s easy to get down during the process, it's easy to feel like it’s hard to raise the money, right, and it’s easy to start to feeling like wow this is a very, very difficult process. What do you – I mean, so I am constantly telling people hey, look, you know, it’s just like sales, right, you’re going to hear a lot of ‘no’s, but that’s okay, you’ve just got to keep going. What do you recommend, like how do you – like do you have like some advice to get people who are going through the process and who are I mean just kind of daunted by it, like what do you tell people in that spot?
Yi-Jian: Well, I mean, just – I’m going to give a very tactical answer to that. I think first of all it’s helpful at the very start to kind of figure out how much money you need to raise, right? And this is usually through developing a monthly financial model for the next 18 months or so. This will be pretty detailed, it would be things like people you need to hire or any online marketing spend or offline marketing spend, sales and so forth. So having that model kind of penciled out and making sure that that gives you enough runway to materially improve your operating metrics so that you can raise your next round at a significantly higher valuation. So figuring out how much you need is an important starting point just based on modeling it out. And let's say you model it and you have a particular number, let's say it’s 750 or something, you may want to raise a little bit of a cushion on top of that in case you may need to pivot somewhere along the line. So you need to get to a number first, right?
Then also understanding that this is fundraising is a bit like a enterprise sales process. So once you decide on what it is you want, then you’ve got to prepare essentially a marketing collateral I guess for your fundraise just as you will prepare marketing collateral for your company. And generally, you at the very at least need your financial model, which you already have, 18 months out and maybe some annual projections going further from that, you will also likely need at the minimum an investor deck of some kind, right? This is sort of like a PowerPoint or Keynote presentation that tells a good story about your business, talks about the problem you’re solving, a bit about the market competition, who you are as a team and so forth. These are usually like 15, 20 slides give or take, so you should have that ready, right?
And maybe another variant of that, we saw for one page or kind of more of a report style thing, right, because these are common pieces of documentation that investors are likely to ask for and you don't want to be in a situation where you've got interested investors and, oh, you know my collateral isn’t ready, can you wait two weeks? That generally does not reflect well on the entrepreneur.
Another important thing to have before you start is to know who owns your company, and the technical term is a cap table. If you’re unfamiliar with what that is, you may want to ask maybe your attorney or maybe your accountant, it is important to know who owns your company. This is especially the case if it’s – you may have debt outstanding or maybe you had a co-founder who left three years ago or something of that nature. Often at least in diligence when we conduct as a group, we often run into situations when the entrepreneur doesn’t know who owns the company and that can be a real issue. And this is not because they are trying to be cagey, it just hasn't been part of their priorities, they’re about building great products, getting customers and so forth.
So once you have your collateral in place, then it’s helpful to next kind of figure out which are the right people to reach out to, right? And the first person you generally want to secure is a lead investor, right? A lead investor is someone who is extremely excited about your company and usually is the person who helps you – who invests a substantial portion of your round, so let’s say you are raising $1 million and they put in $200,000 or something like that, right? And then they also actively help you recruit the other investors or help you quote-unquote close the other investors in the round. Securing a lead investor materially increases the chance that you would be able to get your round together, and it also significantly reduces the time that you may have to spend herding cats because many CEOs realize that if you go into fundraising that it’s going to be 70% of your time, right, and it can easily take three to six months to put the round together. I'm talking about like a $0.5 million to $1.5 million kind of round, so this is very time consuming.
So how do you figure who leads deals? This is not usually published, you can ask around if you have an attorney who has a lot of experience in startups, you can ask them who leads deals in Seattle, or if you're somewhere else, not in your particular locale, or you can take a look at the press like, for example, GeekWire which publishes a lot of articles about startups in the Pacific Northwest. GeekWire often – if a company closes a round, they often mention who led it, right? So you usually have a short – so you can find a short list of potential deal leads. Then once you have that list, it’s about figuring out which ones of these are actually going to invest in your company, because everyone’s kind of got their own preferences and so forth. And again, this is something where you within the community maybe go talk to other entrepreneurs, talk to your attorney, come to our Office Hours, because let’s say you have a consumer company, you’re targeting someone who will only invest in enterprise software, then it’s not likely to be a productive conversation.
So once you have shortlisted the deal leads, then it’s about getting a warm intro. LinkedIn is always a good place to start and you can also ask other entrepreneurs, again other people in the community. So some kind of – doing some kind of networking in the community and getting a warm intro into these lead investors and focusing your time initially on closing one of these lead investors would be helpful. And then only after that then you go after the other investors, people who are known not to – to usually follow other folks, so your lead investor will help recruit some of them and you could bring the rest of them in yourself. And useful tools for identifying who some of the other people could be, there’s AngelList for example and you can to angellist/seattle or slash whatever locale you happen to be in and it’ll give you a list of all the people that’s maybe a good fit and then you can filter again by your domain, like what kind of company, are you a Bitcoin company or something of that ilk, so then you can focus.
