We took to the internet to find some advice on startup funding and enlisted Ankur Jain, a former Tinder executive and the founder and CEO of venture studio Kairos, and our own executive editor Diana Ransom to tell the good advice from the bad.
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00:00It is funny to watch VCs trying to get on TikTok.
00:02It is, it's painfully funny.
00:09Hi everyone, I'm Diana Ransom, Executive Editor at Inc.
00:12My name is Ankur Jain, I am the CEO of the Kairos Group
00:15and have had a chance to buy and sell and build
00:19a bunch of different companies over my career
00:20and most recently ran product for Tinder.
00:23We're going to be looking at some of the best and worst advice
00:26that the internet has to offer on finding investors
00:29and working with them.
00:33First up.
00:34Wow, you're a venture capitalist.
00:36A lot of startups where they screw up,
00:38they go out, they try to raise a ton of money,
00:40they overestimate what they actually need.
00:42That's where we make all of our money is we find guys like that,
00:45we show them what they actually need
00:47and then we become their only market.
00:48So you don't join a cap table, you're the only investor.
00:51Correct, yeah, I never do that.
00:52Wow, and what's the biggest reason for that?
00:54Those people, they are obsessed with raising money
00:56and not actually making money.
00:58And so a lot of startups nowadays,
00:59that's all they care about is raising money.
01:01They don't actually care about making money.
01:03And they get caught up in finding the next big thing
01:05to raise money for and the investors never get paid.
01:08So I care about making money.
01:09Would you take money from Frappero1 or 2 in that video?
01:13Right.
01:14Well, actually, it was funny to me that my takeaway from that
01:17was that they just sounded like they were describing a Ponzi scheme.
01:20A lot of venture is like a Ponzi scheme
01:22and that's the biggest thing.
01:24These VCs aren't actually really being rewarded
01:28on the success of your individual company.
01:31Their job is to get markups,
01:33meaning can they pump up your numbers like a Ponzi scheme in growth
01:36to get another VC to mark you at a higher rate.
01:40And then they go back to their investors
01:42and raise money at a higher amount
01:44because they said, look at my gains on paper.
01:46And by the time anybody is actually sold in 8 to 10 years,
01:49they've already collected 10 years of management fees.
01:52This is the problem.
01:53So they're not even out for the exit?
01:55They're baking into their model that most of the companies will fail.
01:59All right, let's get a fun one.
02:00I just invested in a new startup.
02:02These are the three reasons that I invest in a company.
02:05Do I like the founders?
02:06Do the founders like me?
02:07It's pretty funny that investors are now getting out there,
02:10putting videos saying, can I please give you $100,000?
02:14When you realize they need you as much or more than you need them for capital,
02:20the whole dynamic shifts and investors can smell it.
02:23Second, and in my view, one of the most important elements,
02:26does the business think purpose over profit?
02:30Is it more important to the owners of this business
02:33to look after their users and to give them value than to make money?
02:37And third, and something I always want to instill and ensure,
02:42if I'm going to put money into a business,
02:44will I be able to add value?
02:46I like that he just seems like he has his priorities
02:49and he's letting you know his priorities.
02:51Like you have to be a purpose-driven company over profit.
02:53That's something in your search you really need to think about.
02:56Is this investor going to value what I value?
02:59When you think about raising money,
03:01it's sometimes easy to forget that you're giving up part of your company.
03:05Raising money is like dating, right?
03:08It's like if you come out there and you're too desperate,
03:10people can smell it, right?
03:12But when you come out and you say,
03:14this is what I'm looking for, you know what you want,
03:17that confidence is half, it means 80% of raising money.
03:21Your friend might have 15 reasons for why they may or may not
03:25think this is the right person to go on a date with,
03:27and the minute they hear that they went on a date with someone else,
03:30I should probably respond, right?
03:31So I think that's the game you're playing.
03:35One Reddit user has questions about how to find investors,
03:39and another had a response.
03:41It takes one full month to make a great pitch deck
03:44with all the iteration and feedback loops needed to make it really great.
03:48Number two, I only contact investors I can find warm intros to.
03:52The same people who gave feedback on your deck
03:54can introduce you to investors.
03:56This is great advice if you're lucky enough to be one of the entrepreneurs
03:59that's super well-connected
04:01and can just go directly to partners at a given fund
04:05and find people who have raised $100 million before.
04:08I mean, the challenge is when you're starting a new company
04:10people haven't yet heard of,
04:12they don't know what to listen to and take seriously or not.
04:15And so when you're a cold email,
04:18they don't know whether it's real
04:19or it's just some troll writing up something there.
04:22So if you can get a warm intro, it immediately adds the trust.
04:26So if you get a warm intro from an associate
04:28and then the associate puts you in touch with the partner?
04:31That's the right way to do it.
04:31Number three, only get intros to angels who invest their own money
04:36or partners of a fund.
04:37Don't talk to associates.
04:39An associate is not going to be as good as getting you invested
04:43as a partner will.
04:44But what they're saying is that if you end up with the associate
04:47you're doing yourself a disservice
04:48because that's the person who's going to handhold you
04:50throughout the whole process.
04:51No, that's not how it works.
04:52An associate, once they vet you
04:55and they feel like there's a fit as much as you feel like there's a fit,
04:58they'll bring in a partner to own the deal
05:01and that partner will then move it through the process.
