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Hot Takes: Entrepreneur Vs. Venture Capitalist
9 Plays2 years ago
We're breaking our regular format with a new kind of episode, with a founder who is serving some spicy opinions on how an entrepreneur can succeed. Join us in today's conversation with Taylor Margot, Founder and CEO of Keys, and investor Tanner Potter of Kickstart (a VC firm for startups in Utah, Colorado, and the Mountain West) as we bring you both sides of a Perfect Pitch. In this episode, we'll talk about the following "hot takes":
Why Taylor believes founders should stop listening to advice from investors (yes, this is on a podcast from investors to entrepreneurs!)
Tanner's suggestion for founders to list the top three reasons why their businesses will die on their pitch decks
Whether or not founders actually research the VCs they're talking to (and if it matters!)
Why VCs want to invest in entrepreneurs deeply embedded in a space rather than "trend-preneurs"
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Transcript
Introduction to New Episode Format
00:00:00
Speaker
Today, we're breaking from our regular format with a new kind of episode with a founder who is serving some spicy opinions on how an entrepreneur can succeed.
Guest Introduction: Taylor Margo and Tanner Potter
00:00:08
Speaker
Join us in today's conversation with Taylor Margo, founder and CEO of Keys and investor Tanner Potter, as we bring you both sides of A Perfect Pitch.
00:00:27
Speaker
Perfect Pitch is a podcast from Kickstart that reveals the minds of both investors and entrepreneurs throughout a startup's journey.
00:00:36
Speaker
I'm your host, Karen Zelnick, and I'm excited to introduce you to today's guests.
Taylor Margo's Entrepreneurial Journey
00:00:40
Speaker
So we'll start with you, Taylor.
00:00:42
Speaker
You're the founder and CEO of Keys, an intent-based communication assistant that works across any app.
00:00:49
Speaker
Across?
00:00:49
Speaker
Oh my gosh.
00:00:50
Speaker
That works across any app.
00:00:52
Speaker
And rather than letters, the keys on your keyboard represent the intent of your message, turning the worst communicator, like people who say across...
00:01:00
Speaker
to a highly effective one.
00:01:01
Speaker
And before Keys, you were a partner at Progress LLP.
00:01:04
Speaker
And before that, you were an M&A and VC lawyer at Wilson Sincini, where you closed 21 billion in deals.
00:01:12
Speaker
And you once lived out of your land cruiser where you spent time fly fishing in glacial waters, which I don't know what else we can add to that.
00:01:19
Speaker
That looks amazing.
00:01:19
Speaker
But what else would you like us to know about you?
00:01:22
Speaker
something that people are surprised to learn about me, and maybe this is reflected in that bio you just ran through, was that I always feel like an outsider almost no matter where I am, even when I'm around what you might call my people.
00:01:35
Speaker
I'm not very good at conforming.
00:01:39
Speaker
I try.
00:01:39
Speaker
I'm just not good at it.
00:01:43
Speaker
And I think that might be because I feel like I've spent my whole life trying to align who I want to be with who I am.
00:01:50
Speaker
And it's still a work in progress, I promise.
00:01:53
Speaker
Yeah, I think it's a work in progress for everybody.
00:01:55
Speaker
So at least good for you for recognizing it.
00:01:58
Speaker
And Tanner, it's so good to have you back on the show.
00:02:02
Speaker
Your first episode is our investor expert.
00:02:04
Speaker
And if you haven't already listened, we have an entire introductory episode with Tanner.
00:02:08
Speaker
So check out our show notes for that discussion and his full bio.
00:02:12
Speaker
What else would you like our listeners to know about you, Tanner?
00:02:16
Speaker
One of the things I thought about is the secret love for carrot juice.
00:02:22
Speaker
And I find it very sweet, just the right amount of sweet.
00:02:25
Speaker
And the funny story with that is one summer, I spent a lot of time drinking carrot juice every morning.
00:02:31
Speaker
And a roommate of mine came home after not having seen me for a few weeks.
00:02:35
Speaker
And he came in at first, he said, wow, you're looking tan.
00:02:39
Speaker
And then he said, wait, actually, you're looking really orange.
00:02:42
Speaker
And I think I kind of looked like an Oompa Loompa because I looked at the inside of my hands and my hands were orange.
00:02:47
Speaker
I've had to moderate that love, but it's still there in my heart.
00:02:51
Speaker
Oh, man.
