Startup fundraising: what investors check and what goes in the data room
A New Ventures BC seminar where Keith Ippel of Spring treats a pre-seed raise as a sales process and fractional CFO David Steinley covers due diligence and data rooms. Worth it for Steinley's walk through a $10 million Series A diligence timeline and his folder-by-folder case for a short, curated data room.
- Keith Ippel · Angel investor and venture capitalist, Spring (Spring Activator and Spring Impact Capital fund)
- David Steinley · Chartered professional accountant and fractional CFO to startups
- Trieste Reading · Chief growth officer, FrontFundr
- Keith Ippel says the average investor decides in or out 15 minutes into the first meeting, then uses due diligence to validate or invalidate that decision.
- Ippel treats a term sheet as non-binding and answers a request for one by sending the actual financing documents, which makes the investor decide whether to lead, follow or walk.
- Sending the deck with a data room link and an FAQ built from other investors' questions shows preparation and outside interest, Ippel says.
- In a $10 million Series A, David Steinley says the private equity investor ran financial, accounting, product, market, customer, legal and background checks inside a five-week window set in the term sheet.
- Steinley's data room starts with a hyperlinked index and an overview of about 10 pages, and holds the most sensitive material back until an NDA is signed.
- Steinley's clients spend 20 to 60 hours on an early-stage data room, and he advises starting two months before the raise.
Fifteen minutes. That, says Keith Ippel, is how long the average investor takes to decide on your company: 15 minutes into the first meeting they are already thinking I'm in or I'm out (around 1:07:06). Due diligence comes after, to validate or invalidate that decision. Ippel, an angel investor since 2008 who speaks for Spring Activator and its Spring Impact Capital fund, calls it a character-based investment. At pre-seed nobody can judge you on five years of financial statements, so the question is whether they trust you and your team with their money. Each angel checks differently. A CFO by trade goes straight to the forecast and KPIs. A serial CTO goes to the product road map and IP.
“Anybody know what a term sheet really is? It is a Valentine's card.”
Keith Ippel, angel investor and venture capitalist, Spring
The recording is New Ventures BC's half-day seminar of 27 April 2026, held during Vancouver Startup Week. Trieste Reading, chief growth officer at FrontFundr, opens with equity crowdfunding. Ippel spends two hours on raising a pre-seed or seed round, and David Steinley, a chartered professional accountant and fractional CFO, closes with due diligence and the data room. We focus on what founders should prepare, what goes in the room and what investors check. Ippel's frame is simple: it is a sales process, with investors as prospects in a CRM funnel. Expect to talk to 40 to 80 investors and to spend 12 to 26 weeks raising from angels (around 21:17), and never plan a close in August or December.
“Some investors will do a lot of due diligence. Some will do none.”
Keith Ippel, angel investor and venture capitalist, Spring
His sharpest advice is about the moment an investor says yes. A verbal yes, he says, still carries a 50% chance that the check never arrives; he has heard a bathroom renovation, a climb in Nepal and a safari given as reasons (around 42:44). A term sheet does not change that. He calls it a Valentine's card, not legally binding in any way, shape or form. When an investor asks for one, he sends the actual financing documents as well. Now they have to decide. The investor signals whether they will lead or follow, and in his experience about a quarter of the time they say they are not really interested. Better to find out then.
“I can say for sure that the founders I've worked with who've raised the most money are also so happen to be the ones who are most comfortable pushing back against investors and their demands.”
David Steinley, chartered professional accountant and fractional CFO
On the data room, Ippel thinks like a salesperson. When an investor asks for the deck, send the deck, a link to the data room and a link to an FAQ (around 1:28:51). Every question an investor asks goes into the FAQ with your answer. To the next investor that says you are serious, you have done your prep, and other investors are looking. He also likes data room tools, such as one made in Vancouver, that track what each investor does in the room. His story about it is a warning, though. One founder was frustrated that after two weeks nobody had opened his data room. Six of those investors had said yes. They never did any diligence.
“So the bigger risk is that you blow the deal being too secure about these things. So just try and find that balance.”
David Steinley, chartered professional accountant and fractional CFO
Steinley, who started in audit at KPMG, explains why the mood flips after the term sheet. Until then you have made claims in a pitch deck, in a story-driven, anecdotal way. Then you get a list of 50 things and nitty-gritty finance, legal, business and product questions (around 2:26:24). Investors are evaluating your claims and trying to reduce the risk of unwanted surprises. Fund managers owe a fiduciary duty to the people whose money they invest, so they check that there are no funny arrangements on the cap table and that historical statements are free from error. An angel investing their own money, he says, is a total crapshoot.
His most detailed example is a Series A: a private equity firm investing $10 million in a company he worked for (around 2:31:27). About a month of meetings led to a signed term sheet, and the investor then shared a Gantt chart: kickoff call, financial and accounting diligence, product, market, customer calls, legal documents, background checks. They wanted to call 15 customers. The company pushed back and they did five. The term sheet gave them five weeks. Valuation was a revenue multiple on annual recurring revenue of 1.4 million, so that number had to hold, and Steinley says his job was at risk if it came back lower. The legal bill was likely to be around $150,000.
Most of that does not apply at pre-seed, Steinley says, but pieces of it trickle down. Friends and family may need little more than goodwill and a pitch deck. Pre-seed needs some of it. Seed is a big step up, because issuing priced shares brings heavier paperwork: $20,000 to $40,000 in legal costs, against roughly $2,000 to $6,000 for a SAFE round (around 2:39:03). How much diligence you face also depends on the investor. A specialist in your space will do mostly financial checks. Someone who made their money in a corporate setting with a lot of bureaucracy will ask for more, and their LinkedIn profile usually tells you which kind you have.
His one takeaway is to treat the data room as curation, as opposed to dumping in information (around 2:56:05). He compares it to putting on a gallery from a full store room: the job is maximum compression. Start with an index, such as a Google Sheet with a hyperlink to every file. Add an overview, 10 pages not 100, written as a reading deck that works without you in the room and links to the evidence. Then product (a glossy brochure, road map, IP, summaries rather than raw data), customers, team, market, finance and corporate records. Get your books done monthly, with about two years of historicals, and a cap table before and after the round.
On confidentiality, Steinley says to send things as they are requested and share the least that still gets the job done (around 3:32:25). Hold sensitive product or go-to-market material until an NDA is signed, perhaps in a second-level folder that only the lead ever sees; followers tend to rely on the lead's diligence. Redact pilot customer names but show what they pay. Use read-only, no-download settings for critical documents and IP. He is cool on paid platforms: knowing who spent time on which file is largely a vanity metric, though granular controls help when many investors are in at once. Start two months before you raise. His clients spend 20 to 60 hours on an early-stage room.
For a founder, the data room is part of the pitch: a short index, a readable overview and evidence behind each claim make a yes easier to confirm. Build it two months ahead, and decide early what waits for an NDA.
so much. Thanks for having me here today. Really appreciate all the effort in organizing this and Justine, this is fantastic. As mentioned, I'm trias the the chief growth officer at frontfunder. And for those who may not be familiar, frontfun is Canada's leading equity crowdfunding platform. Now, whenever we do these talks, people may not be entirely familiar with what equity crowdfunding is. So, we start with some basics. equity crowdfunding and and fundfunder. We essentially empower startups and growth stage companies to raise capital from everyone. so really acting as the the bridge to to bridge the gap between innovative businesses and investors helping entrepreneurs turn ground ideas into reality. So what does that mean in theory? Traditional funding channels are raising friends and family, business associates, venture capital, angel investors. With equity crowdfunding, we really open the door to everyone. That can include your customers becoming investors, your partners and suppliers, your social media followers can invest in the
company. So, it basically enables businesses to raise from their greatest supporters. we've been in business now for 10 years. Just celebrated our 10 year anniversary in 2025. and we've raised over 360 million through the platform across 36,000 investments across 300 razors. raises and we've built an investor community of just upwards of 70,000 Canadian investors. So, what do we do? I I think the big thing that companies don't often consider is that they do have this untapped investor pool as a source of capital and that really is their greatest supporters. It's their champions, their customers, their followers, the individuals who use the product every day who turn around and actually become investors and co-owners in that business to move forward. We are industry agnostic. We work with companies raising from seed to series A to preipo. And a little bit about the type of profile of company that we look for, it's typically raises
in the range of 250,000 to 3 million, even above that. we have a raise right now that's doing about 7 million from their community through frontend which is raised companies looking to convert their supporters community of supporters into investors increase brand awareness. We like to say that equity crowdfunding is really like a marketing exercise at the same time. and companies that are looking to grow sales and drive revenue. So ultimately your customers can become investors, investors can become customers and really when you've invested in a business you want to champion them moving forward with your community. So as a result the companies who raise with us who now have hundreds of shareholders have all those great ambassadors to ultimately increase revenue and businesses as well looking to validate product market fit. so maybe they don't have a product on the market yet but they have a great concept, an idea, they've got a wait list. This can be a great way to validate that there is a customer base for there as well. And most importantly, companies that want to share their story. Equity crowdfunding really gives
you a platform to reach a wide Canadian audience. And storytelling is a huge component of converting investors. >> With that, some of the companies that we've worked with, we've got Blossom Social, that's been a big one. I'll touch on them a bit. the hope exchange halta recently went public and we got a great welcome from the CEO blossom here. So why equity crowdfunding? Well, it does play an important role in the entrepreneurial ecosystem. A big thing is that raising capital should be flexible. I think for for many founders, they've experienced traditional funding methods can often require substantial equity or take a considerable amount of time. Equity crowdfunding lets entrepreneurs set the terms and retain their control. As well as that, it should be fast. So with equity crowdfunding, you can launch and close on funds in 90 days or less. As well as that, it should be easier to access. underrepresented founders in particular can face barriers when it comes to traditional capital. Even if you're a business in a sector that
traditionally doesn't receive a venture capital funding, equity crowdfunding really builds communities without needing the connections, which is great. So, we like to say you kind of build your own table and you get to control who gets invited to have a seat. with that as well, the investor demand is there. There are over 12 million Canadians who are investing in public stocks. So, we're looking at the private markets, but we know that many individuals are already doing self-directed investing. As well as that, roughly 12.4% is how much private market investments outperform public markets. And general kind of best practices is that 10% of portfolios should be in private equities. So, investor demand is there. It's a great help for help.
Now, why is it a great capital raising solution? Well, it gives founders unprecedented access to investors ready to support their growth. so with that in mind, growth capital for companies looking to scale. for companies where the demand is so high that you can't fill orders fast enough due to cash constraints, equity crowdfunding can be a quick raise to raise capital and support those orders. It's also, as I mentioned earlier, a fantastic way to increase brand awareness and exposure. So it gives you a platform to, as I mentioned, kind of broadcast to Canadians across the country to find new customers in new markets as your crowdfunding grounds can serve as a strong promotional tool to your community. And then really it's simplified investor management. So the concept of bringing on a few hundred investors is typically scary for a lot of companies, but we do use a tool called the trust agreement that streamlines the cap table to keep them all under one line item so it doesn't overcomplicate your investor management.
Now, as I mentioned, we are industry agnostic. We've worked with companies raising from series, C to series A to preipo. These are some examples of the organizations that we've worked with. We've got quite a few exciting VC businesses on here. I'll highlight quickly the the top three. most recently in 2024 and 2025, we raised with Blossom Social. Not sure if you guys are familiar. They're founded in Vancouver. they're a social network for investors where you actually link your portfolio to your account. So, I think a lot of influencers online get in trouble because they're talking about stocks that they don't even own. With Blossom Social, you link your portfolio so you can have important conversations around public stocks, but there's the added layer that is actually validated by being able to link to your brokerage account. in 2024, they raised around 1.3 million from us in three and a half days. It was an exceptional raise. it blew most of our records out of the water and then they came back in 2025 with a weight list of about 5,000 investors and they raised 1.93 million
in about 6 hours. So absolutely incredible. They have a large community. Their audience is a great fit for private markets investing given that they are public markets investor. But a great example of the power of community and for them they've actually had a lot of conversations with the vent traditional capital sources. they are ventured back as well. But for them, this made sense for them as a funding option because their community is their greatest asset and they really wanted to invite that community to become co-owners on their journey. Another recent example is Edison Motors. They're a clean tech company. They're producing hybrid electric work trucks. and they've raised roughly 6.8 million through the front platform. so they were actually the first company in Canadian history to max out the equity crowdfunding exemption. So, for some context on the legislation, companies can raise up to 1.5 million in a rolling 12-month period from retail investors.
They can stack that to also raise from accredited investors, friends, family, business associates, etc. Edison Motors raised that 1.5 million in about a week, which was exceptional. so beyond that, they ended up transitioning to an offering memorandum, which allows you to raise from retail with no exemption limited. So, they've been continuing to raise. these were their numbers at the end of 2025. They're still on the front platform and they're upwards of seven something million. Now, the last one here that I want to highlight is Gander Social. This is a recent raise that we just had and this is a great example of a company that doesn't have the product on the market yet, but they have a lot of interest. So, they're really looking to build a Canadian sovereign social media platform, which I don't think has ever been more top of mind than it has over the last year. And there's clearly so much interest in a solution like this. They had a wait list of about 35,000 people for their product. We opened up the raise. They did 500,000 within a single day and they ended up folding their round at 2 million raised from over 2500 Canadian investors and those are
individuals now who will support that product moving forward. They've started sending out some beta invites and we're excited to see the social media platform growth. The other thing about equity crowdfunding to consider is that it really is inclusive capital. so I'm sure many are aware that the stats are not always great for all founders, particularly female founders. 2.3% of venture cap capital funding is what typically goes towards femaleled companies. Our numbers are about 19% still not as high as we'd like to be, but as mentioned, it gives those founders the opportunity to really build their own table and invite their own investors to it, which is quite exciting. As well as that, on the investor side, historically 96% of Canadians have been unable to invest in private companies because it was reserved for high netw worth individuals. However, it's also where the majority of a business's value creation happens before they go public.
We've also seen in the last few years that companies are staying private longer. So, this really gives everyday investors an opportunity to access these more exclusive opportunities. So 68% of investment transactions first through us in 2024 were from retail investors. Now last thing I'll say is really just it's a a seamless capital raising experience from start to finish. great investor management tools. We have a dedicated investor relations team to support your raise. We also have the tech and tools to simplify managing your investors as well as providing campaign updates and more. it can be great for marketing expertise and exposure. As I said, you've got a dedicated campaign advisor who will support you with all the marketing strategy on your raise helping you create an effective pitch and attracting investors. And you'll also have access to frontfund 71,000 plus investor community. the frictionless investment flow. from the investor standpoint, you can go on your phone and go to frontfunder.com, find an opportunity that you like, complete your investment in under 10
minutes, having signed all the documents, IV verification as well as made payment which is a pretty incredible and experience. And then we've got turnkey fee, legal, and compliance. We've been doing this for over 10 years. process 30 360 million and we help you oversee the entire compliance aspect of your raise as well. So with that in mind, we'd like to invite all companies to be community invested and next time you're doing your round, think about how equity crowdfunding can be a compliment or a small piece of that round to also raise from your community. So thank you so much for your time today. I appreciate you having me and look forward to Keith's session coming up. Thank you so much. >> Thank you. All right, we're going to switch over to Kate's slides. Are they ready?
That just happened, didn't it? >> Oh, I went the wrong way. >> Sorry, I had a couple appendices just in case. >> Oh, it's not switching for me. Oh, I see. Oh, >> there we go. >> Got it. Ah, okay. So, just some quick housekeeping here. We because it's a scientific, we have a bigger full house than usual. We thought about a microphone. Thank you, Daniel. but we don't want to use it because it messes with the online. So, if you can't hear, move up. This is your chance to move up. That said, Keith has a loud voice and if it gets really bad, we'll put the mic on, right? Yes. We'll figure it out. >> Okay. that's it. Anyone want to move up? Now's a good time. Yes.
>> All right. Okay. Otherwise, yeah, you're out. brother. >> Good afternoon everybody. >> As Angie said, I am loud. >> ask my daughter. She says I'm the loudest human on the planet. So, really excited to spend this time with you. we technically have about two hours together. And so it is important to note that as we dig in I do not intend to talk at you for two hours. I am hoping for a lot of great questions. I probably put some content into my deck that will trigger some debate. That's what I'm hoping to achieve here. I'm hoping that we all come out of here with some increased wisdom with some increased insight and hopefully a lot more confidence on our fundraising journey. Does that make sense?
>> Great. All right, let's get started. so I also will definitely respectfully acknowledge the the territory that we are on, the Coalish peoples and just the honor that we have to live, work, and play here. again, thanks to New Ventures BC, Angie, Khloe and the team for having us, be a part of this and be a part of Vancouver Startup this week and the Vancouver Startup Week team and Innovate BC for making a lot of this happen. so who am I? and who is Spring? some of you know us, some of you don't. Spring exists to change the world through innovation. we love to work with early stage impact entrepreneurs and early stage impact investors. We're headquartered here in Vancouver. We also have offices in Victoria, Toronto, and Ottawa. and we've worked in about 20 other countries around the world. and so what is Spring? Spring is a platform we like to call it impact OS and it has three components. So I'm
actually here wearing two hats. So one is spring activator. Spring activator is the capacity building arm that helps entrepreneurs like yourself to become investment ready to meet the right investors to raise capital well. in addition to that we have spring impact capital fund. that is an early stage preed to seed stage VC fund. it is a 50-50 clean tech help tech fund that invests in Canadian ventures. and last but not least Propel Impact. Propel Impact is an organization that helps Canadian youth aged 18 to 30 to get careers in impact that includes internships, student consulting projects and fellowships. and then sneak peek for all of you raising money. they're actually launching a national studentled fund that will invest in Impact Plus Tech Ventures later this spring.
so another fund coming to the table in support of founders like yourselves. we've been around for just over 12 years now. we've supported more than 3,500 companies. we've also trained over,00 Canadians to be impact investors and be early stage angel investors about $110 million directly catalyzed into companies in our programs. So we definitely have rolled up our sleeves a lot to do that. 20 SP SPVS or special purpose vehicle. By the way, if at any point in time during my presentation I give you an acronym or like a a word or a phrase where you don't know the definition, like just raise your hand and or scream out definition more or dictionary. More than happy to share it.
Two things you're going to get from this presentation. One is a ton of great information. The second one is about 10 sound bites that you can use to wow your friends at the next cocktail party. So SPV special purpose vehicle. and then here's some of the companies that we've had the good fortune of working with, specifically within some of the programs and the SPVS. So, just a lot of track record that I'm bringing to the table. and then for myself, serial entrepreneur, I have been in your shoes. I've raised five rounds of capital myself. That's how I got my haircut. >> oh crap, like that'll work, you guys. Okay, we're warming you up. We're warming up. So but the important part is I've been an angel investor since about 2008 venture capitalist over the last couple of years as well. So just gives you a bit of a context for who I am and why I am in front of you today. so what I want to do today is I know we're supposed to talk about fundraising fundamentals and that's what we're going
to do, but instead of actually talking through some of the facts of like here's a checklist and do this and do that, like what I really want to do is I want to reserve the facts and and all of what I will call the easy learning to two things. One of course is AI because you guys can all Google this stuff, but the other one is at spring we have an online learning portal. and in that online learning portal we have a program called build and Ben has been a part of that. and so if your name is on the roster with New Ventures BC for today, you will all get access to that. So if you're like what was Keith saying about like a closing checklist or what was Keith saying about this? Just trust all that stuff is there. So, what I want to do is I actually want to spend the time giving you some of the insider tips and tricks that people don't normally talk about as we go through fundamentals, closing, what happens if you get stuck.
how many people absolutely hate it when an investor asks you the question, who's your lead? Show of hands. Yeah. So, you can always tell the people who have been actively raising the past, right? You know, somebody asking you who's your lead is is terrifying, right? Right? And so how do you deal with that? So we're going to talk a bit about that today. So as a starting point on fundamentals, remember first and foremost that your ground moves at the speed of relationships. The reason for that, anybody here doing more than 10 million in revenue? No. Anybody three years of profitability? No. So there's nothing wrong with that. But what it means is that if I'm looking to invest in your business, I can't look at your past 5 years of financial statements and say, "Oh, okay. I I'm making a financial decision here." All I can do is look at your early stage venture and in particular look at you and say, "Do I trust you and your team with my money?" It is a character-based investment. So it is important to note
that the more you spend time with the investors to warm up the relationship and to get them to trust you, the greater the probability of success. So this is not a factbased quantifiable investment decision. Joy and blessing and curse for all of you, right? Like it's not you can't just put math in front of people. You got to make me like you, right? And so that's the critical piece here. We move at the speed of relationships. And so this is really important, >> right? >> Wouldn't it be great if you walked up to Keith and you're like, you know, $50,000 save agreement withdraw, you know, wouldn't it be nice, right? And so we can't do that. So, so I know that we all have full-time jobs and we hear this term that fundraising is a full-time job on top of a full-time job. And our goal is to embrace that for all the good that it can be, but also still make it very efficient for us.