05:04Lastly, with the above, getting 10 to 15 meetings
05:07will get you at least one investor.
05:09From start to end with money in the bank in six months.
05:13Guaranteed.
05:13Every single time.
05:14It takes a lot of time.
05:15Six months is not a lot of time.
05:17I mean, 15 meetings and you get an investment, guaranteed.
05:20Six months is a long time in the startup world.
05:21Six months is like a lifetime in the startup world.
05:23Okay.
05:24Fine.
05:25You know, you hear these stories all the time from startups that end up,
05:28you know, I took 100 meetings with venture capitalists
05:30and I didn't end up with any money.
05:32There's enough money out there that if you pitch enough people
05:34you will raise money.
05:36But if you're looking for the right money,
05:37because remember, you're in the driver's seat,
05:40then you should take some of that feedback
05:41and figure out what part of your story isn't resonating.
05:44Can you ask for feedback?
05:45You should always.
05:46Yeah.
05:47VCs are notoriously bad because they want optionality.
05:51One of the things that drives me nuts most
05:54is VCs rarely tell you no
05:56because they never know if you're going to be the one person
05:58who then breaks out and they don't want to burn the bridge.
06:00Associates often will give you some of that honest feedback
06:04and if you can build that personal relationship and ask them,
06:07you might actually get some useful feedback.
06:11Where do we have next?
06:12Ross Loma Capital.
06:14Should I keep doing it? Should I keep negging?
06:15No, no, I'll handle this.
06:17They want to negotiate using hostility and rudeness.
06:21Well, they picked the wrong guy.
06:22Okay, here's my concern.
06:24Here's my concern.
06:25Who the hell picked out that shirt for you?
06:28What?
06:29No, this is all wrong.
06:32I am sensing a general lack of vision.
06:35Your muffins smell like shit.
06:37So do your ideas.
06:38Okay, does that work?
06:39No, I mean, please never be a dick when going into a pitch meeting.
06:45Back when you were raising your first funding ever,
06:48you did not have confidence.
06:50You must not have. It's tough.
06:51It was scary.
06:52I mean, I took every dollar I could
06:54and that's the mistake I learned.
06:55I would walk out of a meeting as a founder
06:58worrying about if they hated me, did I say something dumb?
07:01Did that deck slide make sense, over-evaluating everything?
07:04And on the other side, they were just like,
07:06well, let's just hold and see if anybody else bites.
07:08If you remember way back, I think when you and I first met,
07:11like, I was running a company called Human.
07:14And I thought it was like the stamp of success
07:18to raise money from big Silicon Valley companies.
07:21In every meeting, we would ask,
07:22so how do we build our revenue model?
07:25And the answer was, don't worry about making money,
07:27grow your users, grow your users, grow your users.
07:30For us, that put us in a really difficult position
07:32where a year and a half later,
07:33we hadn't built our business model.
07:36We hadn't figured out how to drive revenue.
07:38When the market changed, nobody cared about us anymore.
07:43Right, and we were left holding the bag
07:44trying to figure it out.
07:45Who you take money from is the most important question.
07:52Nana, hi.
07:54Michael.
07:55People turn to their families all the time
07:57when they need help starting out.
07:59And if my Nana's Investment Club
08:00can help the Michael Scott Paper Company become a reality,
08:04then I'm sure that's what she would've wanted, does want.
08:07How do you expect to turn a profit in this economy?
08:11By wanting it more?
08:12Michael, I don't know about this.
08:14Nana, I really think that Papa would want you to do this.
08:19I'm not so sure.
08:20Well, what is it exactly?
08:21I mean, what specifically?
08:23It doesn't have to be paper.
08:24We could sell medicine.
08:27I love you, Michael.
08:28I do, but no.
08:31I mean it, no.
08:33She should take Mr. Wonderful's spot on Shark Tank.
08:35All right, she's stopped.
08:36But I'm with Nana.
08:37What did he really offer,
08:39other than to say I'm just gonna,
08:40I'm gonna undervalue my product?
08:43Michael Scott has zero conviction
08:47in what he was actually building, right?
08:49And I think as funny as the parody of the show was,
08:53people often try to build what they think investors want,
08:57and that's just a trap too many people fall into.
09:00I think the answer is know what you're building,
09:01know what the problem you're solving is,
09:03and why you think you're the best, and stick to it.
09:05You know, I think my biggest thing with family members
09:08is you have to be careful,
09:09because you don't want to burn a bridge with a loved one.
09:12You know what?
09:13The people who don't invest professionally
09:14can also be the most difficult,
09:15because they're not prepared to understand
09:17the ups and downs you're gonna go through.
09:19Right, can you imagine Thanksgiving dinner?
09:21Oh my gosh, the stress.
09:22This is just not hard enough.
09:25Ankur, why don't you share with us
09:27your biggest takeaway from the day?
09:28I think at the end of the day,
09:29when you're looking to raise money,
09:31just remember that your need to raise capital
09:35is no more than the venture capitals and investors need
09:38to find a company to put that money into.
09:40Because when you realize that you don't need
09:42that one investor, you're just mindset changes.
09:46You start thinking about who the right fit is,
09:48how to pitch your business in the right way,
09:50not just what they want to hear.
09:52And you'll find the right capital,
09:53because they can smell that you are building something
09:56with conviction that other people also believe in.
10:00And let's not burn bridges with Nana.
10:02Yeah, that too.