00:02:52
Speaker
Well, would you have a favorite brand that we all need to try?
00:02:54
Speaker
The classic EA?
00:02:57
Speaker
Is it even you're just playing carrot juice?
00:02:58
Speaker
There's EA.
00:02:59
Speaker
There's another one called... No, there's only like one brand that sells carrot juice because I don't think it's very popular.
00:03:05
Speaker
So you basically have to take what they give you.
00:03:07
Speaker
Or you juice your own juicer.
00:03:11
Speaker
The big leagues.
00:03:15
Speaker
All right, let's get into Key's story.
Keys' Mission: Global Communication and Intimacy
00:03:19
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Key's is on a mission to help everyone in the world experience more connection and intimacy in their relationships.
00:03:26
Speaker
And we're doing that by inventing what we call real-time coaching for every difficult conversation.
00:03:32
Speaker
Okay.
00:03:33
Speaker
We all need to use it.
00:03:34
Speaker
Everybody pull out your phones right now and look it up because we all have difficult conversations.
00:03:40
Speaker
We all need help.
00:03:42
Speaker
Okay.
00:03:42
Speaker
And now we're going to break down how this episode is going to work.
00:03:47
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Prior to the recording, Taylor and Tan are compiled a list of their spiciest VC and entrepreneurial hot takes.
00:03:53
Speaker
We're going to review them live.
00:03:54
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We're going to discuss, we're going to debate, and it's going to be fun.
00:03:58
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So we're going to dive right
Should Founders Listen to VC Advice?
00:04:00
Speaker
in.
00:04:00
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Hot take number one from Taylor is that founders should stop listening to the advice from investors.
00:04:07
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And this is a juicy one to dive into because it is a podcast from our investors with our founders.
00:04:12
Speaker
So Taylor, tell us about this.
00:04:16
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I think this is the number one mistake the founders make.
00:04:20
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And the reason is that VCs are not in a position to assess their own behavior.
00:04:28
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There's two parts to this.
00:04:29
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I'm really curious what you think about these, Tanner.
00:04:32
Speaker
So first, even though they sometimes need to be reminded, VCs are human too, which means that they're by default bad at evaluating their own behavior.
00:04:46
Speaker
Would you ask, for example, a movie star for dating advice?
00:04:51
Speaker
You might walk up to them and be like, hey, how do I date you?
00:04:55
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Of course not.
00:04:56
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And they're going to say something to you like, okay, so you need to be six feet tall.
00:05:00
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You need to be a great listener.
00:05:01
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You need to be financially independent.
00:05:03
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Meanwhile, they're dating a jerk with bad tattoos and no job.
00:05:08
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So it's sort of the same concept here.
00:05:09
Speaker
Why would you therefore ask a VC for fundraising advice?
00:05:14
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point here is, though, that people are bad at understanding their own motives and bad at connecting those to why they take certain actions.
00:05:23
Speaker
And VCs are no different.
00:05:25
Speaker
The second part, and this is the same take, the second part is that there is a mismatch of incentives between founders and VCs or investors writ large.
00:05:37
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So Mark Suster famously advises founders that VCs invest in lines, not dots.
00:05:44
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In other words, VCs invest after getting to know you and your company over time, watching it grow, watching how you make decisions, learning about you.
00:05:55
Speaker
Bullshit.
00:05:57
Speaker
VCs invest in DOTS all the time.
00:06:00
Speaker
If a VC isn't investing in your company, it's because they don't want to.
00:06:05
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Not because they haven't got to watch you long enough.
00:06:07
Speaker
The time between intro and term sheet has been shrinking over the last decade.
00:06:12
Speaker
It's down to something like nine days after being a number of weeks.
00:06:17
Speaker
So I do want to clarify your take though.
00:06:19
Speaker
You're saying advice from investors.
00:06:21
Speaker
Do you just mean fundraising advice or do you mean all the time?
00:06:25
Speaker
In this case, I specifically mean fundraising advice.
00:06:28
Speaker
Yeah.
00:06:28
Speaker
So if we're talking about a seed founder who's trying to make their first institutional raise and they're out there trying to absorb everything,
00:06:37
Speaker
They're out there thinking they're betting, and they may be.
00:06:40
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Their life on the line for this.
00:06:41
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Their family, the lives of their friends, their livelihood, all those things.