>> Does that make sense? Great. So, apologies for the translation from Google Slides to the platform that we're on. So, funky formatting. But, to make a long story short, the most important fundamental that you need to recognize is that often when we start fundraising, so today we're all standing in front of each other. Today's April 27th, right? So, you're like, great, I'm going to start fundraising today. We start working out, right? So, today, tomorrow, next week, next month, and we're meeting investors and we're like, hey, I'm creating momentum. The question is to what ends. So the first thing that we need to do as entrepreneurs is we need to create a work back plan. When do you want the cash in the bank and then work backwards from there. So it's really important that we need to set a deadline. The reason that we set the deadline is because it helps us to start to measure where we will get clarity on whether or
not there's interest from investors and is there appetite for my rounds and can we make this whole thing hang together. Does that make sense? So one example that I would give you is the average entrepreneur will speak to somewhere between 40 and 80 investors between when they start their round and they close it. So if you build a workback plan at least then you can start to say well how many investors do I need to meet every week? How many am I going to get through in the first month, the second month, the third month so I can start to build that momentum, right? When do I need to get my paperwork in place? When do I need to negotiate? Right? So that's the goal is to build a work back plan. so, oh, and by the way, part of the reason I say that is because, ignore the word rep, 12 to 26 weeks is the average amount of time that an entrepreneur will spend fundraising when you're racing from angels.
Now, if you're talking to VCs, you can be on the short end, but it can definitely be longer as well. So, so the important part for us is if we're going to take three to six months for sure to fund raise, build the work plan to link to that and make sure that we get there. Does that make sense? fastest I have ever seen a round come together 3 days start to finish. So, it can happen, but that's literally like getting struck by lightning twice, right? So I have also seen entrepreneurs try and raise around over 18 to 20 months. None of us want to do that. So that's what we're trying to avoid in this process. Okay.
So the important part here is we need to map our raise goals, KPIs, milestones, and wins in this process. So one example I want to give everybody is how many people here have an idea of how much you want to race, right? your name >> David >> David how much do you want to raise >> 500k >> 500k great thank you so for everybody all of us have a number notionally specific general right great so the important part is is that when you're building your work back plan jabad jabad your target is 500k so now what jabbad needs to do and all of us is we need to say great that's my started. What's my minimum?
So, in other words, 500K, great. But what if there's not enough appetite for 500K? Can I get by with 350? Can I get by with 275? Like, what is the number that is the minimum? And then we also need to have an upper limit number, our optimistic scenario. And the reason is I'm going to share a true story with everybody. I was raising a round for a company and we were trying to raise 500k and so we got 400k in so we had 100k left. We met with this investor and we thought it was going to be ideal, right? And so we're pitching him and we're only 25 minutes into the pitch. He's like, I've heard enough. I'm in. He's like, how big a check do you want me to write?
So then I'm like thinking to myself, I got 400K. I got 100K left. So I'm like, "Okay, I'll come up with a smart reason why he should write a 100K check." So I then responded to him and I said, "Hey, excited to have you on the cap table. Here's what we're trying to achieve as a business. You know, you're going to write the check you want to write, but I would love for you to write 100K check and here's why." Because then I'm thinking if he says, "Yes, I'm done." And he's like, "Yeah, yeah, cool, cool. I want to write a 400k check. What would you do with that on the spot? So my point is that stuff happens because these are angel investors, right? So when you're talking to an angel investor and they say, "So what if you raise target 500, but what if you raise 350? What are you going to do?
What if you raise 800? What are you going to do?" So the important part is we want to plan when we build our work back for our target and our min and our max. And the reason is not because we necessarily are preparing for those one way or another. Because the question may come and you remember this is a trustbased relationship. So if I ask you that question, say I asked Ben that question and Ben is like, "Hey Keith, great question. With 800K, here's what I would do with it. I do this, this, and this. This would allow me to get farther back." Right now I can trust him because he's been planning. He's ready to adapt. He's ready to pivot. He's ready to elevate. Does that make sense? Great. So always plan for min, target and max around KPIs and milestones and wins. I don't mean the round, I mean your company.
So the important part is you need to think about KPIs, milestones and wins pre and post the check. And the reason pre is because once say Ben pitches me for the first time, every subsequent conversation I'm going to be like, "Hey Ben, so what's new?" And if he comes to me as an investor and he's like, "Not much." Probably be the last time we talked, right? Because it's a progress game. So Ben, you want to like Ben will plan ahead and he'll be like, "The next time I talk to Keith, it's like we got this customer win. We got these extra users, we did this, we did that." Right? So one is you plan your milestones, KPIs, and wins in advance because then you can plan to communicate them to investors and investors know your company's moving.
You're making a ton of progress. Now I feel FOMO, right? Fear of missing out, I want to be in. I want to invest in this thing. And then what we do is we plan for the post because I might say to you if I put in 400K, what will you achieve? And you'll be like, ah, revenue will go up to here, user base will go up to here, etc. So that's why we plan pre and post. So these are the key things that we try and do in order to control our own destiny. So if there's one message I want you all to take away from this is your company who drives the bus question you. And so the starting point is you drive the bus by setting the goals and objectives up front and then communicating them throughout to build that sense a of trust that you're creating momentum and you're achieving what you said you would. And the second one is creating FOMO because if you are moving and hitting milestones then I don't want to miss out before you raise at a higher valuation or in the next
round. Okay, great. any questions on that before I get into the sales process? I'll start here. by the way, when you raise your hand, just first name your company name and then please >> Gordon. I'm in product management. >> Great. sorry maybe maybe you explain this by just saying you you update them with progress but I didn't understand your comment about pre and post do the do some of these targets change pre and post or you know it's just >> it's a great question so the pre-park that I'm referring to is you plan your milestones KPIs and wins pre the close of the round right so pre-checks the reason that you do that is because it's a way for you to test that it's actually going to be a compelling story to investors and it's a way for you to keep them in the loop. The post is because and how many people here have built a financial forecast? Trick question. Great. Okay. How many of you
have put in your financial forecast in the line item that is cash your anticipated ground and when? Okay. Notice a lot less hands. Still a few which is good. So the important part is when you show me that forecast, right, it's going to say 500k October or whenever it is, then in theory I start to see expense lines go up because now you're spending that money, right? So that's the postcard. So that if I as an investor say, "So what are you going to do with my money?" And you're like, "Thanks for asking financial forecast. Your money hits here and then I do this and then it achieves these and then the milestones and the KPIs both flow from that." So, does that make sense? So, one is we're building excitement and momentum pre-check and showing that we can deliver on results and then the post is so that we give investors the confidence that we have a plan of what to do with their money and we've not only you guys know that slide where it says use of proceeds, right? How many of you guys have seen
that? Great. Great. So, several of you have, some of you have not. It's okay. We have sample slides in the LMS that I was talking about the online learning portal where the important part of use of proceeds says oh I'm going to spend 65% on sales and marketing 35% on product right like you know that that classic slide if you guys want to be in the top 3% of entrepreneurs when you're pitching your slide actually should have two columns use of proceeds outcome of proceeds how many users how much revenue how many partnerships right what version of the product when did you integrate AI Yeah. So the that's the part that all investors want to see is what is the outcome of the money. That's what I'm getting at. It's a great question. I think Javad, you were going to ask a question.
>> J from my question is why do you accept more investment that you need? >> Such a great question. Everybody hear that question. Why do we accept more money than we're necessarily pursuing? So there's a couple of reasons of that. First, there is an anecdote that says it always takes twice as long and twice as much money to get where you need to go. And that is a cliche term, but it is a cliche term built on about 89 85 years worth of tech industry. You go back to like 1940 1945 when things really started with HP and the others, right? So back in Silicon Valley in the beginning and so so first things first if you have a plan and your plan says I need 300K we can all like put our credit cards on the table and bet and the bet would be you probably need more than 300k and the reason is because the market does things like people get elected go to war and like AI like everything else that
happens right so that's kind of the important part but the second one so That's the that's covering downside risk. So one is you could say, hey, I could take a bit more money just to cover downside risk. But the second one is opportunity. And this is why it's so important sometimes to build that third forecast, which is the optimistic forecast to say, so what would I do with another 250K or 300K or 500K? Like what would I do with that money? Where could I go farther faster? new market entry, market expansion, accelerate product development, augment the team, right? So there's a lot of things we could do. So the important part always is as an entrepreneur, we we know that plan A is one of many plans. And so the benefit of thinking pessimistic and optimistic is we cover ourselves if things don't go according to plan. But we can also dream with a plan, right? on the optimistic side. So the tradeoff to Javad's question is dilution,
right? Does anybody not know what dilution means? It's okay if you don't. Yeah, there's a handful of people, right? So the important part is the day you launch your business, you own 100% of your business. And when an investor invests in, I'm now a part owner in that business, which means you no longer own 100%. You own something less than 100. And the more money you take, the less you own. And so that's the tradeoff. That's why you want to look at the opportunity as well as the downside risk, right? Because the question is, if I own 80% of my business and the business can grow grow to a certain size, but what if I own 10% but the company went to a certain size, right? So, as an example for everybody, like I remember Hootsweet when Hootsweet did their it was officially a be round in 2016. Like they raised like $60 million like what did the owners still have?
Like the original founders maybe 30% across three guys maybe, but the company is worth about 2 billion. So 30% of two billion is better than a kick in the pants, you know? Like that's pretty solid. So, so but the question is can you elevate the business and grow? How do you feel about that? So, it's always the trade-off of if I take more money, I have the potential to reduce downside risk. I have the potential to create more opportunity and the trade-off is how much I own my business. There is no black and white decision there. It is management discretion. It's gray area decision. So qualitatively pros and cons here and then here.
>> Yeah. my name is Aish. I'm a founder and CEO of expert incorporated. >> Right. >> I had a followup question on the same thing. basically at one instance do you determine let's say you're getting X plus Y amount of money and you just need X. how do you determine what is the equity you should give you should be giving away or at what instance you determine that this is a maximum equity I can give away >> great question I have a section on I'm going to cover that off so I have a section specifically on valuation >> so hold that question we'll come to it >> great great go ahead >> and I just want to comment >> your name and company >> oh sorry Marissa my business is osis >> thank you >> I just want to point out for everyone people at keep all answer questions about structure. You're not necessarily having to fund on equity can use a safe structure. If you know that your escalation fund is your valuation at this given time relatively soon, and I'm doing that with a client right now, we
decide to do a safe because we know that we're about to close a major pilot for first customer and you don't want to do an equity deal before that happens. We publicize it. >> Yeah. So, how many people do not know what a safe is? Great. So, a handful of people. So, again, buy your friends to the next cocktail party. Simple agreement for future equity. So, fundamentally, what you're sharing is sometimes when we do a certain deal like say a common share deal or a preferred share deal, we're actually pricing the company today. When we use vehicles like a safe agreement or convertible loan, also known as convertible note, we can defer the valuation conversation to a future point in time, sometimes referred to as kicking the valuation down the road. And so, so the important part is sometimes either the trade us I will be talking about this type of structure in a little bit here in the session. So, it's a great point well taken. how many people here love specificity and
clarity? Yeah, you're in the wrong room. >> Yeah. >> if there's one thing that I will say about raising money is that literally everything is a variable and it is a variable until all the checks are in the bank and not a moment before. Literally everything can move as you go through. And so the encouragement that I have here is there is actually one thing that you can really lock in on and that is what is your sense of fairness for you because when you're thinking about like how much do I raise what terms do I use right these different things and you're negotiating with investors trust that sometimes like today is Monday so today's Monday imagine you know you're negotiating with investors today.
You go home, you have a really lovely dinner, you either have a glass of wine, kombucha, whatever your favorite drink is, you have a good night's sleep, you wake up in the morning. The answer then is the answer that you need to know. When you wake up in the morning, does that negotiation feel fair? Because remember I said earlier, I can't value your company based on any quantifiable amount because you're pre-launch or pre revenue or pre 10 years of like financial statements. So you negotiate on something where you're like this feels fair. I think it feels fair. You, the investor, everybody else. Then at the end of the day, you got to go home, enjoy your evening, wake up in the morning and say, "Does it feel fair?" If it does, good. You got a deal. If it doesn't, you got to keep negotiating.
That's why it's important sometimes to have people in your corner. We can actually help you think through it. Does that make sense? Go ahead. >> Muhammad of the founder of partner. I'm wondering how do you quantify fairness in this case because something may seem fair to me unfair to you and vice versa. So, how can you reach that middle ground is compromise compromise? >> Yeah. And I will say like I've had the good fortune of being alongside some companies who were like rocket ships. You know what? When it's a rocket ship, everybody thinks it's fair, right? Because everything's up into the right. You know, for every other company, it is compromised. I have never seen a situation where I've seen six or 10 or 12 investors get in on a company where everybody at the end were like, "That was awesome. It's perfect. It's just everything I wanted. It's not.
They're like, I want in the company. Yeah, I would have loved this. It, you know, but it's okay because it fair, you know, and fair for everybody, just so you guys know, is it's risk is potential return. And for anybody here who is also trying to make the world a better place, it's risk, return, and potential impact early stage. >> Great, great questions coming. Keep them coming. so this is something that I wish somebody had told me the first time that I was raising. because you know when you pitch an investor, what is the investor by definition? >> They're rich.
So, a true story, one of the very first investors that I pitched as a tech entrepreneur at the time, they were the third wealthiest family in Canada. and in in the in the buildings, right? And so you sit across the table from somebody like that and you're like eating ramen in your parents' basement because you're a starving tech entrepreneur. This there there's like a real sense of like I'm just going to beg and I hope they say yes, you know, and and you're going to pitch your value, but but that's it. But at the end of the day, that's actually not the case. You have to treat an investor just like you would treat any other customer. The only difference is you're not selling your product, you're selling a share certificate, right? So when you think about it that way, a lot of times, you know, you pitch an investor and they either say yes, no, or maybe. And you're like, "Oh, if you hear yes, you're the happiest person in the world." If you hear maybe, you're the happiest person in the world because you're an entrepreneur and you're eternally optimistic and you hear maybe, it's yes, right? And so, and then if you hear no, you're sad and you move on to
the next person. But the point is is like people tend to stop there. They don't actually map the process. So it is a sales process. You can put it into HubSpot or any CRM and I highly recommend it. It is an eightstep funnel. So remember when you're meeting investors, you don't care. You don't care if they have a million dollars or three billion. They are a prospect. You're trying to sell them a share certificate or equivalent. And so the important part is you have an initial meeting. If they express interest, 10% probability to close, 90% probability not to. But as you go through any sequence of follow-up meetings, for some investors it's one, for some it's 10, right? Like because again investors are like the box of chocolates, right? You know, like every angel investor does due diligence differently. Even every VC fund has nuances for how they do this.
So, the important part is after you do that first follow-up meeting, you're doing a bunch of due diligence. If you haven't heard that term before, due diligence is just a fancy term for I'm doing homework on your business to validate my decision. Right? But the important part is this one. If I say to you, I'm in 50% to close, 50% not to close. So, if an investor says they're in, there is a 50% chance they will not write the check. Why is that? Any guesses? >> They can get something better than us. >> They can get something better. >> Yeah. >> So, you guys want to hear the the ones that I've heard so far. So, I found something better.
my partner wants to renovate the bathroom. I've decided to climb a mountain in Nepal. I'm going on safari in Africa. Inoperable brain tumor. car accident. These are all real reasons that I have heard, right? And so, so my comment is remember angel investors are what? Remember I said they're rich, they're also very, >> right? Hopes and fears and dreams, good news, bad news, life happens. So, the important part is when they say verbally, yes, your job is to race them down here, right? how many people here have heard of the term term sheets?
Okay. any lawyers in the room? >> Yes. >> so your lawyer has probably told you to get a term sheet. Anybody know what a term sheet really is? It is a Valentine's card. If I say to Ben, "Ben, here's give me your term sheet." And then I'm saying, "Let's go on a date. Literally what's happening? Why? Because the term sheet is what? It is not legally binding at all in any way, shape, or form. So if somebody asks for your term sheet, even if they sign it, who cares? It is the same as verbal commit. There's 50% of the reason why a VC fund or an angel investor will back out. So remember, if somebody asks you for the term sheet and they sign it, then you need to be able to say to them, "Awesome.
Love to send you my term sheet. I'll do you one better. Term sheet is not legally binding. I'll send you my financing docs. You sign those because then you're going to find something out in a hurry, right? Because if I I say to Ben, "Hey, Ben, send me your term sheet." Ben's like, "Great. I can send you that and I will, but it's not legally binding." So, what I'll do is I'll send you my actual financing documents, too. And then you would say, "So, how can I get you to sign those?" And then I would be like, "Whoa, whoa, whoa, whoa." Right? So, some investors would say, "Well, so who's the lead?" Remember we talked about that big problem, right? So, the important thing is the first thing that happens is when somebody asks you for a term sheet, what are they doing?
They're kicking the conversation down the road a few weeks. There's no pressure for them to do anything. So the important part is you send the financing documents, the actual documents. When you send the actual documents, now they got to make a decision. So the first thing that they'll do is they'll signal whether or not they will lead or follow. And you need to know that. Does that make sense? So and then in addition to that, they will also start to clarify other things. So I would say on average about 25% of the time, I have heard people say, you know what, I'm not really interested. Now you need to know that, right? So, but then the other thing is they might say, "Well, I'm not ready to sign the document yet. I still want to do like I still do due diligence here or I still want to get comfortable with the competition or I'm not convinced about the team or like whatever they say." So, remember, it's a sales process. We are qualifying the lead, right? So, when they ask for a return sheet, what they're saying is, "I want to go on a date." And you're like, "No, no, no.
It's marriage or nothing. So, let's figure it out. Tell me what you need to get to a yes or a no. Does that make sense? Great. Go ahead. >> Just going to build on almost nailed it. Every one of these steps has a qualification point. There is a question you are going to ask investor at every stage. And one of the first ones is are you liquid? >> Yeah. Yeah. And so I I love that question. So there's something I want to also share with all of you. speaking of liquidity. So sometimes you talk to an angel who has a small amount of capacity and sometimes they do invest to the point where they have nothing available.
What was the first thing we said about investors? They're >> rich. The statistical probability of you hitting them at the moment where they're not flush, it's pretty darn low. Right. So, so it is important to know when you guys are in this land of may and if I say to you, hey, this is really cool, but I'm just tapped out right now. So, the important question because you don't you want you don't want to take that away as a maybe and be like, well, maybe Keith will be like he'll have money in a month, right? You you don't want to go on hopes, right? You want to control our destiny here. So, if I say to you, hey, like tap that out at the moment, this is cool. You say thanks. when you have capacity, what can I tell you that will get you to a yes or a no?
How can I help you make that decision when you have capacity? Because again, probably about a third of the time, half the guys would be like, "Yeah, you're right. Not really." She said, "Okay, good to know." Right? Or then I could say, "Well, who's in?" Right? Like, "Who's the lead?" Right? That question again. So remember, whenever we're talking to investors, we're qualifying those qualification points. What we want to know is, are they really interested? Yes or no. Are they going to be a lead or are they going to follow? Please do remember followers are great. Do not begrudge a follower. Right? How many CEOs does the average company have?
One, right? Like the world is made up of some leads and a whole lot of followers. Investors are what? They're a microcosm of humanity. Same thing. So, what we just need to do is prioritize, right? So that when Aaron is like, "Tomorrow at 9:00 a.m." You're like, "Which investor do I call?" The one that I think could be a lead. The other guys can wait. Don't waste your time on the followers. Keep on the list. Keep them warm. Does that make sense? Sales process. Sales process. Sales process. It's just a sales process. No voodoo. No magic. Remember investors are not some unicorn dragon magical creature. They just happen to have money. The benefit is you have your company. They have the money.