So the idea is to then try and coordinate a series of meetings and treat the whole thing like enterprise sales process, have some kind of spreadsheet or maybe even a lightweight CRM system where you record, you know, you met this person, first meeting what did they say, second meeting what did they say, what did that they want. So everything is organized, right? And also kind of realizing that you will need, as Joe mentioned earlier, a lot of investors are going to say no, right? So to get 10 investors into your company [indiscernible] [00:32:02], you may need to talk to a hundred people. So you got to manage the whole thing kind of through a spreadsheet or CRM, so you’re organized and know what’s going on. If you’re all over the place, you may find that’s – you may – it’s just very easy to drop the ball on kind of who you are talking to and where you are in the respective process.
Joe Wallin: Yeah, this is really great, helpful information Yi-Jian and this is really great. So for those who are listening, so just to quickly summarize what Yi-Jian said, sort of, you know, what – he has some really great advice here which is so-called marketing collateral you’re going to need a one-pager, a pitch deck, and you can find an example pitch deck on the Alliance of Angels website, a detailed financial model about 18 months of runway, maybe some forward-looking projections beyond that, annualized perhaps, a cap table.
And then I threw in here, one thing I always encourage companies’ CEOs is the sort of abbreviated like short, one-page term sheet, summary of the terms, the offering kind of a document, maybe something like the Series C term sheet or I have like a one-page convertible note term sheet. I get people – but this is great, this is really great advice, Yi-Jian. This is – I mean I guess I’m of the view that it feels to me like, and maybe I’ve just been too long on the company side or something, but it just feels to me like the process is just -- mean it’s very labor intensive, very time consuming, it just seems like, it’s – it ought not be so difficult, but maybe that’s just always the way it’s going to be. I mean, we can maybe change some regulations like the Jobs Act, try to make things easier, but I just – maybe no matter what we do from the regulatory standpoint, it’s always going to be this way. It’s going to take time. And usually I think people say, gosh, you know, six to nine months or maybe even as long as a year, it sometimes takes to raise like a million bucks from angels, I’ve seen it just take a while. And I always wish it wouldn’t take a so long and be so difficult, but maybe it’s just the way it is. I don’t know if you have any thoughts about – it sounds like the best way to accelerate the process is just get really prepared, have everything done and then you’ve given great advice. And everyone out there who’s listening to the show, Yi-Jian is easily reachable. If you email me, I can email him and connect to you, or I’m sure you can probably pick up Yi-Jian’s email from the Alliance of Angels website or something.
Yi-Jian: Yes. And I mean to follow on your points about how – you mention how it takes a long time to close a round, I mean I mentioned earlier too the easiest way you can – one of most time tested way to accelerate your process is to find a strong lead investor. And if you have a strong lead investor in place and close, you will find that you’ll be able to get through the rest of your fundraising relatively quickly, especially the person is hands-on in helping you, essentially having a partner with you on fundraising.
There are also some tactical things on timing around the calendar, the time of the calendar in which you want to start your fundraising process, right? Probably one of the better times is probably in the January timeframe, January, so you have a lot of open months here to close your round, right? And the other would be immediately after August, so early September will be another time. So you at least have a short like a few months before the holiday seasons, because generally as far – angels in general are – and many VCs as well, it’s hard to get things done in the months of August and also near the end of the year, people may be travelling and so on and so forth. And what you don’t want – when you’re running a fundraising process, you generally want to create momentum, right? So people are interested, your commitments are going up, every time you email all your prospects you say, hey, you know, now I’ve got 400 out of 600 committed and the numbers keeps going up, you want the kind of message that things are going well.
If you run into a zone like August, when everyone’s – where a lot of people are not around, you may find yourself losing momentum and then it’s very hard to raft it up again when everyone comes back because sometimes the inclination would be go into the next shiny new thing. So starting kind of in the January timeframe or if you are kind of a [indiscernible] [00:36:36] early September would be a good time to think about starting your round, if you’re able to plan it in that way.
Joe Wallin: Well, so, we’re just about – we just about out of time Yi-Jian, but I want to thank you for being on the show. This is really, really great. Mike, any parting thoughts or questions for Yi-Jian?
Mike Schneider: No, this has been great. I think the takeaway should be people should reach out and get in touch early even if they’re not ready to raise money, it’s time to, you know, it sounds like an open invitation to get to know some angel investors. So I’d say my advice would be take him up on it.
Yi-Jian: Yeah, absolutely. I mean we are out in the community, come to our events, come to our Office Hours and you can also email me directly. So we are open for business and we’re here to help. So please don’t be shy about reaching out.
Joe Wallin: Thanks everyone for listening. We’ll see you all next week.
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