00:06:45
Speaker
They're trying to absorb every molecule of information out there from blogs to tweets to posts to podcasts.
00:06:51
Speaker
Every single time an investor gets out there on one of those podiums, they're violating the mom test.
00:06:58
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So the mom test is a customer survey technique that basically says, don't ask what people think they will do.
00:07:04
Speaker
Ask what they have done.
00:07:06
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It's saying, let's focus on actions rather than expectations.
00:07:11
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The classic one is like, hey, what's a feature that you would like added versus tell me how you've used your phone over the last week.
00:07:20
Speaker
And if you're up there pontificating about, oh, I want to see X, Y, and Z. And then if you look at the actual members of the portfolio and what investments look like, very often do those not look like, let's say, perfect concentric circles.
00:07:34
Speaker
This is a fun take.
00:07:36
Speaker
There's the adage that you've heard, Taylor, I'm sure, which is ask for advice and get money and ask for money, get advice.
00:07:44
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So I do think that giving investors a line, meaning giving them a dot where you talk to them, you get advice, you understand what their thesis is, is important for qualifying who you're selling to.
00:07:58
Speaker
But I agree that if you take the advice of every investor, you're going to run into what's the Paul Simon problem.
00:08:06
Speaker
So Paul Simon, when he was a musician, he's well known for having success over multiple decades.
00:08:11
Speaker
But what he found is after he wrote one of his hit songs, all of his record labels and the people advising him wanted to write the same type of song that he had just wrote.
00:08:20
Speaker
And so...
00:08:21
Speaker
Most VCs will succumb, as you mentioned, to the bias of like, I want you to invest in the thing that I think that looks good over the last five years, which is B2B enterprise SaaS.
00:08:31
Speaker
And the danger of that is that you won't really be innovating.
00:08:33
Speaker
You're trying to create something that fits into a box that may or may not work.
00:08:38
Speaker
So you can't take all the advice, but there's some grains of wisdom and they're particularly fit comes from Kickstart.
00:08:44
Speaker
I would like to add for any of you listening at home that Kickstarter led our round.
00:08:50
Speaker
And one of the reasons that we picked them was that they do not play by most of these rules.
00:08:54
Speaker
And yes, this is a sales pitch.
00:08:56
Speaker
And I hope it's landing.
00:08:57
Speaker
Yes.
00:08:58
Speaker
Because they have been completely different.
00:09:01
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Tanner in particular, I can't speak to everybody over in that shop.
00:09:04
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But no joke, guys.
00:09:06
Speaker
Tanner is the real deal.
00:09:07
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When he opens his mouth, wisdom will come out.
00:09:10
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You may not understand it for a long, long time.
00:09:14
Speaker
but it still was.
00:09:17
Speaker
We all just keep a notebook of Tanner's wisdom and we're like, someday, someday this will make sense.
00:09:23
Speaker
I feel like I'm like, my hair is going gray as you're saying that.
00:09:27
Speaker
Patience.
00:09:29
Speaker
Yeah, patience.
00:09:31
Speaker
VC is a long game in so many ways, including understanding Tanner's wisdom.
00:09:36
Speaker
Okay, I like it.
00:09:37
Speaker
That's good hot take.
00:09:38
Speaker
So Tanner, hot take number two and your first hot take.
Pitch Decks: Top Risks and Metrics in Seed Funding
00:09:42
Speaker
Founders should list the top three reasons why their businesses will die on their pitch decks.
00:09:49
Speaker
I would love to see this clearly and I have never seen it.
00:09:53
Speaker
If you've read The Power Law by Sebastian Malby, it's kind of the current canonical book for VCs and it gives a history.
00:10:01
Speaker
One of the things that we're always thinking about is what is the white hot risk here?
00:10:06
Speaker
As we invest, we're investing in risk at the seed stage.
00:10:08
Speaker
We know that there's a million reasons why this company could die.
00:10:13
Speaker
The reason that I think this should be on every founder's slide deck is because founders are running experimentation machines.
00:10:20
Speaker
So they're trying to figure out what a risk is and figure out what they can do to avoid it, mitigate it, or in some ways exploit this risk.
00:10:27
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And so I think that there should be a slide that says, here are the top three reasons that I think this company...
00:10:33
Speaker
Either A might die or B might not become a unicorn.
00:10:37
Speaker
And by doing that, they both show the self-consciousness, the understanding of where the white hot risks are in the business.