You have the ROI hair. Go ahead. >> Oh, go ahead. >> Yes. Kevin, headline AI. I see your exact funnel but for the funnel can you tell me a bit about where and how to find those angel investors? >> Okay, I will talk a little bit about how you source them in a bit. >> Yeah. So hold that question. >> Okay. Good. Go ahead. Regarding the sales process of the the investor part, so when you run for the flows and try to get the investor to say, you know what, check the finance dots. Let's make a deal. And when do you want to just create that little bit of a timeline where you can create some FOMO, talk to more investors, etc. If you don't want to be prepared to deal with >> Yeah, such a great question. I remember we talked about variables and the we're all going to learn to embrace our variables, right? And this like gray area. So, the question is when do we push to close?
>> So, I'm going to give you guys my perspective on this. It is an imperfect science, but I'm going to use Jav's number 500K, right? So typically speaking, as you start to meet investors, you're starting to you hear a bunch of nos of course and then you start to hear some yeses, right? Verbal 50%. So the important part is I start doing the math on that, right? How many people are actually saying yes in what amount? Right? Because when typically, not always, but typically an investor will say, "Hey, I'm in for 50k or hey, I'm in for 100k." Right? So, the benefit is you don't have to ask, right? They're like, "I'm in for 50. I'm in for 100. I'm in for 25." Whatever the numbers are. And you're like, "Great. I'm adding them up." And so, typically speaking, what I like to do is I like to say, I start to consider pushing towards close when I'm at 100% of my round, 500K in verbal.
Remember that I'm going to lose some of that money, but I also have people that I have earlier in the process. So, if I get to 100% verbal commit, I will look at that list and say, "Do I think they're warm enough?" And if I do, then I ping everybody and I'm like, "Okay, 30 days to close." And then what happens is that 500K will drop probably 375, 400K. Like some people will bow out again, bathrooms, this that, whatever they're doing, right? But the benefit is is that you go to those prospects and you're like, "Hey, I got enough. I'm closing." So then some people feel FOMO and they jump in. So 500 net some people out add some people in I can hit 500. So 100% verbal commit. And the reason by the way for everybody is you can roll the dice and do it earlier. But now you're I feel like my experience tells me you're gambling. You have less than 100% in verbal commit because now you're trying to quote unquote sell your way out of the problem. Right? So say you want to raise 500. You got 300 in verbal and you're like, "Yeah, but I'm talking to a
bunch of nice people, but 300k in verbal, you lose 100k of that. Now I I have 60% of my round fill with prospects with 30 days." Because when you tell people to close, 30 days for Canadian investors. If you're in the US, 15. So, true story. I had this actually happen to me when I was raising my third round of capital. I had this US investor and I was like, "Hey, good news. is like, I'm going to I'm going to push the close 30 days. He's like, why you going on vacation? I'm like, pardon? And he's like, why is it going to take you 30 days? What's wrong with you? Like he got mad. Like he was like, what is taking you so long? Like 15 max, let's make it 10. So, true story, I actually got negotiated to closing it in 10 days, right? And I was like, you know, and then you have heart attack, right? And so the important part is remember that geographic nuances. And so American investors will tend to hustle. They'll hustle faster than a Canadian investor. So when you're talking to all Canadian investors, it's
30 days to close. If you're talking to US investors, it's 15 days to close. Just honor the difference in culture. Does that make sense? Then you really got to believe on your verbal. So if it's gut feel, but that's the way that we do it, right? Go ahead. table out of 10 deals you're making, how many of them are you? >> Oh, me personally and also that's great question. So, for everybody, I'm an angel investor. Spring Activator also invests off its balance sheet and then we have the fund. So technically I'm answer answering this across three and so with the fund currently we're doing about 40% we're leading and then interestingly enough on on my personal side it's probably more like 60% that I'm leading and the reason is because again I'm an individual angel investor I my hopes and fears and dreams. I like to make the market for certain deals. I like to invest in deals when either it, you know, it's like a quirky market that
people aren't sure about or you know, it's in a space that people are not comfortable with or, you know, or it's in a space that I think is up and coming, right? So, I definitely am not the norm. Yeah. Yeah. But, but it gives you perspective. But the important part is remember venture capital funds will always tell you exactly what they will and will not do. That's the that's the benefit of VCs. VCs will say if they will lead or follow or do either. Angel investors tend to be a little bit more evasive. and there is an interesting piece of human psychology around angel investors. And so if anybody wants to prove me wrong, I applaud your courage what I'm about to say. So a 100% of the instances where I have worked with entrepreneurs, like say I'm pitching you, right? You're the investor and so we have a great conversation and I'm like, "This guy would be perfect for
my lead." So then I say, "Hey, would you be my lead?" So, true story. In the 20 years that I've been supporting entrepreneurs in this, 100% of the time, if an entrepreneur asks the investor if they want to lead, not only will they not lead, but before the round is done, they're completely out. And you know why? It's human psychology. Because if I say to you, want to be my lead? The average human is like, well, hold on a second. of all the humans on this planet, you think I'm the perfect person to be the lead for this round? And they're like, "But you're in this industry, this business model, and at this stage, and I don't have all that experience." Like, I think Rob has better experience. Why aren't you asking Rob to be the lead? Well, wait a minute.
If you're not asking Rob to be the lead, what kind of judgment are you using? Now, I'm questioning your judgment. It's literally this crazy self-inflicted circular thing that happens and all of a sudden poof, the investor's out. So, here's the important part is when you're working with angel investors, I personally recommend never ask somebody formally to lead. They offer it or you don't get it. It's one or the other. Okay. So, it's a tricky question. Takes a lot of courage to work through that. Go ahead. Can I have a followup question, please? What's your average check size right now? Okay. So, if you guys want to know the market, so interesting enough, 2026, I would say the average angel check size right now, like macro average is 50K. If they go into an SPV like frontf funer, it can be as low as 2500 bucks for an accredited investor. on the high side, definitely seen 250K from an angel. So that you know the range is broad but I would say you know notionally you're you
know if this is a room of angels you're thinking 50k per and then see if they tweak up or down. So if you're thinking 500k right that's 10 investors 50k a pop like you know it's 10 people on the cap table as an average right now in the Canadian context we have a bunch of preede VC funds now which is actually good news for all of you. There's more preede VCs funds now than there ever has been before. So typically speaking those preede VC funds about 250k first check would not be unreasonable as a baseline. but it does depend. So anybody here know active impact investments in town. So active impact investments great. clean tech fund their current fund I think is 110 million.
They on occasion will do a preede, but like the absolute minimum is 500. They prefer to do a million as a as a baseline check size. So with VCs, the benefit is is if you talk to a VC, you can ask a question, they will explicitly tell you their mid, max, and average, but that does vary by VC fund and the size of their fund. In our case, with our fund, our first check size is 400 typically speaking, but we can go as low as 100, as high as maybe 600. and then off our balance sheet we have done 10k to 600 and then personally I won't tell you. So there you go. >> Thank you. Go ahead. >> You have any words to >> it's a great question. I can cover that.
Yeah. So because that requires a specific approach. Great question. go ahead. >> yeah I have a question. So my business is X. So the people who get it want to buy me out and the people who normal people I try to get to invest not really get it in a way. now a lot of people ask me like what's revenue like that's a lagard indicator basically my project is only five weeks old having people interested in buying it but what I'm what my question really is is like how do you close that gap between revenue indicator but then really good technical progress that you know more strategic people are seeing but I don't want to sell it right I don't want to sell so weird spot right now. Yeah, it's it's great. so thanks for asking.
this is actually a really important question I think for the room. How many people here would consider yourself to be deep tech like hardcore IP? Great. And then how many people like software as a service? Great. A lot of people any CPG any like physical product folks in the room? Yeah. Great. Thank you. A couple of you. Great. all of you are awesome just to be crystal clear but all of you are different according to your question. So what I mean by that is when you are talking to investors so you made a comment where somebody's like hey how much revenue so what has happened is an investor has looked at you and before you have had a chance to say anything they have said so how about revenue so it is important to note that you need to shape with an investor or a prospective acquirer in the future you need to shape what actually progress means in your company in your industry in your business model right because if
you don't answer that question up front 100% of investors will look at you and say I just assume it's revenue so you need to say ah I'm a deep tech company and I'm in this space and I'm at this stage airgo progress is insert right and so it is important to note that progress can include include user customer traction, revenue, pilots and paid pilots. it can include technical progress including maybe IP, trademarks, secrets, patents, pending, etc. team development like growth of the team, additions to the team. what else? It can include finance and funding, right? Including grants and loans and other equity, right? So the important part is you need to shape what all of that means for your company. So for all of the SAS people in the room often investors would be like our go-to assumption is is you get yourself to market. So tell me what that means like
how many sales prospects in the pipeline how many pilots, how many paid pilots, how many have converted. Right? So I'm going to start to go in that direction. Right? With deep tech, I'm going to want to know the breadth and depth of the technical team. I'm going to want to know whether or not you have IP. I'm going to want to know, have you been testing in a lab? Have you been testing with potential customers? Like, you know what I mean? So, for everybody, this is really, really important when it comes to progress. You need to shape what progress means for your company based on your industry, your business model, and your stage. If you don't, the de facto by investors is they're going to assume revenue. And if that's works for you, great. And if it doesn't, make sure you tell them first. So, does that answer your question?
>> That does answer my question. I try to introduce myself and the company. >> Okay, great. Thank you. Great. Okay, I'm going to keep on rolling. so one thing to remember is seasonality. Again, we go back to our original point about investors. They are rich, so they take holidays. So, this is very important for all of you. If you're like, "Hey, I'm going to close my round at the beginning of August." The answer is no. Unless you decide to fly to the south of France and meet the investor in the villa, right? And in December, you can meet them in Whistler or in Vale or wherever, right? But otherwise, checks don't happen in these times. So, the important part is remember we we talked about our work back plan. So when you build your workback plan, make sure the end date is not in these two ranges because the statistical probability of you closing around in these two date ranges is zero. So just plan for it.
It's seasonality. It's like ice cream. Great. Just plan for it. Go ahead. >> Is it just from a fold or BC as well? >> Everybody. >> Everybody. >> Well, don't forget that people who launch VCs are what? >> And they're rich. >> Yeah. >> So they go on vacation. >> Yeah. So, it's just like this is the reality like true story. I the last round that I closed as a tech entrepreneur. I had this investor Stephen great guy friend right he's like I'm in like great you know and so June 12th we sent the email and we said okay everybody send us your bank details you know you can we'll wire the money right no reply from Stephen who said he was in and B is a friend right no reply so two days later I sent him a note hey you know 3 days later hey you know nothing so then I started asking around and I was like where's Stephen and everybody's like I No, nobody knew where Steven was. We're like, he's dead in a ditch somewhere. Like, literally, we're like, we have no idea. Like, nobody knew where he was. That was June 12th, September 15th, my phone rang with
Stephen. He's like, Keith, he's like, oh my god, what happened to you? And he's like, yeah. He said, you know, just one night, my wife and I were talking spontaneously, we decided to go to Africa. I just got >> So, here's the trick. Somebody ghosts you when they verbally say yes. So this is what I do. I say to all my investors, I'm like, I got a couple people who are stragglers. I'm going to hang my round open for when they get back. So when he got on the phone, he's like, "Hey, I'm so sorry." And I'm like, "It's okay." Like, "I'm just glad you're okay. Did you have a good time?" "Yeah, we got together." He's like, "Show me his photos over coffee." And I'm like, "Cool." He's like, "Yeah, sorry I couldn't make it around." And I'm like, "No, no, no." I held it open. So he broke that. So keep that in mind. But seasonality is really really key because you don't want to accidentally put yourself in a situation where you need checks in August or you need checks by Christmas and then investors go away and you're stuck. None of us want to be stuck. So just plan for seasonality. Now due diligence you're going to go through a session
with David after this on data rooms and it's going to be magic. So trust that you guys are going to crank through that. David really has a lot of breath and depth here. So what I'm going to do is I'm going to cover more in due diligence process and how we manage it. Right? So again remember due diligence is just a fancy cocktail party term for I'm doing work on your business. And because every ini every angel investor is an individual they will do it differently. So Jim his his last name won't come to me. There's an angel investor in town. His first name is Jim. and so he is a CFO by trade. So when he does due diligence on your business, he goes into your financial forecast, your numbers, your KPIs. That's where he goes. Other investors will be like go to market strategy, sales, right? U friend of mine, David, is a serial CTO by trade.
He's written more than 200 applications. Quantitatively the smartest human I have ever met in my life. So needless to say, he goes to the product road map and he goes to the IP, right? So every investor is different. but they're all doing homework. statistics have been done on and research on the average amount of time it takes an investor to make an investment decision from the moment that you begin the first meeting. Any guesses? How much time? >> Four weeks. >> Don't be shy. and one week, >> six months, >> six months, one day, >> three months.
>> So, the average amount of time it makes an investor to make a decision to invest in your business is 15 minutes into the first meeting. So, studies have been done. The average investor after 15 minutes, they are already thinking in their head, I'm in or I'm out. However, they will do due diligence. Why? Because they're not dumb. They got rich for a reason. So, they will do due diligence to validate or invalidate that decision. Okay? So, just to make sure that you guys know, like if you get to the end of the first meeting and they're like, "Great, let's keep the conversation going." You're add a yes. Now, you need to sustain them to the check. Okay? So, but this is the burning question. Do I trust you and your team with my money? It is a character-based investment decision.
Okay. So with that in mind, these are some of the questions that I I think it's really important for you to to talk through. So I've spoken to a number of investors that I have seen be very successful in tech investing. and this is actually their rank order in priority. So notice something. You know how we always talk about I'm investing in the team after I get past the market. So the first thing that they look at is they look at the size of the market. Now it is important to know that does not mean that you need to have the largest market ever. What what they're thinking is I have as an investor I have a certain risk return profile.
So I am looking for a certain size of market that will allow me to achieve that. So your goal is not to fake a size. Your role is to be honest about how big it is and let them opt in or out, right? So once they look at this size and they're like, "Yeah, okay, great." Then they can get into things like team and other. So remember, you're an early stage entrepreneur. So sometimes having a bit bigger market means that the market size is sufficient that it buys you time to figure it out along the way. How many people here have heard an investor say to you that you're too niche? So, I really appreciate the honesty in the room. That's a very difficult message to hear, but remember what they're actually saying to you is because you're early stage and I look at the size and shape of your market and my worry is if you don't get it right the first time, you will not have a second chance of success.
That's actually what they're saying. So the important part for all of you to niche is one is first make sure you consider the global total addressable market and not just Canada right we're all Canadians right so the joke that I always make is if I'm an American I say hi my name is Keith but I'm Canadian so I say sorry my name is Keith and all of you live that when you pull your Tam Sam together you're like the TAM in British Columbia is you know so so the important part is the TAM like make sure you you give the the objective like the whole opportunity whether that is BC or Canada or North America or the world doesn't matter but you have to play that out right but the second one is if you do have this kind of narrow market what you need to articulate in your deck is here's the three ways that we can win plan A B C and plan A will not be fatal and here's why you don't articulate ated as directly as that but that's the story
line that you give. Does that make sense? Okay. So I start here then I asked this question do I like you and your team? Remember I said 15 minutes 15 minutes is like Aaron and I are chatting and at a certain point in time I'm like wow you got a good team here like this could be good. Great. Okay let's keep going or not. But the benefit for you is you can't control that. I either like you or I don't. So like it's out of your you don't have to lose a minute of sleep over that. Your team is your team. you guys are awesome. If an investor agrees, great. If they don't, it's okay. Move on to the next one. So, is a product, solution, service exciting to me? Do you know your market and competitors? actually, I'll give you a great example. Frontfunder, by the way, you can just hear it earlier. one of our companies just successfully raised on there. It's Vegan Gain Nutrition. So, Vegan Gain Nutrition is a vegan nutrition company. Patents pending, super cool, right? me personally, I just signed up for the Grand Fondo in September and the Vain product is like transformed my training. Like it's incredible. So I love their product. So now I want to do due diligence, right?
Like firsthand experience. do you know your marketing competitors go to market and progress? We'll talk more about progress in a bit. And then this last one is super important. how many people have asked the question, what is your exit strategy? Right? How many people keep Keep those hands up. How many pe How many of you found that question to be really annoying? Oh, better than I expected. Still a few. So, when I was a first- time entrepreneur, you know, sometimes you think you have all the answers. And so, people would ask me that question. I'm like, why are you asking me this question? The reason is because the premise is, well, of course, we're trying to build a business, but if somebody comes along with a $100 million check, they'll take a longer look at it.
Like that was my perspective. But the issue here is actually timing, right? Because some angel investors want you to exit in 3 to four years because they don't have a lot of capacity and need to recycle their capital. Anybody here heard of Hake Ferris in town? Thank you. Couple people. So Hake Ferris I think is 88 or 89. Still an active angel investor in town. He was the first angel in D-Wave computing which is a quantum computing company here in town and I still remember when he first invested shortly after he invested and I was chatting with him what are you doing like this is like it's like putting your throwing your not throwing your money away it's like I don't know like you're just never going to see it and at the time he was already like late 60s right and he's like Keith he said I'll be long dead before this thing ever exits but he said I want to leave a legacy so for him timing is not 3 to four years. It's infinite. So the important part for you
as a founder is you need to make sure that if you're thinking about like selling in a hot minute that you tell people if you want to build a billion dollar business. So Ryan Holmes when he was doing Hootsweet people asked he's like I'm going to build the first billion dollar business in Vancouver which implied time frame, scale, patience, number of rounds, everything else. And I will tell you a lot of investors walked away when they heard that and some stuck right and if you say quick win some will stick and some will walk away right so the important part is it's a sales process target customer make sure you qualify right go ahead >> you just you mentioned hey it's interesting because in my first startups back in 2002 >> and first time I wrote a business plan I didn't know what it And we met with Hey, he said no.
>> But he said my son might be interested. Yeah. >> Because their investing profiles were different. >> Yeah. >> That's so true. >> So we got a son too. >> Yeah. Exactly. And and the fun part is again angel investors different right. >> And to that point he if if somebody says no meet with an investor they might have somebody in their rolodex who can say yes. Ask them. >> Yeah. So that's great. Go ahead and then >> how many questions out of these would say that you see the teeth when you have >> Oh so it's a great question technically none and I will explain. So these questions are all questions that we're thinking as we go through the first meeting and as we start to roll through due diligence.
So it's very rare that you would look at any one of these things and be like ah this now right like we want to like this we want to be an artist right so it's very rare very very rare that that happens but typically what happens is it's it's I don't know kind of like boiling water like you warm up to it so so the goal is so the term that you will often hear probably more used by VCs and angels is we try to build conviction on each one of these through due diligence. So we have our initial gut instinct and then what we want to do is we want to build conviction over time. Does that make sense? So is it like actually you're right my my followup question was is it going to be product specific or corporation specific but I think >> yeah it's very much very much that is specific a little bit of a follow what was said there when it comes down
to investors saying no I've heard different schools like if you have an investor that would say no never ask for a referral because someone that told you no and most probably that referral investor is going to ask is going to ask that investor, hey, are you in or no? So, what would you suggest in this case? Would you suggest asking for a referral? Can you get a no? >> That's a great question. So, so for everybody, the recommendation was if somebody says no, you can always say, "Hey, listen, no worries. Do you know anybody who would be interested? Ask for a referral." And then you've heard the opposite. >> Yeah. So, I did a post on LinkedIn about a week ago and Michelle Sinclair is a fairly famous investor in Canada and I was talking about part of this process of like getting to a close and so and we were talking about this at what I call a a Canadian no, which is when you hear maybe, right? And so, so what was interesting is Michelle actually went off on that in the comments. She said, "I hate it when people ask me for a referral. I just
said no. I will not waste any of my introductions on a company that I don't want to invest in myself." You know, that's her opinion. But here's my comment. If I go to your your comment where you're like, "Hey, Keith, you want to invest?" I'm like, "Nah, it's not for me. Do you know anybody?" So, so in this case, I'm already a no. So, frankly, what does she care what I think? you know, if I get offended, but if I don't get offended and refer people, so I am the opposite of Michelle, Miss Michelle Sinclair, like if somebody asked me if I legitimately know, and here's why. She's thinking to herself, you know what? I said no to this company because I think it sucks. That's actually the mistake. I say no to a lot of companies because they're outside my thesis even though they're awesome, right? So then I do want to refer them over. So typically speaking, my encouragement to you is that if an investor says no, then what you do is you say, "Hey, no worries. Do you know an investor who invests in my sector and stage and business model because I'd love to talk with them." So what you're doing is you're reminding
them, I might be outside of your thesis area, but I can be in his or hers. So yeah, that's my go ahead. >> Thanks for asking about the feed. So >> your name and company. >> Oh, yeah. Okay. My name is Josh. I work in Soul Italian. >> Okay. so my hyper so in my case I am right so so is that something that's like how can I find someone industry and coounder can just >> great great question so the question everybody is what if I do not have founder market fit this is a term that you will hear in the startup world where somebody says you personally have industry or business well industry or andor problem experience yourself. So, I have worked in this industry. I understand the problem. Air go, right?
And that's what you're referring to. And you're like, what if I don't have that? So, there's a couple ways that you can do that. One, of course, is add a co-founder who has that. The second one is yes, you can add advisors andor board members, but typically early stage, it's advisors. But the third one is is that you create a surrogate. So, here's my recommendations. Anybody here have a great idea, great company, but you do not have specific experience with the problem or industry. So saying do not have founder market fit. There's a few of you. So the important part here is go look at a pitch deck on the internet which by the way for everybody here you should look at this pitch deck. It's called Launch Rock. All one word and LaunchRock is like forever ago now but it's still a gold standard deck. And so Launch Rock was a company that existed for a very brief period of time and exited for a lot of money even. And so when you read the deck, it was like LaunchRock, the logo slide two, the tagline, getting users is hard. And so I was at a pitch event when they were
pitching this, there was 800 investors in the room and I was about three quarters back in the crowd. And so the guy gets up on stage, he's like, "Hey, so like I'm Johnny from Launch Rock and getting users is hard." And like literally 800 investors were like yes. You know his next slide 1 million plus signups. At that point in time nobody asked about founder problem fit. Not a single person. So the number one way that you deal with founder problem fit is with traction and progress. So that's the other avatar that a lot of people will look for is they'll look for people who are actually like superstars at execute, right? Arguably Hootsweet was that back in the day, right? It's like what did they know about Twitter dashboards? Nobody knew at the time.
They just out hustled everybody else. So does that make sense? So that's a that's a fast way to do it. there's probably a few other secondary ways, but there you go. It's a great question. Okay. So, I want to talk about some tips, tricks, and trends. sorry, washed out a bit. you drive the bus. So, I had this interesting situation. One time I was working with this entrepreneur. He was trying to raise 300K, Greek seed round. And he's like, "Yeah, I've got all these great people and I have a lead investor." And so, great. And then, so I coach him and a couple weeks later I'm like, "How's it going?" He's like, "Yeah, we're still working away." So that's like, you know, a couple of months went by and he's still not getting the checks in the bank and I'm like, "What is going on?" So then we meet and I'm like, "So why don't we have the money in?" Right?
Like so we were talking to it out and then he's like, "Yeah." And he's like, "You know, but my lead's lawyer blah blah blah blah blah." And what he said, I was like, "Hold on a sec. What do you mean your lead's lawyer?" He's like, "Well, my lead was really generous." And he said, "Just use my own lawyer, Son." So who pays that lawyer? The lead. So who does the lawyer listen to? The lead. So if the lead doesn't tell him to do it, what happens? Nothing. So I So at that moment, I was like, "Great." I said, "Let me guess. He also gave you his account." He said, "Yeah." I'm like, "Great." I said, "Pick up your phone." Like we were in a coffee shop, right, in Olympic Village. I said, "Pick up your phone." He said, "Great." And I said, "Call a lawyer and fire him right now." And he's like, "I can't do that." And I'm like, "Yes, you can and you must because you need your lawyer to drive this bus." So, true story, in 20 minutes, he got on the phone, called a lawyer, fired him, and the lawyer actually said, "I was wondering when you were going to do this." True story. Hung
up and called the account, fired him. I then picked up the phone. I I introduced him to three lawyers and three accounts in town. The next day, he picked one lawyer, one account. 3 weeks later you had 400k in the bank your bus you drive it. Okay. So the other thing is these are the key items that you need to work with. So for all of you who are raising for the first time. So first things first have a startup lawyer. A lawyer who is a startup lawyer not a divorce lawyer not an public. Get a startup lawyer. lots of good ones in town. I'm happy to refer you to there's great startup lawyers here which is great. deck and data room.
Again, David's going to cover off data room which is going to be a ton of fun. and then graph deal terms which I'm going to talk about here in a moment. target investor list. So your target investor list is each one of you. You're in an industry. You're in a business. You have a certain business model. you are at a certain stage. So your job is to do the research to find out who is actually your target investor. Remember you do not sell your current product to every human on the planet. Right? So you have a target market for your product. It's the exact same for your round. So if you want a bit of inspiration, remember I said average entrepreneur, we'll talk about like 40 to 80 investors. So, if you want to check out a company, it's called Social Nature, all one word. Annalia Krebs is the CEO. Total amazing CEO. And so, when she was going to raise her round, she's like, "Ah, I don't want to waste any time here." So, what she did is she did her homework on who the
target investors were. She came up with a list of 16 names. She contacted a grand total of 16 investors, 13 invested. Done. Now, took some research up front, but this is the very definition of pain now versus pain later. If you focus in on like you're a health tech entrepreneur, health tech software preede, like do your math, do your homework, because it makes a huge difference. Remember we talked about building trust with investors. If you reach out to me because I'm a clean tech, health tech primarily investor. You're like, "Hey, Keith, like I'm over here." It's like, "Oh, okay." Right? you know, so so don't waste their time, but don't waste your own time. Like, do yourself a favor? anybody ever hear the cliche term never say never?
Yeah, it is your enemy when you're raising around. If you want to believe in never say never when you're fundraising, buy a sandwich board and say, "I'm raising a pre and go stand on the corner." Never know, right? Never say never. Maybe somebody's going to drive by and they're an angel. Would you do that? No. Please don't right but it is effort up front. the work back plan that we talked about now remember earlier we talked about Javad had 500k as his target. So then we have like a min max. So the important part is please always have a plan B, a plan C, a plan D when you're fundraising. It is incredibly rare that a founder will raise exactly as they described. Right?
So just please keep that in mind. Always plan BCD. now data room, you guys, if you're going to get into it, I'm just going to touch on a couple of quick things that I think about from a sales process perspective, not content of data room. So, first you're going to have a sharable folder. Now, one thing that's kind of cool is there's a product out there that was actually launched here in Vancouver. So, it's a homegrown product called Orange Docs. Orange Docs actually allows you to share your data room and you track every single thing the investor does to the data room. So if you're wondering where people are lingering or like where they're exploring or you know like so the benefit is it's great. Now I'm going to share a funny story with you. The first time I used orange docks which few years ago with a company the the entrepreneur called me after about two weeks and he was so frustrated and I was like why are you so frustrated and he's like I'm talking to all these investors and they asked me for my data room and he said they're not looking at it. He's like because he can track it,
right? He's like literally no one is going into the data room. And I'm like, "So they're not talking to you?" And he's like, "No, six of them have said yes." They just never did any diligence. >> So fun fact, right? Some investors will do a lot of due diligence. Some will do none. But with Orange Docs and equivalent tools, you can actually at least get a handle on like who's doing their homework, who might be higher maintenance, right? who's going to be an easy close, right? So, we use those tools. The other one is sales technique. So, we want to stand out from the crowd. Can you guys do me a favor? Can you guys just all like just look at each other? Just turn around, look in the room, right? Okay. Wave, say hi. Okay, you guys are all best friends and you're all enemies, right? This is this is friendnemy territory right here, right? And the reason is because we are pitching for investment, right? And while you might not take the last check, like I might meet you, get excited, but then I meet
you and I'm like actually I'm gonna invest in it, >> right? Like so that can happen, right? So the important part is how do we stand out from the crowd? There's a few ways to do it. And one of them is if I, you know, meet Ben and Ben pitches me and I'm like, Ben, this is awesome. Send me a copy of the deck. Then Ben will send me an email. He's like, Keith, I'll do you one better. Here's a copy of my deck and my link to my data room. Everything's sent in. And here's a link to my FAQ. So now what Ben has done is he's actually said to me, first I'm serious. I'm not just running around town pitching. The second thing is I've done all my homework. I'm prepped, right? And I've got an FAQ. What is an FAQ? Frequently asked questions. So where do those questions come from? Other investors. What does that say to me as an investor? I'm not the only one. Now I start to feel like FOMO. So use this as a sales technique, right? So we share this early and we have an FAQ. Every time an investor asks us a question, we
put the question and our answer into the FAQ and then that document is in the data room. We share the link because what that says to the investor is I'm serious. I've done my prep and there's other investors living. Okay, make sense? So use it as a sales technique. and then here's a critical piece as you go through. I made this comment. I don't know if you guys heard it. It was a passing comment earlier and I was like, "Hey, I meet Ben for the first time." When I meet you for the first time, I'm full of curiosity, right? I'm like, "Who are you? How did you come up with this idea? How did you build the team? Like, where are you going? Like, what have you learned?" Like, there's a million questions that I have. when we meet the second time I have the same question every single time which is so what's been right and so the important part in that is you need to prepare because this is a trustbased relationship and it is a character-based investment the one thing
you plan above all for every single investor meeting is what am I going to tell Keith today that will increase his trust in me and the team and you need to have answer that question. Am I sharing progress? Am I sharing big wins? Am I sharing some reflective learning? Am I sharing some feedback from a customer? What is it you're going to tell me that is going to increase trust? Because when I get on that call, I'm building conviction in this deal, which means I'm building trust in you. Don't leave it to chance. That make sense? Great. That is the one thing you have to do before every meeting. Now progress, we talked about this a few times. So first, as you can see, progress is many things. Market traction, user traction, weight list, like I remember Ben as you're like getting gearing up, right? It's like weight list and weight list to user, pilots and paid pilots, IP progress, team edition, surround programs. How
many people here in your business model you would sell to businesses where you would start with a pilot? Okay, so all of those hands, it is important to note that the number one concern that an investor has is do you know how to convert a pilot into a contract and do you know how to convert pilot one into pilot 3 and pilot five. So the important part is is that when you're mapping progress to me, you need to say like in our first meeting, you're like, "Hey Keith, I got three pilots." D. So in the next meeting, what are you going to tell me? So these two pilots are going to contract and here's how and I've added now three more LOIs that will lead to a pilots in 90 days. Like see what I'm saying? like you need to convince me all you pilot people you need to convince me that you know what you need to do because sometimes you're like hey I got a pilot then you're like man what do I do right you know and that's okay first- time entrepreneurs
totally fine get the answer right like that's the key is to make sure you have that in this process IP we talked about any patent application people in the room anybody with patent applications anybody with trade secrets Anybody have no idea? I appreciate the honesty. Thank you. so there is an amazing program that New Ventures BC leads. if you are not aware, it's called Accelerate IP. if you are unclear in any way, shape or form about your IP strategy and execution, talk to Bowie and the team, right? Is that fair to say? and just make sure you're aware of that. you just re the federal government just reapp smartest thing you do if you don't have IP it's okay then like there's two types of businesses right there's like tech first companies and then there's execution first companies just know thyself right and and pivot accordingly team additions we talked about round progress is also very important [1:34:07] one thing I will note in the Canadian context is sometimes when we talk about round progress around progress is not only investors but it's also grants right anybody ever heard of NRC IRA trick question I swear like the moment you incorporate a business in Canada you go to the office and they like tattoo NRC IRA on your wrist you know and so it is important to note that grants in Canada are great when you are pitching to people that you are getting grants Make sure that you position I we got a grant X. That grant is catalytic because it allows us to do X.
So don't just tell me you got 600 grand from IRA or like digital supercluster or whatever. Because if you just tell me that you got a number then my concern as an investor is that you're trying to run the business off of grants. You're not trying to run it off of go to market and revenue. Grant should be catalytic. They should not be operating. Does that make sense? >> So it is important to note that investors are assuming that you have the ambition to grow and you have the ambition to serve your market. So there are many companies and there's a few of us in this room can name them. There are companies that have been around for 20 years in Vancouver that probably cumulatively have done less than a million dollars in revenue over 20 years. but they've gotten grants every years. So, so investors in Canada, it's important to note they're always going to gauge early. Don't talk up the grants. Talk about them as like here's where we're going. This is what we're trying to achieve. This is what I'm raising in equity. Oh, by the way, got a couple of grants. They're catalytic for
these ways. As in, they're not here for operating. They're helping me to advance this, advance this. Go. Right. Does that make sense? Go ahead. I noticed one problem founders in sometimes is there's founders who rent optimized versus revenue optimized. yeah, I feel like that's kind of like the double edge side of getting grants too. >> And and and to be honest, like I'm glad that you raised that. Like I have phenomenal respect for entrepreneurs who have gotten grand revenue. I've done it. Right. And the diff and the reason is because there's a delta between ideal and reality. Ideal is like we run out to market, people start buying it right away, pilots like user revenue whatever and like up and to the right.
It rarely happens that way. So sometimes we do need to supplement and sometimes yes there happens to be like right now the Canadian government has some very strategic grants in the market. So sometimes they line up right up to your business and you're like I'm going to take that you know. So, so please do note I am not disparaging grants, but your job as an entrepreneur is to make sure that you're conveying your ambition and and you know kind of like the scope and scale of what you're trying to achieve and that you will control your own destiny in getting there. And yes, you will take grants, but they're catalytic for that as opposed to like, okay, I have a million dollars in expenses. I'll get a million dollars in grants and then we'll breathe and then I'll figure out revenue or pilots or whatever the case may be. Yeah. So, Rob, go ahead. My name is >> Oh, sorry. Just behind you first and then back to you.
>> Thanks. Yeah, Rob from Prime Health. I guess my comment is is about the the combination of brand pilots. So, you know how I feel about pilots. >> Absolutely. the comment about pilots is that if you have a pilot hospital if they're not the one who's paying which if you're in healthcare or you know a lot of other spaces quite often you know have a partner they're getting money from somewhere else or you're getting money from somewhere to pay for it. if they're if they don't have money on the table, they're not a customer. Not yet. >> So, pilot and >> and so maybe two things just very quickly on that. I just want to make sure all you pilot folks hear that. So one is when you're doing pilots first of all what Rob is conveying is that he understands that in his sector pilots work a certain way and therefore he is stepping into those pilots and working
those pilots accordingly. So that gives me confidence that he understands his pilot process. Yours may be different. Right? So that's that's point number one. And then the second one is always know who the economic buyer is. always know who the economic part is. Go ahead. Continue. >> I'll just say yeah to to your point along with with grants. So I say that we're we we have a grant trajectory and revenue. We haven't taken any of but we are leveraging the grants so that we can you know also get red at the same time. And I found that a lot of the grants recent are very sort of revenue forward like positive they're trying to drive you in that direction. So to your point if you have particularly in health if you have written a a grant application lately you should be able to back up [1:39:49] you should it should be at the tip of your tongue be able to tell your story about about how that grant is held >> because you you will have just written 5,000 books. >> Yes that's great. final thing that I will note if anybody here thinking about pitching to US investors. Okay, great. So, it is important to know you go south of Portland and American investors have no clue what the grant landscape is here and they don't care, right? So, it is important to know like if you were to go down to Silicon Valley and do a pitch event and you're like, "Hey, you know, I'm raising a million dollars because I already got a million dollars in grants." And they're like, "What are you a communist?" Like, I'm not joking. Like these guys are like they're like why do you need grant money? Like surely you're solving the problem enough to get the revenue. Like it's a thing. Like if you pitch in New York or Seattle or Portland like they're close enough to the border they've done enough crossber stuff that they get it.
But if you go down to Silicon Valley to LA to San Diego to Miami don't even talk about grants. They don't understand it. They don't get it. It doesn't exist in the US. They're just assuming you're hustling your butt to get it to revenue. Period. So make sure you're positioning accordingly. Now you're going to say sir your name again. >> My name is Neil from a question regarding to solo founders. You know in the age of AI we can do too many things without having a team especially in early stage. So how do the feeling of investors about solo found? >> So great question. so I'm going to speak in general. The reason I say that is remember we said angel investors are all individuals. so I definitely know of angels who invested in solo founder le businesses. But I would say statistically and investors don't like solo founders.
and the reason of course is like you know you pick your cliche like win a lottery, move to valley, get hit by a bus, like whatever the case may be. but more fundamentally, there's just not a bre enough breath and depth of knowledge and experience and bandwidth and capability for me. Like if I'm putting a half a million dollars in and you're early stage and there's a ton of risk, then I'm like, I really wish there was four people around you, right? So it is important to note that that being the case where I have seen solo founders sort it is they add people very quickly to leadership team. So while they may not carry the mantle of co-founder they have like a like a director or VP sales they have like a CTO they have a they have a so they do add those people. I have seen a handful of situations where people will stretch it enough. Let's say you talk to these two guys, you're like, "Hey, you should be a part of my team." And they're like, "Yeah, I'm totally
interested, but like I need a day job. I got a mortgage." Right? So then you're like, "Well, why don't we sign a conditional employment agreement such that when I raise 500k or more, you agree to quit your job and come work for me?" I've actually seen a couple situations where that happened. But if you're solo founder and then you got like a manager here and like a developer over here, then that lack of breadth and depth and capability inserts another dimension of risk that tends to put an angel investor to the place where they're like now there's just too much risk. So it's about that breath and depth and capability and bench strength managing risk in what is otherwise a very risky venture. Right? So that tends to be what happens.
>> Go ahead. >> thank you K. My name is Say I'm from Nan Region Lab and our company is a bio >> and I was thinking maybe I don't know if I'm right or not. We're going to talk first about you talked about funding. Should I start with pricing the company the method that >> valuation? Yeah. >> Just about there. Yeah. >> Okay. >> I'm I'm about there. Yeah. Yeah. So, you're going to talk about >> I am. >> I promise. Oh, absolutely. Baited breath. I'll wait till I got till 3:20. >> Here's the time. Yeah. >> No, no, but I definitely >> It's the most important because if there's some if you want to sell shares, you should >> It's the most important and it's the least important >> and I will explain. I promise.
>> Okay. I promise. >> Okay. >> I had a follow-up question on the previous question. so you're saying that soloreneurs add a additional layer of risk basically when it comes to securing funding from the investors. >> Correct. But isn't it the whole game that the angel investors end up funding the soloreneurs or the smaller companies because it is it's a cash 22 situation. No. >> Yes and no. and so so typically speaking in this world of technology startups and I I can't remember the statistic used to be 2.3 founders per startup like they they did the math one time to be like oh the average like for startups that are funded in the US is like 2.3 founders. I don't know how what you do with a point three of a person but there you go. so the but the important part is is the other cliche term that you will hear is actor and hustler.
So sometimes you'll hear that you'll read about it on the internet where every startup team has a hacker and a hustler. What they're actually referring to is people have their respective strengths and capabilities breath and depth. So there's a couple ways to build a team. One is say sorry bad math six people in the front row. So you six all meet at a bar after this event. You're like, "You know what, Tuck Keith, my current idea is no good. I want a new idea." And you're all like, "Yeah, let's come up with a new idea." Nine o'clock tonight, you guys, we got a new idea. Six co-founders, right? And the important part is a a lot of startups is a couple people coming together to be like, wouldn't it be cool if we did this or this is a big problem solved, right? And then definitely there are others where it's like I'm looking out the window and I'm like, "I got an idea." So, so think about it from an investor perspective. If you six come up with this idea, what is that idea?
It's your baby. You birthed it. So, your conviction and commitment as a founder is higher. Now, if it's your idea and you come to these five people and you're like, I got a great idea. And you're like, hey, it sounds cool, right? And he says yes to joining you. But the concern that I have is if 3 months later and you're paying him $3,000 a month and he's got a mortgage in Vancouver, he's like, "Yeah, it's a cool idea, but I got a big mortgage." So, so that's why co-founder as a term carries a lot of weight with investors because every company does this and when you're down having been a co-founder when you're like convicted because you birthe the idea, right? So, that's where it comes from. Okay, I'm going to come to you. person.
>> John says Prince went if angels are wary of co of individual founders. >> Yes. >> How do they feel about married founders? And is that even worse if they've previously been divorced? >> Yeah. >> So, it's a great question. if you anybody here quietly writing a sitcom your notes, it's like such a great opportunity. I'm here to tell you. so I would say like circa 2017, 2018, if a if a founder came to me and they said, "I'm a solar founder." I'm like, "You're not going to race." And if somebody came to me and they said, "We're married." I would say, "We're not going to race." Like 10 years ago, nine years ago, it would have been next to impossible.