00:10:44
Speaker
They immediately address the concerns that the investor has likely already thought as they're talking through their pitch.
00:10:50
Speaker
What do you think, Tyler?
00:10:52
Speaker
This is a good one because I don't disagree with the thinking.
00:10:57
Speaker
I might disagree with the when.
00:10:58
Speaker
Yeah.
00:11:00
Speaker
It's probably an under-discussed, under-thought-about aspect of founders around their own companies.
00:11:07
Speaker
Why are we going to sink?
00:11:09
Speaker
Because it's scary.
00:11:10
Speaker
And you don't really want to think about that.
00:11:13
Speaker
But you probably have to.
00:11:14
Speaker
And the founders that are actually making adjustments on that are going to have higher, if not home runs, less failure results.
00:11:22
Speaker
Now, that being said, what I want to know from you, Tanner, is why is the pitch deck the time to cover that versus, say, in a discussion live with the investor on a call?
00:11:38
Speaker
Because when I think about the pitch deck, it's serving a very particular role, which is to get you maybe to that first call, building some momentum, building some steam, building some rah-rah, building some excitement.
00:11:48
Speaker
Hey, I want to show this off.
00:11:50
Speaker
Versus like, when are we going to splash some water on all this?
00:11:55
Speaker
What's the right time?
00:11:57
Speaker
It's kind of a wet blanket slide.
00:11:59
Speaker
You're like, all of a sudden, you're getting so into it.
00:12:00
Speaker
And then they're like, oh, by the way, the macro trends may shift.
00:12:04
Speaker
And it turns out people don't use smartphones anymore.
00:12:09
Speaker
Well, I kind of put the dagger in my business here at QSAI.
00:12:14
Speaker
Yeah.
00:12:14
Speaker
You made me amending my advice to say in the second meeting.
00:12:18
Speaker
However, I do think that it would push conversations along much quicker.
00:12:23
Speaker
The startup has an experiments ledger that's like, here are the most important things that we're working on.
00:12:28
Speaker
And I think that you can turn it not into just a wet blanket, but like,
00:12:31
Speaker
here's the reasons why smartphones might go away.
00:12:34
Speaker
But then you can actually show the data and like, here's the reasons we can mitigate it.
00:12:37
Speaker
Actually, the usage on smartphones is 10x what it was a year ago.
00:12:40
Speaker
And so because of that, we think that there's a lot of reason to believe in this vision.
00:12:45
Speaker
I do think there's a danger.
00:12:46
Speaker
And I've heard other founders saying like, I would love to have Socratic dialogue and get feedback from the founder to investor.
00:12:52
Speaker
And I think one of the problems that you can get into is if you get too analytical, that kind of turns off the vision side.
00:12:59
Speaker
So you do have to be careful on not getting too far down in the weeds because then all you're thinking about are numbers and traction and metrics, which I know we'll get to soon.
00:13:08
Speaker
I love your take.
00:13:10
Speaker
If you think about our classic risk quadrant of four quarters, top right are dangerous, very unknown.
00:13:17
Speaker
Bottom left are not dangerous, fairly well understood.
00:13:21
Speaker
Those top right ones, what you called white hot risks,
00:13:25
Speaker
I think showcasing an understanding of those and using that as an on-ramp to a conversation about it is a place you can level with and meet with the potential investor and have, as you said, a real conversation.
00:13:36
Speaker
Let's accelerate this past the baby steps more quickly.
00:13:40
Speaker
I've not done that successfully in a deck myself.
00:13:42
Speaker
So I'm curious how it could look versus leaving somebody wanting and being like, Oh man, these guys are sunk.
00:13:49
Speaker
Yeah.
00:13:50
Speaker
And you may agree to those risks right there and say, yeah, those are too big.
00:13:52
Speaker
I do think that the stage matters.
00:13:54
Speaker
And at the pre-seed stage, one of the things that we're most thinking about, the meta-cognition or the meta-analysis that's happening is how high is the refresh rate of this founder?
00:14:02
Speaker
How quickly will they adapt to the environment?
00:14:05
Speaker
And so I think the earlier stage of business, the more that you can show that you're agile, that you can respond quickly, the more interested I'm going to be in making a bet on that founder.
00:14:15
Speaker
Nice.
00:14:17
Speaker
All right, then we're going to be moving on to hot take number three.