2026, like I'm seeing deals get done. I'm seeing it deals get done with solo founders and I'm seeing deals get done with CO. And so so the important part is when you're solo founder remember I talked about augmented team make sure that you're building senior team beside you so that people have conviction that it's not just you when it's marriage you need to have agreement right so typically speaking kind of a reverse vesting agreement or some other agreement that says on the off chance that something happens now I will say for you guys like I've invested in couples And I've invested in singles like solo entrepreneurs. And the reason is because you know what? Two, three, five, six people, married, not married, I don't care. Like, you know, I I've invested in a parent and a child. You know, it's like there's I personally think it's just as much risk. But sometimes you want to have some kind of a written agreement in case things go sideways.
And it's like, okay, then you know, thankfully you can just take this to a lawyer. They'll affect the agreement and be done. It's actually when because investors like risk you're like no no no we got a reverse testing agreement okay you know as opposed to oh you're married they're like no no but we love each other you do you know so does that make sense great hand up I think and then and then I >> do and I know that probably we saw each other was at a Christmas party >> yeah good memory >> I'm younger than you so And I know I also know that when I see you and if I don't give you an update, you're not going to talk to me again.
So, can we just touch a bit more on the difference between pilots and paid pilots? Yes. We just noticed past weekend, but the weekend previous. >> Congratulations. >> Thank you very much. >> That's a huge milestone. >> Thank you. >> And I did it with my married co-founder. So, >> well, I'm married, divorced, now remarried. >> Yeah, of course. co-founder's not here. I left. >> Okay. >> Just like I did at the Christmas party, right? >> but and s for doing through doing that process, we we learned a lot. had to adjust and like but so >> what like how do we turn those pilots into paint pilots if we're just sort of like >> you know like we need those pilots to sort of work through these like you know TV stage so >> get to the next >> so I love this question so it is important to know some of you in this room are pilot type businesses how How
many of you again are just straight up SAS with no pilots? Straight up SAS. No pilots. Anybody? Whoa. All those SAS people disappeared. >> what do you mean no pilot? >> So, in other words, you can just sell the product. You don't require a pilot to sell. >> You'll need a pilot. Exactly. Yeah. So, some of you who's selling direct to consumer? >> Yeah, couple of you. Great. So, the important part, it doesn't matter what model market traction. Aaron, this is what you're referring to. >> Yeah. >> So, it is important to know all of you have some version of a salesunnel. >> So, that what you want to do in that first meeting is you want to help the investor to understand that you understand your funnel, that you understand how your business works.
In your case, you're saying I have a B2B funnel and I have prospects and then I have there's interest and then maybe from interest there might be like like a confirmation of ability to pay. You might go to anou, you might go to an LOI and then you'll have pilot, paid pilot contract, right? So you start to work through. So it is important for any of you in the room who might do a free pilot first that is okay and sometimes very validating so long as you shape it in the context of the overall funnel. So, so the important part is you can say, "Hey, this is a free pilot and I'm doing it for these and these reasons and it's going to convert into X, which could be a testimonial, a case study, a video, a paid pilot, strength to contract.
So, so your goal is is free pilots are awesome. They're not the end goal. Tell me what comes after it right now. If any of you are like, I actually have no idea how to go from a pilot to a customer. So, first my comment to you is it's okay. You're not alone, right? Second of all, if you are looking for specific help on how to like sort out your salesunnel, I don't care what business model you have include, but Aaron's is the one we're talking about, then my encouragement to you is look for very targeted advice and support to that. So don't look for like a generic advisor, a vendor or anything else. Like if you're like, hey, we're trying to figure out pilots. Find somebody who's an expert in pilots and be like, I need you to help me to figure this out. So there are some people in the ecosystem in spring, we have a program which is called the growth venture studio. The growth venture studio is specifically a go to market program. So if if you came into our program like Rob and you're like, how the hell do I go from pilot to
contract? then we'll show you how to do that, you know, and that's that. Like, but don't So, my encouragement to you guys is if you're trying to raise and you aren't sure of how your business model works or how to make something go through the funnel, get somebody to help you with that before you really start to race. Because if you stand in front of an investor, remember we did our ideal investor targeting, right? I'm pitching you. I'm like, "Hey, I got a free pilot." And you're like, "So, what's next?" And I'm like, "Well, I think it might be Then you'd be like, "Hey, this is cool. Keep me posted." Which is code for I'm going to wait and see if you figure it out. Which means I ain't writing a check until you do. Which is not the answer we want to hear. Okay? So trust the benefit for all of you in this room. Don't care what problem you're solving. I don't care what business model you have. There is at least 16 entrepreneurs in the world who have gone before you. No problem, no question you have is rocket science. somebody else out there has tried it, done it, figured it out. Your job is only to ask enough people until
somebody gets put in front of you that gives you the answer. Right? So that way when you pitch her, she's going to be like, "So how does that work?" And you're like, "Thanks. This is how we think it's going to work." She'd be like, "What about this? What about that?" And you're like, "Oh, good question." But now she's leaning in, right? Great. Go ahead. I have two questions relating to the discussion that we said. One of them regarding the soul conscious label. So let's say my in my case for instance I'm a solo founder but I have a team of seven that are based on internet. So would that still be considered each one of them has to go would that still be considered a solo founder venture or philosy founder for each one of those folks. So >> yeah it's a great question. So two things one is remember it's the level that they're at. So like if you have six developers, who cares?
>> But if you have like a CTO type Yeah. like so, so first think about that. The other one is if you're telling an investor that I have multiple people on the team and they're just working for equity, what I hear is cool, you have a very short window upon which you can raise because these people are going to they're going to have to pay their bills somewhere along the way or they're going to find a different moonlight that's cooler. So, so the important part is if you tell me your team is only working on equity, I'll give you like four months. You don't raise your round, I can assume people are going to start dropping off. Don't tell me they exist. Does that make sense to everybody? It's about commitment levels and equity is cool, but it's only cool if that other person is like super wealthy or they're 16 and still living at home.
Put a point on. >> Go ahead. >> Perfect. Another question when it comes down to the pilot table. So for example, in our case as well, it's called a pilot initially, but it's going to it's going to be a feature anyways because we have we're like at the double-sided marketplace pretty much and the buyer side is free and then the vendor side is going to pay eventually. So the buyers can pay attract vendors. So whether a pilot or not where they're safe, they're still going to be for free. So in this case, how can I let the investors know that it's all a free pilot, but we're not converting those folks. We're actually getting other folks that are going to be grabbing. So, it's a great question. So, the answer to your question is going to take longer than we have time for. Not that it's terrible, but the important part is what you're running is a marketplace. Y >> and so a market. Anybody else run a marketplace here?
>> Okay. So, just a couple of views. So, the important part of the marketplace is there's what we call strong side and weak side. So, the strong side is the side that really needs the marketplace. What you're saying is it's like I've got one side that wants to be a part of this and once I get enough of them, then the other side will show up, right? strong side and weak side. So I don't consider that to be like pilots. What I think is you're preloading the strong side so I you can attract the weak side. So you need to convey that to me. That makes sense. Great. Sorry for too many questions. >> No no it's great. do you have any comment questions? >> Yeah I just wanted to comment on the pilot. I'm just the customer I mentioned or my client that I mentioned sign pilot. They're they exist in a market that is always pilotled for the rest of their money.
>> Yeah. >> and and the you might know of shots bought with the gunshot guys. They didn't that's that's the market. It's somewhat nebulous around that. We don't we but it's the same sort of market structure. They will they've always done pilots first and then they have a very beautiful conversion process. They have a very smooth frictionless conversion process and they got really good at just converting. >> Yeah. >> So don't be afraid of it. If you have to build it into your model if you think that or in the first two years of your existence that's what you need to do because you got to collect customers and data of performance. both of them. Don't be afraid of >> Yeah.
>> So, I'm gonna I see the questions, but I'm gonna I do want to get to valuation properly, which has come up a couple of times, and just in the honor of how much time we have, so might have some time for a few questions at the end, but one thing that I will note here, this is the framework for a monthly update email that you will send to investors. I will tell everybody here I have been training entrepreneurs now for 15 years. I have literally shown this to every talk that I've given about fundraising in 15 years and what I say to everybody every time is the best entrepreneurs give regular update emails and only 5% of them do it. And I got to tell you, I always hope that when I say it to a room full of people, everybody's like, "Okay, everybody, we're going to do it," you know, and they don't, you know. So, so my encouragement is do this because you will guaranteed be in the top 5% of entrepreneurs.
Why do the 95% not do monthly update emails? Why we cannot? Any guesses? >> They don't have an update. >> They're afraid and don't have an update. Same same. So the important part is one of the things that I love about monthly update emails is it requires you to have an update because if you're delivering it the first week of the month, you better have something to say. So if you want external motivation to like create progress and create traction and hit milestones this and the second thing is you can't be afraid of bad news because no investor believes that any of the businesses in this room are all champagne and roses, right? We always know there's ups and downs and things work and don't work. And so, one of the great things about sending a monthly update email is sometimes you send an email and you're like, "Wow, last month sales went down, but here's what we learned and here's what we're doing about it." So, when you convey bad news, and you should because it's natural, is you say, "What
happened? What did we learn? What are we going to do about it?" So when you deliver bad news, sales down, users down, product growth, whatever, just make sure you're like, "Here's what happened. Here's what we learned. Here's what we're going to do about it." Okay? Because then what you're doing is you're increasing trust. A, you've been honest. B, you're not being like, "Oh, wow. That was a bad month." You know, it's like, "Here's what happened. Here's what we're going to do about it." So you're pivoting. You're adapting. And remember, sometimes we do this and it's all in our head, but we forget to communicate it out loud to investors. We forget to communicate the resilience, the pivoting, and the adaptation. So, this is what we do. Again, this is in the online learning portal, so you can check it out.
Valuation. So, this is the magic conversation. so I'm going to give you some some information. There's some information on the slide, but I just want to make sure you guys have a starting point. So, valuation is one of these things where you're like, I got to get it right. Now, here's the thing. If this room was all investors and you're like, I today you get a chance to pitch every investor right. So, it is important to know when you stand on this stage, I don't know you, I don't know your company, I don't know your industry, nothing. Right? So when you stand up on stage and I look at you, I just assume you're giving up 20% of your company on the ramps. That's it. I don't know who you are. I don't know how much you're raising. Nothing. I'm speaking to preede and seed stage, especially in preede. but also seed stage. Once you get to a brand is different because you're farther along and sometimes there's good math use, etc. But the important part is remember it's a trustbased relationship. It's a
character-based investment. So the average angel investor and the average preceded VC we look at your business and say so what do we think looks like fair and fair looks like 20%. without knowing anything about your business. And then as you pitch your business, then you talk about your industry, your business model, the problem you're solving, you talk about the quality of your team, right? Like you, so you start to talk about all these things and then we can start to talk about whether or not things start to move up or down. So, so here's the interesting thing and I have been on panels with other investors and I literally caused fights when I do this on stage where you know an entrepreneur like you in the crowd is like so how do you value a business and I'm like it's 20%.
So, if you're raising a million dollar, then I'm going to assume your valuation is 5 million after the check, right? So, it's $4 million plus 1 million in cash equals 5 million. 1 million divided by 5 is 20%. I have just valued your business. That's it. Now, I got to tell you, when when I'm on stage with investors, they go mental when I say that. and after five or 10 minutes of debate, they're like, "Yeah, it's kind of how it snaps." So, it is important to note that when you're thinking about valuing your business, it's actually because your preede, it's just a notional value according to how much you are raising.
So, notice I said if you're raising a million dollars, your valuation is $5 million after the check. 1 / 5 equals 20%. So what's his valuation if he magically changes to 2 million 10 right and up or down? So the interesting thing is the valuation goes up or down based on how much you're raising in 20%. Is there any logic to that? No. It is the accumulated expectations and experiences of investors over time. If we don't get 20% of your business, why am I taking the risk as a starting point right now? I want to make sure you guys hear this. Notice 5 to 15% dilution if you're a rockstar. Like that first round in Hootsweet, I think was 7% dilution, but it also went from zero to 1.6 million business users in 13 months.
Like it was like we're unicorns. So they only diluted by 7%. But the average is 20. So the important part is now you get to have this conversation with yourself which is so how much do I want to raise? So Java you said I want to raise 500,000 right? So 20% is 2.5 million after the check. So that's the starting point. Now here's the fun part. you actually can now start to ground yourself in a little bit of reality like external market validation which is called comparable transactions. So, comparable transactions is when you would go into the news media, pitchbook, crunchbase, drawing the blank at the moment. I feel like there's more platforms that we can access, course, claude, chat, GPT, etc.
But the point is is what you do is you say, okay, I'm in a certain sector, I'm preed, I have a certain business model, what other deals have happened in the last six months? And then the internet and these platforms will feed back to you and say ah there's these three deals that have happened. And so the important part is then you can start to link yourself and say ah my valuation is actually 6 million and the reason is because he raised money on that valuation and he's similar to me and so did he. So now you're using an external validation to say I'm pegging my valuation based on what I see. Does that make sense?
So it is important to know that this is just to ground you in a baseline. I am not saying set it and forget it. What I am saying is ground yourself in a baseline and then what you want to do is go onto the internet onto pitchbook onto crunch base hockey stick. There's a few others and you can go out there and say so what other deals are out there? Remember we talked earlier about having a startup lawyer. Ask your lawyer like have they seen deals similar deals etc. One thing that's very important to notice you have to consider the following when looking at comparable transactions. One is was the deal done in the last six months or is it old?
So you're pitch me as an investor and you say hey my company's valued like his. This deal was done three months ago. I'm like okay I'll take that as a legit. But if you're like, hey, my company is valued like his and he raised around 18 months ago. No, because the world changes. We all know that in the last 18 months, right? So, it is important to note that when you're looking for comparable transactions, ideally they've occurred in the last 6 months. And the older they get, the less relevant they will become for investors because of passage time. Right. Go ahead. Are you the one that's going to be setting the valuation let's say as an entrepreneur or do I just ask for what I'm going to create before I then let the market kind of decide it? It's a great question. Remember we talked about a sales process?
>> Yeah. >> Okay. how many people have heard a pitch where somebody gets on stage and they're like, "Hey, I'm raising a million dollars and the terms will be set by the lead." Anybody heard that before? Couple of you. So, so my comment is I have heard that pitch before. It's the very last thing you want to do ever in your life. And the reason is because if you stand on stage and say, "I'm raising a million dollars and the terms will be set by the lead." What you're saying to me is, "I'm not driving the bus. Second, I have no lead. Third, I don't have to do anything at all until you call me with your lead." you you so imagine if you're standing in front of this room and pitching and if I was pitching you guys and be like hey I'm raising a million dollars and the terms can be set by lead you guys are followers you're like like you know what I mean like you're like just I won't even have why would I talk to you >> because you don't have a lead you have no terms I have literally no basis upon which I can evaluate this business because there's no terms so it is
important to know I'm it is important to know you must set your draft terms When you set your draft terms, then what you do is you stand up here and like, hey, we're raising a million dollars. And this is the way I like to do. We're thinking about raising up to up to, remember we talked about plan ABC. We're raising up to a million dollars and we're we're considering a safe on these terms. Talked about safe for and so so the benefit of saying it that way is first I'm aiming for a million, but I might take less, right? And the second thing is we've done the homework to say I want to drive my bus and I'm I'm thinking safe but if you want to do something else I'm openminded to it. So it's sales technique, right? So up to an ML and we're looking at it. We're thinking about the this type of paperwork, common shares, safe agreement, convertible note or prefer preferred sharing, right? So just to to be crystal clear on that. So so my encouragement by the way, sorry, there
is one other channel where you can go for comparable transactions. a great accelerator, a great incubator. So like New Ventures PC, SFU Venture Labs, Launch Academy, Spring, Biotech, like there's lots of people out there where you're like, "What are you seeing?" And just people would be like, "Oh, I'm seeing this. I'm seeing that." Right? Does that make sense? final thing, a lot of you raised your hand when you said you were going to look at US investors. So first, I applaud you. Thank you for not being geographically constrained because if your ideal investor by industry or business model is in Portland, go get them. If they're in Singapore, who cares, right? Great. So, but the important part is you have to remember exchange rates, right? Because if you go down to the US, this is not a critique. If if you go down to the US, according to an American, how many currencies are there in the world? One. So if you say I'm raising a million, they hear a million US, which is 5 million post US. So now that's a 1.37 million round here on
whatever that is 6 something 6.8 million post. So but you've been telling people to hear a million on five. So now what do you do? Right? So the important part is is if you're pitching American investors, remember your deck and and that core information is in USD. And if you're pitching up here, it's in CAD to make sure it makes sense. That make sense? Yeah. I had this hilarious situation one time because I could see like a lot of weight right now around valuations. So that so that we had the situation on currency where I was pitching US and Canadian investors. So we had the terms and so so anyway so I had a US investor who's like super excited to invest it and we're like great. So he sent his banking details to wire the info and we're like great please send us a check for $137,422.19.
And then like literally about 9 seconds after I sent that email that the investor called me. He's like what is this? And I'm like what do you mean? And he's like I'm investing 125k. And I'm like, I know. And he's like, what's this 137 blah blah blah? And I'm like, well, it's just the exchange rate. He's like, no. He's like, it's in USD. You take it in USD. Don't do this. You know, like he and again, like he was pissed. I don't know why, you know, but the point is it's like, yeah, like if you're in the US, talk US currency. So, one thing I will encourage is if you're starting around and you're like, I'm going to talk to US investors and Canadian investors. My encouragement to you is have two decks. a CAD deck and a USD deck. And the benefit is if you can raise 100% in the US, you've just given yourself a 37% premium on valuation and on money in the bank.
But if there's no appetite down there, you got your CAD deck. So it's a million in a million. It's just in two different currencies. Does that make sense? Great. Great. Okay. so we just talked about this setting draft terms. Don't don't don't tell people the lead will set the terms. We're telling them draft terms I'm looking at. Right. Every VC and every angel knows that if they're super convicted in the deal and they want to change the terms, they will or they'll try. Right? So, so it is important to do that. If you tell a room of investors, an investor of one to one, I'm raising a million. Psychology says, I'm now expecting you to raise a million. So, 6 months from now, you're stuck at 750. And you're like, you know what? I'm just going to close it at 750. I'm like, no, no, no.
What happened to a million? That happens all the time. Don't do that. Right. So, just make sure you say up to up to up to. and then, around terms, safe agreement was talked about earlier, simple agreement for future equity. It is this kind of hybrid equity almost debt-like creature, but it sits on your balance sheet as like a contingent equity. and so so it is important to note that the majority of deals in 2026 so far have been safe. Last year was the same. And the reason is because in this like world of economic uncertainty and everything else, a lot of investors are like, you know what, let's not try and hammer out what the valuation of this company is. So, let's kick it down the road, right? So, we're we're putting that out there. and then, as I said, with a with a safe agreement, one of the terms is a valuation cap. And so what the cat means is that in the future when
you convert this into equity which is on your next financing typically speaking is that irrespective of what your your round valuation is in the future when it's priced then I am capped at a certain valuation to protect like my upside as an investor. So let's say you and I agree to a say a 10 million cap and then 18 months from now you do a round at a $20 million valuation I converted 10 because that's the cap right and so that's the difference. So sometimes if you're giving shares then you're like oo like I'm valuing the company today right and so that you feel the weight of that but when you're doing a safer agreement it's a cap and so it's it's a projection of kind of like I'm here today I'm probably going to raise around in two years or less. So I'm going to be worth this much today this much in two years. So typically the cap
is like some negotiated position between those two numbers. So go ahead, please question. Okay. >> so what do you think about founders who raise like really early and destroy their benefit? >> Okay, so that's a great question. so, how many people here don't know what a cap table is? Do not know what a cap table is. Okay, there's a couple of you. So a cap table is basically a document or an ability for you to list who owns the business and in what amounts, right? So it's like everybody who's a shareholder by percentages, right? And so that's what you're referring to. So it is important to note somewhere in the rest of my deck. Here's quickly taking a photo. Boom. Okay. there it is. Possible five messy cap table. So it is important to note that a messy cap table. So a messy cap table can mean a couple of things. One is more than say 20 investors on the cap table.
The second one is where somebody owns more than 20% of the business but is not active in the business. So this could mean for example a co-founder who has left and and so so that's called dead equity is the term that investors will use. so those tend to be the two biggest things. There are some more complicated versions, but it is important to note that for the most part there's typically multiple paths upon which you can clean up a cap table. So my encouragement is if you do have any of you have messy cap tables, don't hesitate to ask. no progress in the business around obvious lag lack of financials andor scenarios especially for all of you in the niche category unrealistic deal terms. So what I would say right now is if any of you are in the room thinking a preede round of more than $2 million Canadian that would start to be way above the norm in the Canadian context. US maybe difference preede specifically first
round of capital right so it is important to note that if you came to me and said Keith I'm raising a 3.5 million preede I'd be like whoa like that's off standard and again investors are no different than other humans you're doing something off standard then I'm going to start to question it if you are trying to dilute remember we talked about dilution if you're saying I'm only going to dilute by 5 or 10% you better be a unicorn If not, people are just going to be like that's just way way way too high, you know, in in that world that we talked about solo founder. And notice I put the question mark because if you have a great leadership team beside you, then sometimes you can counteract that. very quickly, a lead so you hear this term. So it is important to note a lead is three things. One is a person who negotiates the terms with you. So in other words, I say to you, I will lead your rounds with, you know, in support of you. We agreed to the terms. I've done my due diligence and then I
publicly say to people that I've led the round and you can say it, too. Right? That is the rarest form of leading. So most of them actually is some combination of second and third and typically speaking, it's the last one. And that is if sometimes people just say yes and they write the check without anybody ever talking about lead no lead. So the way that we can tackle this oh no the way that we can tackle this is by what is called the coalition of the willing. So you remember we said we're going to talk to like 40 to 80 investors and our hope is to talk to like 15 to 30. But when we start to talk to people, my encouragement to all of you is when you're ready to go, you have a target investor list. You do what's called a 30-day blitz. 30-day blitz is you try and get in front of these guys as fast as you possibly can. And after 30 days, you start to get expressions of interest.
Then as you're warming up, typically you get to like the third meeting or so. And if if I haven't say verbally committed to you, you'd be like, "Keith, we've had three great meetings. this is super exciting. You know what? I would love for you to be on the cap table and so tell me, you know, is there any additional information that you need? Can I send you the paperwork, which is code for give me a yes or a no? Right? And then so then you're going to get a yes, no, or maybe, right? And a maybe often is like, so who's the lead? So you're like, oh, okay, great. I just started raising, so I'll call you when I have a lead. Or I'll be like, sure. because some people don't care, right?
So, your important part is as you start to pitch investors early, find out who gets excited but doesn't care about a lead. And the reason we do a 30-day blitz is because we want to compress it in order to find out fast, right? Because what you don't want to do is have some like where you're like raising around for six months and then I say to you, who's your lead? Because I know you've been raising for six months and you're like, I don't have one yet. So if you don't have a need after six months or you don't have a coalition of the willing after six months then what happens is I start to think you know when you sell a house right raccoons in the attic right mice in the walls that's people start to worry passage of time is a thing right okay and I am rapping so what's next for everybody I mentioned build build is a program that spring runs so again all of you are going to get access to the LMS coming out of this through New Ventures BC.
now if you want to take it formally as a program, the next intake is July. It's 3 months. It comes with five bookend webinars to sort through kind of like all your like I need to figure out life as as my round. Now round prep is actually funding roundts. So you're like no no I am going to raise now help me build my deck, my data room, my deal terms. I want my ideal investor target list. So, this is like I'm going to do all the homework. I'm going to be ready to go, right? And in particular, I'm going to be ready to go after the summer holiday season. So, that's what this is for. And then round ready is for any of you who are actively raising right now and pitching investors and you're like, I got to get it done or I'm stuck or whatever the case may be. So, we've got three ways to do it. And then as I mentioned earlier on the pilot, if you're like, "How the heck do I go from pilot to pilot two or how do I go from pilot to contract or how do I get more users?" Anything that's go to market focused is our is our boot camp venture studio. I'd be happy to talk
about any of them. I will note that companies that have gone through the top three levels have raised $10 million in the last nine months. So it's getting the job done, but people are raising capital focus on preede. So, it's really exciting to do that. And that's it. >> Hey, Randy. >> Yeah. >> Hi, everybody. >> Hi, too. >> Thanks for being here. It's a It's a full-on fundraising afternoon. I I think you'll find my style compared to Keith. Well, Keith is a super engaging presenter. I I hope to be like that, too. So, I'll try my best. this is also a very technical topic, due diligence and data room. So, don't expect the exact same. my goal is though I mean my goal though is to make sure that you guys take a look and actually see what's inside of the black box of due diligence and preparing for it in the form of a data room because this is something that really doesn't get a lot of talk in the startup space. Part of it is because it's tough to say exactly what goes in due diligence on at an early stage company.
part of it is just because it's nuts and bolts work, but it's very important because there's a way to do it right which helps you get to a closed deal and there's a way to do it wrong which makes sure that you don't get a deal done and a lot of the reasons that you might fail in due diligence are preventable if you know what to expect. so I just changed title of the talk today used to be frictionless data rooms expanded the scope. You've seen scope creep in real time but I think it's justified today. we're going to talk about the overall process of due diligence a bit without being duplicative of with what Keith said before. and then from that context I'll dive into how to be prepared for it with the data bro. So the goal being faster more successful successful fields.
So I'm David Sly. I'm a turn professional accountant by profession. I started my career with KPMG in audit and I somehow very securously found my way kind of sort of back into that realm. Didn't mean to but here we are. I worked with a handful of you know well a big handful of startup companies now different stages right some precede raising their first round some raising a series A I'll tell you a bit about that most recent deal today and everything between all the different types of capital as well so equity investment debt investment grants consortiums partnerships raising customers so I've done a lot of work in the fractional CFO space and I want to bring that expertise to you today in the form of this talk. I've done a lot of sessions like this now.
So, I want to get a sense though, I missed the beginning of Keith's talk, so if you went through this, forgive me. We had to do it again. I just want to get a sense for who in the room has raised a round of capital already? >> Couple. Okay. And then is everyone else thinking about raising then and has not yet? >> Yeah. Okay. Does anyone else think they're just gonna like you think you want to build it more of a lifestyle business and not raise capital, but you're just here because you want to see what it's all about? >> Yeah. Kind of like Okay. So, most people So, a couple have raised I'm assuming those who have raised haven't done up to a series A. Is that correct? >> Yeah. Okay. So it helps me organize myself because what we're going to do is we're going to talk more about a more mature stage due diligence process because it helps illustrate you know what's all happening here then talk about how to make an MVP out of that right so what how is the whole process relevant to the early stages because you know spoiler alert only bits and pieces are I'll try to help you think through what's going to be relevant to your view
what you learned today why investors undertake due diligence in the first place what you should expect from the due diligence process how to be prepared with an exceptional data room and then how I can help get this done and I'll tell you a bit about my practice at the end of this. So due diligence process of evaluation and the reason investors are doing it I think he's covered this very nicely. I'll give you my take in case there's anything else you can glean from this. what they want to do is evaluate the claims that you are making because up until this point you've made a lot of claims in the pitch deck and that's because you needed to you need to get interest and get your foot in the door with the conversation. That's the exact right thing to do. But then the the flip that happens almost overnight it seems like is well I didn't get really questioned to this point but now if I want to get this term sheet signed or maybe I did just sign a term sheet and they want to go into a couple months of what was this due diligence happening now and all these requirements and they just gave me a list of 50 things that I need all of a sudden like it's jarring right because you got into it in such a storydriven
anecdotal like lighter way but then all of a sudden it's like nitty-gritty finance legal business product stuff and it's like you know let's talk about that part of it all. they're evaluating the claims that you are making. Make sure that the claims you're making can be to the extent they can be validated, right? ultimately you want to make it easy for the investors can get to a yes, right? Because in this process speed matters, right? Slowness kills deals. time kills all deals is the old adage in the deal man. And if you're not ready for what comes up with these investors, you're doing yourself a disservice, especially because these are things that really should be started months in advance. >> Yeah. Wow, it might be. So, yeah, you're trying to make it easy for them to say yes because when they say yes, you get cash every once in a while.
Why do they do it? To reduce the risk of unwanted surprises first and foremost. I mean, these are professional money managers. Some of them, some of them manage their own money, right? So, they do a little bit less. We talk about that. But other ones have a fiduciary duty. Next point to the investors that they raise from, right? So if I'm an investor and I have say 10 people who have given me money from it I've created a fund and now with that fund of capital I'm I'm placing bets across a bunch of different startup companies. Okay. So I now owe that duty to act in their best interest those 10 individuals who gave me money. And part of that is going deep into diligence saying can I at least verify that there's not going to be any surprises that I should have captured to begin with? Those are easy checkbox exercises, right? Like no funny arrangements with the equity on the cap table and you know that the historical statements are free from error. I mean they're going to do at least what they can to be reasonable about this, right? the fiduciary duty runs stronger the more sophisticated and
mature the investor is. So really, if you look at them and you know that this is an investor who's been around for a long time, you can be pretty darn sure they know what they're going to be looking for in this due diligence process. Your goal is to help them get what they need. on the other hand, if you're dealing with an angel investing their own money, then this is their first or second investment. it's total crapshoot, right? Maybe they're going to be really riskadverse and want everything and more. other people might just say, "Here's the money. You know, loved your pitch. I understand your space." So it's it's tough to say but ultimately professional fund managers need to do this legally. also framed in the positive they want to build conviction in your business opportunity right like they want to feel the way you do about this business. And what's I find really interesting about this work is that you know everyone here in the room who's building a business myself included we all have our you know arcanum our our very specific knowledge of the the entire space the entire domain. we get a chance in due diligence to present this to different investors,
you know, so now it's not just we that know this. We have our conviction, but we can contempt to help an investor see that same thing. And that's a really powerful thing if you can get it done right. >> And ultimately to make better bets is what they want to do, right? they don't want to make silly mistakes. They also want to make good bets. And if you can take the lead, as Keith was saying, drive the bus in this regard, you're doing yourself a big favor with that obviously doesn't build your business as well as you do. So a recent experience that I've had in series, this is a series A range. bit of context, it's a private equity firm who's making the investment. It's $10 million investment invested in a company that I work for. what happened was probably about a month of probably about a month of meetings with them from first emails all the way through to term sheet signed. And once the term sheet was signed, what that's saying is basically that we have in principle agreed that this is something that we want to continue to [2:31:27] work toward close deal or maybe more specifically the investor at the time of the term sheet says if everything checks out in due diligence, this term sheet is the rough strokes what the deal is going to look like, right? So we can agree in principle with some looser terms that we want to keep working together and work this towards the close of a round. As soon as that term sheet was signed, this is what we know, right? So for the Wednesday, maybe it was a Tuesday. and the lead on the investor side said, "Okay, great. We're going to start due diligence. Here's what we need." So this is just a screenshot of the Gant chart that they showed and I'll I'll read it out. It's text a little small in the back. Kickoff call. Fine. Just like any any project man kind of thing, right? Financial due diligence, accounting due diligence.
That was my realm. So first and foremost up here this mattered a lot in series A because they were looking at revenue because that was the basis for valuation at that stage. so yeah no pressure we got through successfully so it's all good but finance accounting product due diligence market customer calls they wanted to call 15 customers 15 which is crazy and we pushed back. They did five. But it's interesting, right? Because these folks cared almost exclusively about revenue. I'll talk more about exactly the procedures they went through. obviously if you're pre-revenue, we've got it just that session. market customer calls, very important, legal documents, background checks, a bunch of other stuff. interestingly, deal close is on here.
And that was actually in the term sheet that they had five weeks to get through due diligence because no one wants to be hung up in intermittable discussions. another reason to be prepared beforehand, right? For us, it was reasonably okay to get all these financial and accounting information that they needed because well, we had just been doing that anyway, right? So, it's more of a handover exercise. It's a bit different at the early stages if you don't have that yet. We'll return to that, but you can see it was roughly four weeks and then, you know, they deal closed. They have they had an extra week at the end, but you know, they they managed it really professionally, right? And it's, you know, again, another interesting flip is where it was all about selling. You get to the term sheet, then all of a sudden you go into crunchy stuff mode, right? Where it's we're going to work through things systematically in a process in parallel through all the different work streams.
and we're going to work together to get this thing done because we don't need to sell to each other anymore, you know, explicitly, right? Like obviously the founders always selling. They're always trying to put the best spin on these things. >> but it's ultimately you're trying to just get through the process so they can get the comfort, right? So this is I would say the most robust due diligence process that I've seen presented from an investor largely because they were private equity buyers and the way it breaks down is roughly this. So they wanted to validate the things that were happening in the perspective of the business and the business opportunity. So is there an opportunity for returns? I would say this is something that happens really early on in the process even before the term sheet. you've got you've got you're probably not going to get a term sheet signed if the investor is not interested in you know agreeing in principle that you know we should continue to do diligence spends a lot of people's time. Yeah. so they're kind of doing that in in advance. The founders looking at the investors a lot of talk about strategy a lot of talk
about thesis a lot of talk about you know traction so far these are high level high high level things. Then we got technical diligence. Ultimately, they want to make sure they're buying something that's high quality and is secure, especially in this day and age with everything that's going on with AI and software. they're looking for any kind of vulnerabilities. They're looking for sloppy code. these are these are, you know, things that change of course depending on the company, but they might bring in an external technology auditor, take a look at the codebase. they're going to be looking at, you know, various technical documentation. financial in this case was probably the most important thing not just pocking my own book but they you know ultimately wanted to validate that the basis for valuation in this case the valuation of the company I worked for was based on their annual recurring revenue there's a very strong incentive for them to make sure that that number is exactly what we told them it was going to be right in this case it was 1.4 4
million ARR was the was the target. Anything if anything happened that pushed that number lower, I would say that frankly my job was at risk, right? Because everything had been negotiated about the valuation on that number, right? Use a revenue multiple times the ARR gets us the value. Now imagine how the founder would feel if somehow it came back and like we can actually only recognize 1.2 million of revenue, you know, and suddenly your valuation is 20% less. and get a sense of how important this is to particularly founders. >> Sorry about that. >> It's okay.
>> Okay. >> Anyway, so financial diligence important. it it breaks down into historicals and forecasts, right? Like we can be diligent with the historicals in a much easier way because that's literally, you know, factual information that's happened in the past. We should be able to verify it. And then there's things like the financial forecasts that come, you know, an extrapolation of the past, right? Like historical, accounting, forwardlooking, more about finance, and we're projecting out. We're going to look at both those things. And then we got legal, bunch of documents, get a good lawyer. We'll come back to this. I mean, honestly, I didn't I don't really have a whole lot more to say, I think. And in interest of time today, legal, there's a couple sections we'll talk about, but it's like I think Keith probably said it, too. It's just so important to get a good lawyer, right? like these kinds of things like there should be I think it's kind of the same with accounting where success is like you never hear about them right it just yeah everyone's completely silent it's just it happened okay great move on right like there's no there's no like swing up it's just nothing went wrong and then there's if something goes wrong you know all hell breaks loose right and that's kind of
like legal and accounting diligence so you just need someone who can you know make this process happen for you someone who's seen the rounds I would say the value of a really good lawyer is that they've got amazing pattern recognition reveals and if they see something funny in the terms and they think like, "Oh, hey, by the way, this could work adversely against you in the future, like they're worth their weight in gold, right?" this the legal bill for this round is probably going to be $150,000. So, you ask yourself like what? That's what I said. Incredulously, what ultimately, you know, it was it was very expensive, but I think very well worth it. Yeah. Comment question. If it's any part of the deal like this proposed or do you think you have to extend that upon?
>> Yeah, you kind of have to spend it up front a bit, right? So you can negotiate. The question is like you know where's the cash from come from for that legal bill. ultimately the idea is that once the once you get the money for the round closing that money that you paid for the legal bill will be part of that. Right? So ultimately, it's kind of a combination of all the new investors are paying for at least their side of the legal bill and then the company has to have some cash buffer to at least pay the short-term debts and then they can clear the bill once the money lands. but it's kind of like a shared burden. But it can be a trick if you don't have the money in the bank. In this case, there's no way we would even gone down this process if there wasn't enough to pay that bill.
>> But it does catch founders off guard, right? Because even I'm jumping ahead a bit, but if you're going to do a seed round and you're doing say preferred shares, so you actually have shares that you're issued with treasury, those could cost you 20 to $40,000 to get set up and to have the round successfully execute with all the paperwork and all the negotiations and all the people signing. So there's risk. There's legitimate risk because what if the deal doesn't happen after you flip that bill? You need it at that point, right? So that's one of the reasons that safe notes are so popular because to do a safe note round you know bills are probably more like $2 to $6,000 depending on if you know someone. So if you're raising free seed money which I think most of you in the room intend to safe notes are really really excellent. they're quick they get the job done. So I would highly recommend them.
>> Any more thoughts on that? I mean that's really yeah >> had a question in regards to the lawyer when it comes down to this like I've heard for example I've talked to some lawyers where for example after you get the terms and negotiate but then any any of the fees is going to be part of the proceedings of the of like let's say the deal itself so they're going to get paid after the deal is done would you recommend this or when would you recommend not to do this is there a specific kind of >> I think I think like so the question is you when do you need or when can you negotiate later payment terms. >> Yeah, pretty much. Should we do it? I Yeah. >> Yeah. I mean, I think in the early stages, if you're doing like a if you're if you're doing safe notes, you're going to need to pay the five or six two grand if you got a cousin who does this work.
You know, you're going to need to pay that up front. It's relatively smaller. by the time you hit a C round, you're issuing shares. you can probably do, you know, maybe 30% up front and then another 30% on this target, another 40% when we close. but it really depends on like your relationship with the lawyer and whether they want to take that risk, right? Because if you don't raise then you know they know that you don't have the cash to pay them well that could be right. But if they really believe in your startup I mean ultimately you're trying to sell to everyone, right? So if you can make I think it's probably good policy no matter what if you can pay a bill later to try and get those terms for yourself, right? And lawyers are no exception. >> Perfect. >> All right. Hold on. Is this relevant to me? Well, I'd say for those in the room, not particularly. However, the reason I brought this up is because a it's recent experience, so I can speak to it, but b it's illustrative of what you will encounter. And it also helps frame why things happen the way they do at the early stages. And effectively, what's happening is different elements of all
of this are trickling down into the early stages. And how do you know which are going to trickle down? there there is no way. but I I'm going to try to tell you about the different approximations I would use and the different principles that I think about when trying to align what you want to prepare with the needs of your investors. And the reason there's no one-sizefits-all answer, the reason I do talks like this and you can't just go to chatbt and get every single answer like if it was formulaic you could just go study a book and get the answer. So clearly it's not. So what happens I'll say obviously but you have infinitely many different types of startups. You have infinitely many different types of investors with different needs. They all change just a little bit in most cases and the optimal solution is always going to be what's the best match between yourself and that one investor. Right? So, a lot of founders do prepare slightly different information depending on who they're speaking with. I think it's a good idea in general, but I would only do it for the top say three or five investors that you're really interested in dealing
with. and the reason is because the stronger the match between what you have and what they want, the better this process is going to go. So given all the different options, you know, the match can be many, many, many different ways. So that's why we can't have something consistent, which is a bit of a shame. but it is the way it is. So what I will say though is how do you know when it's relevant to you? Alluded to a few things, but just make it as clear as possible. If you're bootstrapping, if you never intend to raise money, you're probably not in the room, so we'll skip that. if you're raising from friends, friends and family, might be able to get away with goodwill and a pitch deck at that stage. some of them might want to see more, but hey, you don't need a full data room for that. Going to be very specific things and you're going to have time to figure it out. Preed, yeah, definitely some. That's where we're going to focus the rest of our time today. seed big step up here in complexity because at the seed stage now all of a sudden because you're issuing shares that had a price to them the documentation that goes along with that is much more sophisticated it it's
also expensive so on the legal and financial side things step up a lot but I would say between preede and seed a lot of the business and the product in the market that's all going to be relatively similar right so it's more of a backend you know back back office function step time you hit series Okay, like heck yeah, you need all that stuff. And largely the diligence is going to center on the the revenues that you have because again that is the basis for your valuation. Everything back here valuation kind of like a big question mark. I think Keith went over that so I won't go for it. So yes, relevance but it's a it's a sliding scale. It increases in complexity over time. As it does there's more requirements for you, but also you're going to have more of a team to assist you at that stage, right?
the right contractors in place with the right processes and the right internal people who can help you gather that documentation. So, here's how to think about how much due buildings you're in for with the investors you're with. Again, I'll try my best to speak in principles here because we can't get too too specific given everyone's building different businesses. but it really depends how well you and your investors know each other. So, first off, if you have goodwill with them, as in you've known them for a couple years, you've got to know you've shown that you know their business. They've got to know you by following you on LinkedIn, maybe seeing you at an event, maybe go for a coffee at some point. Like, this really helps the diligence process because now you're not just coming out of the woodwork like, "Surprise, I'm I need a half million dollars. Will you give it to me?" Like, if you just came like fresh out of nowhere, email in the inbox, it's like, well, hold on. like especially in Canada. Yeah, we need to get to know each other a little bit first, right? And it's very very forward. I think in America little bit less like this. the founders I know who've raised in America, they say it's more just like can you make money, right? If yes, okay, let's talk. But
definitely Canadians more so, you know, want to know who you are. I want to know, you know, what is your experience? I want to just know that you are legitimate and that you're not scamming me and all these things, right? So, if you're out there getting to know investors before you need to invest from them, that's an incredibly good policy to maintain throughout all of your business dealings, right? Like it's it's tough to go to a conversation with an investor and just be asking for things right away. but it's hard not to do that if you need to raise money right now. So if you started out your conversation building your your relationship building with your investors 6 or 12 months or 24 months in advance that goodwill will acrew to the point that this situation can be much easier process for you. so do they know you? Do they know your business opportunity? Right? do they understand the space that you're in? If you're in deep tech I know I saw some of you raise your hands when Keith was up there. I think I think if you have a generalist investor you and you're in a deep tech space very you know they're broad you're
vertical you can imagine that there's a mismatch here yeah they're going to have to take more time to learn about what it is that you do that's going to slow them down but it's also an opportunity for you to teach them what you're doing and be the owner of that narrative right and that's a really impressive thing I remember investor saying to me one time one of the like best signals that she looks for is whether the founder can teach her something about this space, right? A space that she already knows. and I think that's a that's a strong heristic, right? So then it's like, okay, well, you know, what can we teach? Like you've got all this great information. So do they understand your opportunity? Again, like the flip side is that if they're specialists in the space that you're also specialized in, easier diligence, right? We don't need to bicker about the market. We don't need to bicker about the way that you're building your business. they're going to get that impression really quick and then it's going to be mostly financial diligence. Check the boxes, move on, make the investment.
depends on your investor's risk tolerance whether they feel comfortable yet. So, some investors very comfortable with risk. you know, particularly I would say those who took a lot of risk to get where they are like imagine someone who made a lot of money in Bitcoin, right? I can't imagine there would be a whole lot of due diligence. in fact, I've seen this. There isn't much due diligence, right? Easy come, easy go, though. And then there's going to be other investors who maybe have 50 grand left and they want to be very careful about it. Well, they probably shouldn't be doing angel investing. How about how about just in general? They made their money in a corporate environment where there was a lot of bureaucracy and governance and control. You would expect that person based on their history to ask you for a whole lot more due diligence items, right? So, you can kind of get a sense of what they're going to ask for if you understand their LinkedIn profile, where they've been.
That's a couple ways. Last one depends on whether they are investing other people's money. we talked about that already. So they owe a fiduciary duty to whoever they raise money from. If they squander money, if something silly happens that they really should have caught, all of a sudden they're not going to be in business very long. So they really really care about getting those rights. >> So a couple huristics. As I said, one more slide. I'll stop for a moment. We're going to focus on the early stages today in that continuum where it said some underneath preede. I think that's where most folks in the audience are. So I want to talk about that. I also want to talk about making an MVP data room and how to think about focusing what really matters. Yes. >> Thank you very much for your talk. Can you tell me how many what's the percentage of companies that they succeeded actually in their startups?
Can you give me numbers of figures? 10% 20% they >> when you say succeed in your startups you mean like raise capital or just like build a hell of business >> they can have their business and they have profit and successful in their own business or >> I don't know I mean I there's so many different businesses >> because I asked other mentors and they said they don't have any figure in Canada that how many startups actually they were successful >> yeah I I mean I think yeah >> I think a ways back I I read I saw something from deer and she wanted to do that had a filter and it started with a thousand and it just went through the layers and it was like got down to 10 where four broke six broke even and four ended up being profitable for the investor.
>> For the investor. >> For the investor. >> Yeah. Yeah, that would make sense. like they made their money back and the other ones made more money, didn't they? >> Yeah. Well, let's I mean, I think it's two very different things, right? So, the question is, you know, how many businesses succeed ultimately? and then there's also how many businesses who raise capital succeed? Like it's very different businesses, right? Like you've got lifestyle businesses, traditional businesses that are focused on customers and profit. It's like that's business, right? Well, in the angel and venture capital space, not really, right? because this whole industry got booted up so that people could take really big shots, right? Really, really, really big shots. And the math only ever works because like you said, very few from the investor's perspective actually make any money. the math only ever works if there is a really big business opportunity associated with the play that you're going after. just because the risk is so high, but it makes sense. So, you can think about it like a risk curve, right? So as you a very like a very lowrisk business would be like consulting right you can just go out you
get paid for the hour that you put in your risk is basically you don't get paid but you put in safe credits fine and then you kind of move down the product spectrum where you move out on the risk curve start hiring some people okay fine if you want to just straight up build a product and you can't make money until the product's ready that's a more risky business if you're doing something like quantum computing like Keith alluded to like that's like over there on the risk curve right So the farther out you go on that risk curve, the more the more large the opportunity has to be able to theoretically be, right? If I want a startup consulting practice, you know, whatever, right? I can make a employment level wage, if I'm going to do quantum, they're better to be billions, many hundreds of billions up for grabs because that's what's going to compensate the risk. So to your question, it's like how many businesses succeed? The farther you go on that risk curve, the less succeed. But if you want to start a business as a consultant, probably like 70%. Right? If you want to do like a angel funded, VC funded, maybe like one or two%. If you're doing something super deep tech, less. So it really depends. And there's all kinds of
like different permutations of the business along the way. >> Yes. the philosophic philosophy I think what you're saying I mean in startups actually in BC you know many of them surely I mean how good they have been how they have been successful to bring money and sell eventually and the investor gets the benefit the profits out of it that's my question if there is any statistics so >> I don't maybe within the different archetypes of companies. >> Yeah. >> But in general, I don't know. I mean, yeah. I just think it's such a such a strange and wonderful part of business, like this whole like venture capital angel business, right? Like this didn't exist not too long ago, right? But now all of a sudden, we all have the opportunity to get funding for a business which is really great. But the trade-off is that we need to pursue an opportunity that's big enough. So the bigger it gets, the more risky it is and so on. I don't know any Good. But you know for the purposes
of today we are talking about angel and venture capital. So we'll stick with that. how do we build an MVP data rate? It's the next step here. So I do have some example files. I could try to pull some of them up. It's a little challenging with the laptop the way it is here. But let me try to describe them first and just along the way if you want to ask for examples of any of the things I'm talking about or if I went through anything too quickly, please just let me know. but I'll just actually stop for a sec in case anyone has any questions about due diligence because that was the end of our due diligence part. >> Yeah. >> You you mentioned legal. What do you mean by legal? Oh for the investors u yeah so there's there's a legal obligation that they have to be I don't remember the exact term but basically like reasonable about the investments they make with other people's money right because if they're investing other people's money like that's a much higher bar that the investor has to do things above board regulatory and of course with their reputation right if they're simply
investing their own money they can do whatever they want with it it's their money so when I say legally I mean as a fund manager I owe that duty to my partners who have given me money. Yeah. And of course the takeaway with that is that they're going to care a lot more about this stuff. Okay. Data room. if you want please this is the folder structure that I use for data rooms. I went to great lengths to make everything one word. you can take that or leave it. But this is this is the best way that I found to organize things at the early stages or any stages actually. It didn't break during the series A, so that was the nice surprise. >> And what is a data room? A repository of business information needed to close the deal. Yeah. All of the information that you conceivably need to close the deal that you're working on today. That information is going to change, but that's what it is.
>> Keith alluded to a couple different platforms. Orange Docs, Docs End. You can use Google Drive. We'll talk about a few of the options after, but really I mean, you know, not making mountains out of mole hills here. It is a shared drive with a folder structure and some subfolders if you want to go into it some more and that is it. And you know, you might ask yourself why, you know, why do I care about this stuff? Am I crazy? What's what's wrong? But, really it's like what can we say in this that helps get deal? That's what's exciting though, right? It's like, you know, can this actually be a tool to help you fund raise more successfully? And I think the camera is mostly down. I'll flip to the next slide. I'm going to say and here's here's my point. I like to think about it. So saw this picture at the beginning museum.
I like to think about this whole process like you are putting on a gallery. You're the artist. And the trick is there's nothing in it, right? You boot up a shared drive. It's just like empty. So you go to chat GPT, you go here, you go there, you talk to some people, you know, try to figure out what should be in it, right? So trying to put the information you have into that in the process of curation. Yeah, this is the difference. And if there's one takeaway today, I'm going to do that cliche thing. If there's one takeaway, I want you to think about the data room as curation as opposed to dumping in information and feeling sorry for whoever the poor bastard is who has to read through all that on the other side. Because like really if you think about what's going on, it's like you want the investor's experience to be excellent when they're looking through all of this deep detailed information that you have.
This might be the first time that they can really truly assess, you know, how serious you are as a founder and how professional you are and what it's going to be like to work with you for the next decade because that's how long these investments are going to take for them. I know Keith said there's a couple that you know maybe three or four years, some could be longer. I think like any anywhere on the spectrum can happen. it's just gonna it's one of those things where it's going to depend on what they want, what you want. Anyway, I'll stop that. But what I was saying about this gallery is that you start with just empty floor, empty walls, empty ceiling. You got to figure out what to put into this. And you got a store room of information in the back. Like no one here has a shortage of information. Like maybe you don't have the information you want yet because you haven't got to that level of business. like maybe the information that's like really valuable that could be a inflection point for your business.
Maybe you're still working on that. But I tend to think about all this information you could share as having so then you've got this like what's in your brain, what's on your computer, what's in your teammates's heads, what you've acrewed over the many many decades of you've been doing stuff in the world. And the tricky tricky thing is like how do I take that and put it over here, right? And and make sure that the people coming in and seeing this for the first time have a good experience. not easy, right? So, it's it's more akin to editing down a book and finding like what really needs to be in that book than it is getting the words on the pages in the first place, right? Like anyone can get the words on the pages, but only a few can like really compress it down into absolutely what still needs to be said, right? So, maximum compression is what you're aiming for.
That's the real word, right? Anyone can dump it in, not everyone can compress it what needs to be said. So, that's the way I think about these things. the data room in general. This is your fundraising operating system in so many different ways. so yes, angels VC is on the screen here, but also you know sometimes government programs IRA, they're going to want certain things like this different the superclusters, they ask for a whole bunch of stuff. different partners like even if you're going to sign a partnership with someone who could be I don't know maybe doing a joint R&D project with someone they they might need elements of this as well, right? So it's going to change depending on who you're working with. M&A IPO a little more straightforward. You're going to have a whole bunch of support there. No worries. That actually has a lot of the elements of the data room as well. Then you know angle VC standard stuff we've been talking about. But my point is like if you can get this information set up, this external facing business information about your business and if you can get to know it and get to love it and get to understand why you're
doing these things maintaining this database for yourself, you're putting yourself in a good situation, right? Because every time you have a funding opportunity, you're thinking like, geez, that'd be cool to pursue. You know, you've got somewhat of a foundation there for you. The caveat is, you know, you don't want to overbuild and make stuff really fragile and have to update it all the time and get stuck in administration, right? So, there's a there is a balancing act with almost literally everything associated with this, but you're never going to do yourself a disservice by man managing something that's light and and and covers the fundamentals of your business. What matters most in the data room? again from principal perspective knowing what long-term success is to you I think is something that's super under well maybe not underappreciated but maybe like I don't know maybe it's something about how investors have the money like I think Keith was right when he said like you want to be driving the bus. I I would extend that and say you want to value yourself and your startup, right? Like so like it's it's I think it's so easy to give your power
away or for me even to give my power away to people who I deem to be more expert or have money etc. but what does that do to me right? And now I'm in this position where I don't really have much of a say in this process and that's not a good place to be. So I actually think that starting out this entire process, knowing what you want out of this, you and your team members, your friends and family who invested and maybe if you have any angel investors so far, you know what is the what is what would success be in 10 years, right? Is it a dollar value? Is it a measure of impact? Is it you know expansion across a certain geography? Because if you can do that and have that as your north star, you can think more clearly about what this funding round should be today and who might actually invest in this opportunity today. So start there. Start there. And everything else in the data room really should be in support of that, right?
more opportunity less risk. So you know here's something that you know strictly okay a bit broad and then a bit specific. So if the perceived opportunity of the information that you share in the data room is greater your asset price should go up that is the value of your startup should go up right because the expectation of returns in the future is greater go the value goes up if you can mitigate risk successfully which generally happens say if you've made more progress on your technology right the risk has now gone down if risk goes down valuation also goes up right and so the spread between what you say being able to justify more opportunity and lower the risk means a bigger valuation for your business, right? So the incentive is very like in a very like kind of fuzzy amorphous aspect.
It's like like what is opportunity and risk, right? Like in the eye of the beholder, whatever. But in a very practical financial application of that like literally those are the functions that move an asset price, right? So if you if you're wondering, well, you know, how can I ask for a $5 million valuation based on what I have right now? Like think about the information that you could share that would increase the perceived value of the returns in the future or decrease the risk that the investor perceives in your business today. If you can say more things like that, that's a really good way to frame product and customer validation. So if you're I'm assuming pre-revenue for a lot of folks in here, if you got I think the question is like what can you do before revenue, right? If you can do more things to validate the product, more things to validate the customers.
We'll talk more about the specifics of that. Again, this is something that's going to increase the valuation that you can argue for. Not saying you'll get it, but you can argue for it and feel confident in it. financially, legally prepared. And guess it financially financially and legally prepared. Those are going to be external contractors to your business. So, we can talk about, who you want to hire a bit later on because what we're going to do now is talk just I want to go through each one of these sections, a brief what it is, make a point or two. I want you to stop if there's anything in here that you want to double click on because I don't believe we have time to go into any level of we can go into some level of detail actually, but I have a whole bunch of templates I usually show. It's just tough for me to get back to the laptop and bring them up and shift the screen. So, if there's anything that really piques your interest and say, "Hey, how can I communicate that?" I'll I'll I'll figure it out. Let me know. Yeah.
>> Yes. >> I can Yeah, if you're interested in it. Sure. >> Sorry. Yeah, regarding the templates other than slides itself be able to share that as well in case templates are popular but just >> Yeah. Yeah. so I'm I'm actually I'm working on finishing them up and making them available for sale. I don't have them online yet but reach out after if you want to get access. >> okay maybe the index I'll show here. what is an index? It's table of contents. Yeah, super easy. But what's the point? Well, when you have a bunch of files in this folder, the what you your goal is to make sure investors can find what they're looking for, right? So, give them a list, right? It makes a lot of sense. If you do that in a Google sheet, just put a hyperlink to all the files.
They can have it up on their second screen if they use one and you know, okay, cool. Like, here's what I got. Here's what I want. I click on the link, I get it. Right? That's that's the level of simplicity that you're aiming for. That's the kind of stuff that really moves the process along quickly and do it in a spreadsheet or use whatever overview document you have, but whether it's a pitch deck, we'll talk about that next. You can put hyperlinks in that document as well. I find that's a nice touch. what I will show you here is kind of hacked apart. Kind of not too bad. I think folks online can see that too. Yeah. So really what we're doing is just creating this list, right? If you wanted to take a image of or a picture of it, you can.
That's you know, nothing more to it than that. But it's one of those things where it's like a it's a real small delight, you know, if I'm an investor and I can see that hey, this is like you know, this is what I'm working with here. And if you take a picture, there's also some of the different like checklist items that accumulated over the years. So, probably be useful to take away. Checklists are kind of a dime a dozen, though. So, if I haven't made the point clear already, like these things change depending on who you're talking to, but it'd be a good starting point. Okay, so that's what I mean by an index overview, some kind of document or a slide deck that communicates everything about your business opportunity. So, I really don't care what you call this one. it could be, you know, pitch deck executive summary, very high level. If you go a little bit lower level, you're talking an investment memo or a reading deck, as in a deck that has all the detail on it that you actually send to an investor for them to read themselves. you could also do an investment memo.
You could also do a business plan. There's all these different words and really all they are just, you know, what's a file, right? Like, it's just a way to communicate information. But what matters is that you're putting you have at least one document that has some level of depth but all the pertinent sections of your business, right? It's a long read, right? It's probably 10, 15, 20 minutes. But this is a document that investors will spend the time on, get a full scope understanding of what you have to offer. And in that document, you can reference out different areas of the data room that are going to support the claims that you're making there. Right? So that's that's what's really important about the overview. some kind of something 10 pages, 10 slides, enough detail, maybe some appendix at the back. >> When you mention a reading deck, do you mean that we need to put more words compared to like deck?
>> Yeah, because strictly speaking like pitch deck versus reading deck, like pitch deck really should, you know, you do things like, you know, that that art gallery slide where it just says curations like what the heck is that if I'm reading through it on my own, right? I have no idea. It's no context because you're the context. So pitch that. but a reading deck is like I would have to write on that slide what's up here, right? and then that way they could get to do it themselves, right? And the reason you would even want something like that is because they might want to send a single document out to people on their team and say, "Hey, take a look." Right? Or start getting to know this. More information's coming. Yeah. I think I think that's probably good enough for the overview. like I'm super agnostic towards you know what kind of what you call it just again something that's globally relevant to all the different information in your business but it's more at a high level more like a glossy brochure that I'll use that term a few times more like a glossy brochure than it is like a really deep technical dive about like you know every single last thing 10 pages not 100 right I think that's the takeaway here
products show what you do and why it matters I think a lot of technical founders in particular you know might end up in a situation where it's easier to explain how the product works than what the product does for someone. And you need both, right? That's what it comes down to is you need both. If you want to sell, you know, you want to sell the product, do it with glossy brochure that kind of sets the tone. This is what it is and this is why it's exceptional. This is the value it brings to our customers. you might even have a product brochure that you share with your customers, right? When you're trying to sell them, I would include that, right? So, that can cover that use case. For the technical documentation, there's a whole number of things that could be, right? So, if you're building something in deep tech, you're going to have a lot of IP so maybe the IP documents themselves pending or approved.
everyone's going to have product road mapaps. a technical explainer if there's something like really like you know sophisticated about what you're doing just like think about could a person without you being in the room understand what the heck's going on here right like will they have the context if no you provide them the context in some cases if you actually have performance data on how your product performs you I don't know if I would put the raw data in but I would summarize the data and put some kind of a onepager or executive summary about right I think this is the kind of thinking where you want to separate out the detailed stuff from the summary or explainer of what it is, right? Because when those things are mashed together, it gets really it gets very hard to sift through as the investor who looks at one of these a week, right? So, you want to give them the guidance that they deserve.
okay, so product. Yeah, I mean ultimately I think everyone should have a product road map. I think everyone should have a glossy brochure. If that's where it ends, that's probably enough for product boring IP question so far. >> Yeah. What to avoid in the products kind of bolder? So >> yeah, >> you obviously want to give the nitty-gritty of your business sology wise. So where is the order? >> Yeah. So, what what to what's the borderline? What what might you not want to include in your product folder? you know, do you you know, you don't want to give away too much, right? Like is the question basically. I think I think I would it's kind of like you want to give them as much glossy brochure information as possible, as soon as possible. So, you're not going to get an NDA just to share a
summary of what your stuff does, but it's your information at the end of the day. And if there's something that you deem very secure or valuable that you're not just going to hand out to anyone who's asking you for stuff, then you don't have to do, right? And you can say, "Look, here's what I'll give you now. Some kind of brochure, maybe a little bit of the product road map. Sprinkle that in there. Just keep keep the mystique going. Okay, now I want to know how you going to do that." and then for anything that's like too technical that you deem, I would just say, "Use your judgment." you can say, "I'm going to hold that back until I get an NDA signed." Because they will sign an NDA once you get farther into the process, right? It just won't happen right away. So, some people talk about doing the data room and like a split it in two. So, you kind of got like a level one, which will be open to anyone who wants to move into it. And then you'd have a level two data room, which would be okay, this is the other stuff. We're going to hold that back until you've signed an Indian. And probably the reality is that it might only be your lead investor who actually ever signs that NDA and gets into that level.
Yeah, it's kind of interesting because then the lead investor will go ahead and try to syndicate the round and tell the fancy way of saying tell their friends about it, right? And they all know each other, right? So especially in Vancouver here. But if someone if you get a lead and they really like it, they go deep, they sign the NDA, okay, great. They're going to tell people like I've done the diligence. This checks out. I like it. here's why. That's how they're going to that's how the other investors who follow on are going to avoid having to go through the same diligence procedures as the lead, right? Because a lot of folks just don't want to do that work, right? And so it's it's fair enough. I mean, it's a ton of work, right? And a lot of folks would just rather follow on and that's the exact reason that these angel funds exist, right? So from Victoria, so over there we have a group called Syndicates. I think it's a minimum of $5,000, right? So, some people want to opt into due diligence because they want to, you know, learn about technology and get deep in deep in it. Other ones are just like, give me some money, right? Like, here's my money. You return me some money and I don't want to look at a damn thing. So, it's kind of like got everything in. [3:13:35] that was a lot of words. I hope I answered your question. That was good. Yeah. >> Thank you. >> Good. there's some other questions in IP in product. >> I I would you could put it in legal as well, but I put it in product. I just just my opinion. >> I have a question. So your code let's say I have like a really good algorithm security. I don't care how much of an investor they are. They're not seeing it as the moment they see it. That's that's the right. so like how do you deal with that? Is that normal to just tell them like hey like this there's a level that you just can't cross and that's it. You want to end it with anyone out? >> Yes.
>> Yes. Yeah. Because again, it's like, are you in your power? Are you aware that this is your information? The answer should be yes and yes. And if that's the case, you don't feel comfortable. You say, "Look, here's why." And if anything, they'll likely respect you for them for them. I would I don't know that that's true, but I think I would hope that the world works somewhat like them. I I can say for sure that the founders I've worked with who've raised the most money are also so happen to be the ones who are most comfortable pushing back against investors and their demands. Like none of this stuff is like Bible, right? Like there's there's no canonical you must give us this master data room list, right? Like it's always your description. Always always the risk is just doesn't get in the way of the deal. So find that balance.
just to kind of build on that a lot of it has to do with who you are and what it is. So if you're saying I've got this amazing technology I'm not going to let you technically validate it. nobody's ever heard of me. I have no team. My soul is burdened. You're not going to get that practically unless you have some avenue to prevent them to validate your technology as being real. Particularly if it's a technology that your exit is going to be an acquisition, you want to get bought or licensed or or some other model like that. It's super critical. So, it I I don't know how like if I'm sure you've seen this where you know you you've got four or five or six co-founders, they're multiple time multiple assets.
That's a lot more credible from a technology standpoint. Do you know what I mean? Like question the track record. >> It's inferred. Yeah, for sure. And by the way, asking for a code base is not not would not be normal, right? So you you you would you'll never get asked for your codebase. The most you're going to get asked for is like just the strategic implications of what that means, right? So I wouldn't worry about the only time that actually codebases come into due diligence is like I said if it's if it's like a private equity firm is buying you for $50 million, they're going to want to know damn sure that that code's good. So they're going to get experts in third parties. In that case, normal, right? Right. So at the stage of exit anything beyond before that I would say strange like proceed with caution >> but but you'll have to describe some way of them understanding of >> maybe >> why that is the next revolution.
>> Yeah. >> Yeah. customers are a good way to do that. It's a good segue. This convincing evidence that customers want and need all of this. Okay. So it's like if you don't have revenue, what do you do? you could talk about the kind of returns that you can earn your customers, right? if you can talk about what they're currently paying for a thing, what they'll pay for your thing if they buy it, that there's a big like delta here, right? Like maybe you cost like 10 cents to their dollar and they're getting a 10x return. All of a sudden, your pricing is justifiable. That makes sense, right? It's like, wow, you're saving them a lot of money. It also implies that you know their profit and loss, right? Because if you have some sense of how they're making money and how you work your way into that, it shows a lot of you know, it shows that you know their business very well.
So more relevant for B2B, but I'll just speak about that for the moment. Otherwise, sales pipeline, awesome. convincing traction, you know, whatever you got, customer research, testimonials, I mean, qualitative things work fine, right? Like like I say, with that series A process, they wanted to call 15 customers. Hey, like that's like >> it's so overkill, but it's like, you know, at some point I don't care what you say about your own product if I call 10 of your customers and they say it's awesome, right? So, it's kind of like I'd rather that social proof than I would a founder telling me biased information. They're going to be looking for things like that. They're doing that analysis. >> Yes, I had I have another question. Yes. So regarding the sales pipeline, let's say you've capped the amount of pilots that you want to get at a certain point.
How do you want to convey that to the investors because you don't want to get more pilots, right? >> How do you tell them you don't want more pilots? >> Yeah, pretty much. >> It's an interesting kind of thing, but yeah, like how do you convey that? >> I mean, I guess well, yeah. I mean, I guess you could just get stuck in piloting forever, right? It's like where's the actual customer? I think most would understand that though, right? Like if you've got I mean I it kind of comes back to what's the purpose of, right? Like why aren't you just if you're just doing like are you going to do a bunch of pilots for a year? It's like why don't you just sell the product, right? Like what what is missing and what do you need to gain from that pilot? Maybe you're just trying to need to improve the product, but then my question would be why don't you just go make a sale, prove you have a customer as as compared to a pilot.
yeah. So, I I think I think really that it would be more risky than anything to say you have too many pilots, but the incentive really should be to make them less and they'll understand. >> Okay, perfect. >> it's kind of like the same argument as the grant argument. It's like if you just like grant after grant after grant like there does at some point in time come the question is this company viable without grants, right? Or in the pilot perspective, is this company viable without the pilots? Meaning, are any of these actual customers or are they just seeking for a deal? Sure, you are the ones to do this. Yes, your skills and experiences, of course, a biography, but don't forget your aspirations. We talked about this already. knowing what you want in the long term is a really powerful thing. It anchors basically all the rest of this stuff. So, I would spend a lot of time with your co-founders, with your team, figuring out what that is. and I would communicate that here too, right? Like, if you've got a track record of thinking big, doing big things, showing that you're damn like, you know, okay, like, what's a
what's a company? What's Cleo? Does anyone know how many employees Cleo has? Very specific question, but Cleo's that legal tech startup worth a couple billion dollars. Now, I'm going to guess that they've got in the thousands, maybe a thousand. But if you know, if you if you're saying from the beginning that you want to build a billion dollar company, you're also implying that you want to build a company with a thousand or 500 people if you use AI, well, maybe like that takes a certain kind of aspiration, right? And not everyone in here needs to build a billion dollar company. I want to be very clear about that. You can raise money without doing, but your aspiration is to do something genuinely that big. And if you're speaking to that with conviction, like you actually mean it. Now all of a sudden my pers my opportunity measure like when I'm looking at how big this return could be, it makes a little bit more sense now, right? It's not it's not just we'll see what happens. It's like no, they're they're really endeavoring to do something large here. And I could see my financial return being commensurate with them.
yeah, wish you had more time, but I I really think there's like this middle ground. brief side quest like you've got this you've got this like lifestyle business where you're not going to raise money because the opportunity won't be big enough you can't go fast it then you've got the proper angel VC space angel VC space which is very much like build build quick everything you got burn or you fail it's very very like binary but then there's this middle ground too right I'm really interested in this middle ground I think it's really appropriate for us up here and in Vancouver in particular where it's a bit more of a balance. And if you find yourself kind of split between these two things, thinking I don't know if that's for me, but I don't want to just do a a me by myself business like just know that there is workable middle ground and in that middle ground there are investors who are interested in those things. I actually think now that there's AI enabling people to go farther alone.
I've experienced myself in my own company, I've been building some software, too. Like who who would have known I could build software for myself until now, right? And it's like that's pretty cool. So there's going to be a whole new class of investors that are looking for three to 10 person companies right now. This is emerging, but keep your eyes peeled because this is this is something I guarantee this is going to be big. It's kind of like the concept of seedstrap. Has anyone heard of that? The seed strapping is like you do your seed round of capital and that's it. So you're not bootstrapped. You're just one round strapped and then you don't raise any more capital. Some investors hate it, right? because it says you're just going to you're just going to promise me big things and then you're going to put a ceiling on it after that. So, I don't know how I'm going to make my money. But there's other folks if they really know your industry and they want to get involved in a more, you know, deeper way. That might be perfect, right?
Because then you can, oh, maybe we're going to build a business, four person business, going to do a million in revenue per headcount. It's going to be awesome. This is our target. We know what we're trying to build and we're just going to rake in the profit for as long as the opportunity exists. And there's going to be an investor out there that says, "That sounds awesome." Right? Is that the same as traditional VC and angel? No, it's not. Right. But that's the match, right? So, you're trying to figure that out. So, just I think for me, I I found that empowering when I was working with businesses that I'm like, "Yeah, you're really really stretching to do this angel VC thing." Like, let's figure out like what you want first as the north star and then we'll talk about what kind of funding is available. marketing get I think you went over with Keith so I'll make it short. Market happens out there in the ether no matter if you're there or not, right? It's external to your business. The best you have right now is a thesis on how this thing's going to play out. And when you're talking about market, you want to talk about it in the future, right? Like what's the state of the future market? I don't care what it is today. really, it should be small today because I want to see it emerging. Meaning the time is right to get in front of the wave. Yeah.
So, it's not a bad thing to have a small market now, but you need a thesis on why it's going to be big 10, 15 years and that you're going to be a major player in. Okay. So that's how I talked about future market. I would say I contrast that with well what when you actually control that then you control your approach to earn as much of that market share as possible. But these are two very different things right and you're selling both. You're selling your approach and you're selling your thesis on what you think the long-term potential in this market is. So when you're talking about like literally what are the artifacts for market like some kind of size analysis right like lots of information about that online. Well, won't be labor to the point here. and just like a white paper, right? There's this company, I'll call them now by name, Grew Space, Gru Space. They're a Y Combinator company, and they put out a white paper. They want to build a hotel on the moon, right? So, imagine that, right? It's the kind of stuff Silicon Valley comes up with. But what they did is they said they put out this beautiful, not beautifully stylistically, but just a really well-formed document about what they
think about the future. It's like damn like I want to buy a piece of that story right so that's kind of the market you're selling this big aspirational story driven thing why you think it's going to be that way and then you got your approach the opportunity is that so we're going to do it with why so yes >> so I have a question but it's kind of like relating to the current company Dwave computing so how would you map all of these steps for Dwave quantum computing if you have to is to visualize all of this mention the existing context >> within the market. >> Yeah. like all of these like overview product owners teams is it's a very deep type right and >> so like all the different steps along the way >> just a high level >> I think I think yeah high level well I yeah I'm going to have to go rapid fire mode here pretty quick if the most important things are your vision for the future which you need no timeline to get there basically unless you're like manufacturing and early exit like you know you have you're like five years time I'm out we're all
out we make like that's that's fine. But usually your vision deep in the future. You don't need all the steps to get there, but you need to have a clear vision for what that is. Be able to communicate it. And then you need to focus on the next two years, right? Because that's literally how you're spending the money from this, right? the steps 2, three, four, five, etc. It's less relevant. There's this like middle space that's super fuzzy and ambiguous and everyone knows when you take this next step, all that calculus is going to change and you take the next step and all of it changes again. But that's why Focus on the first few years, focus on the deep vision of a plan operations, basically reducing costs. So for those who are in hardware here, so much of hardware businesses is basically getting your unit cost down. There's a lot of clean tech businesses. There's a lot of great ideas. Very few of them make economic sense. And we no longer live in a world where investors are going to pay a premium for businesses that don't make financial sense. Those times are over whether we like it or not. So you need to be able to get your cost down.
You need a plan that shows if we do this costs come down. If we do this, costs come down. It's kind of like this water cascade effect. actually for software too these days, how can you control your compute costs, right? You know, are you going to orchestrate your your models in such a way that you use the cheapest ones when you need cheap ones and you use the expensive ones when you need expensive ones. I have a client who went so far as to buy four GPUs, put them on a in a in a this janky little storage locker in Calgary somewhere because it's basically the server is out in Calgary with GPUs. Cost a couple hundred,000 data stored on Canadian soil. He's in a position where he can train his own models, open source models that do everything in house. So it's a software company but they've got 300,000 in capital expenses or capital assets. Not very common for startup companies, right? But he's doing it different. This is probably a sign of more companies about to do the same thing. So operations very much that finance where's the money? You're talking to
people who are single-mindedly focused on making more money out of money. I know this. I'm in finance. you have to have a story of how you'll make money. That is the financial projections. it's it's like it's super like yeah, it is what it is, right? You got to know how you're gonna make some money. You don't need to have proof that out, but a road map is good. Also, get your books done monthly during the process of fundraising. if you've if you've got like four or five months of unreconciled books, you got to get that cleaned up before you go out because investors will be asking for the month the most recent month and back for the year-to- date numbers. And you want to have about two years of historicals to go along with that. So if your accountants haven't figured out your taxes to date or your statements to date, get on them. Get that done.
Finance, corporate, good housekeeping. Remember I said no surps what and who is projected to own what. So when I get involved in the legal documentation, it's largely around the cap table. I think most people in here said that they know what a cap table is. It's really just a record of who own what's who owns what in the company at a summary level. so investors like to see like what is the current holdings versus what will it look like when the new money comes in. So I spend a lot of time on that making sure all that documentation's in order. from the lead lawyer's perspective, I don't think it really matters too much what they need to do. don't know their job and you don't know too much about it other than you need to know what the documents are for, right?
So, we're pretty much at time. I will give you guys the option if you want to opt out and take off and go to the next event. I think the present's happening. Please, I won't be obsessed. or if you got 10 more minutes, we can finish this up. It might actually be more like seven or five. So, your call. I'm going to keep going. Okay. And if any questions at this point, please. Of course. >> So if we're late, we're let's say following doctor's just for a long time. >> Yeah, that doesn't matter. >> Doesn't matter. >> You don't owe tax at the beginning anyway, right? >> Yeah, exactly. That's what I'm saying. We're taxers. So it's kind of I'm delaying my money getting getting some money back. So it's fine. I think you'd want to do your taxes and get all that stuff or even just like your statements and all that set up because if you're getting a shred plan, like if you're getting money back for your shred plan, you got to get that set up. So, it's more so unlockable.
>> Yeah. I mean, of the 35 companies I've worked for, I'd say like free pay tax. So, >> yeah. systems free, no problem. paid I like mark expensive like 150 bucks a month basically you get permissions right you get permissions and you also get to see who's spending time doing what I think that who's spending time doing what is largely vanity metric I really don't know that anyone has made meaningful progress in the round just based on who's like looked at the document but it's kind of cool I guess I think what's more important is that if you plan to do like a really high velocity race where you're dealing with a whole bunch of investors at the same time the free ones can fail and The paid systems can be a lot more granular with their controls.
You can decide if people can download a file or not. you can just do the more like it's easier for you to manage the project. So, make the decision if you want to spend a hundred bucks a month on one of these. If you're going to be doing it high velocity or if you're dealing with two, three, four investors max, keep it free, keep it simple, not a problem. Thought stand by the way have like 90% off one from acid weight. So you guys want to get like one. >> I'm not a 10. >> Yeah. Just to let you know. >> Yeah. Thank you. >> 1,200, 1200 bucks. I think it's like 90 bucks for >> deal. Yeah. I saw that code floating around too. >> Yeah. >> You know where to get it? >> I can give it to you. >> Maybe we can circulate a code. If anyone wants 90% off Dropbox.
I got two more slides here and I'll tell you what I'm working on. So, security due diligence just simply send the things as they are requested. Your goal is to share like pretty much the least amount of information, you know, less information, less questions, etc. while still getting the job done. Yeah. save some things until you have an NDA sign. So, if there's anything really sensitive around your product or your go to market strategy, that is something that you should hold back until you get the NDA. In particular, pilots seem to be very sensitive like who your pilot customers are. A lot of people want to keep that back, but what you can do there is just redact the names, right? Like make a list. Here's what they're paying us, etc. Here's what we're doing. Just don't include the name, right? So that way you can tease investors a little bit and they see like, oh, okay, this like seems legitimate, but I I still can't like use this for nefarious purposes. Not that I would imagine that they would do that.
Information just slips. The real risk is that someone kind of says something. It's like, you know, probably shouldn't have shared that, but is there any really severe business risk sharing too much with investors at the early stages? Not really, right? is like what's the odds someone's going to go spin up something similar to what you're doing after learning it from an investor like slim to none. So the bigger risk is that you blow the deal being too secure about these things. So just try and find that balance. permissions only to those who absolutely need it. Same deal. Use read only no download on critical docs IP if you're in the life sciences space. I see a lot of that all this but not at the expense of the deal. Okay. about effective due diligence. Now start preparing your materials months before this is not something you want to wait till you know I'm going to go raise I better like make the data room. It's like no like make this stuff give yourself two months. I think that's the right amount of time.
You're not going to be working on it all the time, but you're going to be putting in a couple hours here, a couple there. There might be a week where you spend a couple days. I surveyed some of my clients and they said roughly they're spending anywhere from 20 to 60 hours preparing a data room at the early stages. So there you go. about a week's worth of work. I say two months though because if you find out that you need some external contractors, you got to get them lined up, you know, procure the person, get them to work, and they're going to have their own timeline. So those kinds of things can get protracted. Just get on a verge. answer investors requests ASAP. Always have a next step at the end of a call. So that's just a matter of normal process, I would say, with any kind of, you know, selling. But if you're in the room with them, just make sure that especially in due diligence, it's like, okay, you know, here's where we're at.
What more do we need? Great. We'll get that to you by this timeline and like keep running a really tight ship here. Yeah. Because they'll appreciate that you can get this thing done, right? Like your professionalism really shows. always define a road map to DD completion. I was inspired by that GAN chart I got that I showed you earlier. Like I really appreciated the investor said like this is exactly what we're doing by swim lane with target end dates and the term sheet actually said here's where we're going to have it done. So that was pretty cool. And I mean like you could reverse engineer that process for yourself and say like hey investors like we're hoping to do these things like if you can come along for that timeline you know that's awesome like we understand if you can't but this is what our goals are so we're going to endeavor to get you what you need so that you can make your decision like I think that shows a lot of like ownership and power from your perspective on diligence. So I'll stop there for a sec and a question on diligence data rooms where yeah well and okay so I'll give you the slides I'll give you the slides after this and maybe a doc send code that's cool appreciate you bringing that up and I'll just close
with give me a minute here if you'll indulge me I've been building some data room software internally called corpus I'm about 3 weeks out from being able to actually have people sign up and use it full functionality so I want to tell you a bit about it. We'll see if you're interested in maybe being part of the founding cohort. So this is same image. I have one image on my laptop. I use it for everything. This is this is corpus. Basically you have a data room. It's more built like notion would be different, you know, different different tabs all the way down factored like topics. And each topic is going to have a summary set of information that's autogenerated. It's also going to have links to whatever source data that you feed to it. so the goal is why this is different than the other platforms. Managed to onboarding is the first reason. any of the platforms we talked about today I'll assume that you have the information right and they're going to help you present it because that's what they were built for. But I
don't want to make that assumption. I want to help whoever uses Corpus get the information right. Okay? Because really that's like the big, you know, burning question in all of this. And there's ways that you can get around it. like you can go share your data room with a friendly investor and get feedback. But in this system, there's all kinds of gut checks, you know, checks and balances, review steps, conversation that we'll have to make sure that what you put in it is going to be effective for for those investors that you're dealing with. So, we don't assume that you have it right. Step two, automate presentation. All those call them blocks, those tabs on the side, they're going to autoop populate based on what you already have. No incremental work required. step three, frictional sharing. That's basically the same as you have with all the other tools. you get all the permissions, download versus not download. And I just want to make it really easy for an investor to come in, get the information they need so they can say yes or no. That's corpus. got a QR code. If you're interested, I got a basically a form online. just shoot me your contact info. I'll be sure to get in touch when I'm ready [3:38:09] to start you know, chatting with some folks and getting this thing off the ground. So yeah, I appreciate any interest that you share in this. This is something I've been working on for quite some time. So I'm very excited to be sharing this with you today. And that's all I have for the session. So appreciate you sticking around. What a
Auto-generated transcript, may contain errors. Play the original to confirm wording.
Summary and analysis by VirtualData-Room.com from the public video. Play it above; the original source is linked there.