00:14:20
Speaker
And Tanner, you kind of alluded to it a little bit that we'll be talking about metrics and Taylor's hot take on this one.
00:14:26
Speaker
Our number three is that seed metrics don't matter.
00:14:32
Speaker
Right.
00:14:32
Speaker
You are.
00:14:34
Speaker
Am I?
00:14:34
Speaker
I don't know.
00:14:35
Speaker
Am I right?
00:14:35
Speaker
Tell us.
00:14:38
Speaker
I have two friends that are founders who have received investment from the same partner at a very well-known VC.
00:14:46
Speaker
We're going to go nameless.
00:14:47
Speaker
We're not going to call anything out, but you all know this fund and it's read their writing.
00:14:53
Speaker
One thing that they're adamant about is that they do not invest in companies that are not metrics-driven.
00:15:01
Speaker
Full stop.
00:15:02
Speaker
They say on the first call, hey, send me your metrics dashboard after this.
00:15:06
Speaker
And if they don't get a screenshot of that dashboard within 24 hours, deals off, you can take your ball and go home.
00:15:14
Speaker
There will be no investment or further meetings.
00:15:18
Speaker
When both of my friends received investments from this particular investor, they didn't know what dashboard was.
00:15:27
Speaker
They had no metric infrastructure set up.
00:15:29
Speaker
They had no KPIs.
00:15:32
Speaker
They had a story and a vision.
00:15:36
Speaker
They were particularly good at presenting themselves in level setting.
00:15:40
Speaker
What I'm getting at here, what matters more is being the mystery box.
00:15:48
Speaker
There's this Family Guy episode where Peter is given a choice between a boat and a box with a mystery surprise.
00:15:55
Speaker
And he goes, a boat's a boat, but the mystery box could be anything.
00:15:59
Speaker
It could even be a boat.
00:16:01
Speaker
So the seed founder's job is to be that mystery box.
00:16:05
Speaker
Metrics can be a component of it, but I'm not sure they even rank in my top five.
00:16:11
Speaker
And I say this, by the way, as a founder who, when he raised his seed round, had phenomenal metrics.
00:16:19
Speaker
You know what nobody remembered after the first call?
00:16:22
Speaker
Our metrics.
00:16:24
Speaker
Nobody remembered them?
00:16:26
Speaker
Nobody.
00:16:28
Speaker
Somebody sometime was like, Oh, hey, wait, you're the company with really good metrics, aren't you?
00:16:34
Speaker
And I almost ate my hat.
00:16:38
Speaker
So Taylor, how would a seed founder that's going out to fundraise take that advice?
00:16:42
Speaker
What's the practical application of that?
00:16:46
Speaker
I think the practical application of that is sometimes you're blessed with some optionality about when you need to raise.
00:16:53
Speaker
Maybe you have some extra runway.
00:16:56
Speaker
Maybe you don't.
00:16:57
Speaker
Maybe you have $50,000 in the bank and you're like, oh gosh, we have to raise now.
00:17:01
Speaker
Okay, so those are different.
00:17:04
Speaker
If you're in the case where you have to raise now and you don't have, quote, the metrics that you've either read about online or have heard that you need to hit a certain minimum threshold to go raise with, don't get discouraged.
00:17:19
Speaker
Instead...
00:17:21
Speaker
really maximize the things that you are good at.
00:17:24
Speaker
Because having bad metrics is not as bad of an anchor as you might think.
00:17:28
Speaker
And having good metrics is not as useful as you might think.
00:17:33
Speaker
We had a really hard time raising our seed, to be totally candid.
00:17:36
Speaker
And we had really good metrics.
00:17:37
Speaker
If you just looked at the metrics, you would have thought, oh, this company is going to have no problem.
00:17:42
Speaker
40% retention at like 24 weeks, week over week engagement.
00:17:46
Speaker
Phenomenal.
00:17:48
Speaker
People engaging with the product 10 to 20 times a day, every day.
00:17:52
Speaker
Seems like a no-brainer.
00:17:55
Speaker
And yet, we still really had to chip away at it.
00:17:58
Speaker
So if you have things like founder, market fit, that's huge.
00:18:05
Speaker
Play off of that.
00:18:07
Speaker
All the other things you are bringing to bear, don't get discouraged.
00:18:11
Speaker
Don't feel like you're done because you don't have the metrics that, quote, the market says you need.
00:18:18
Speaker
I would largely agree.
00:18:19
Speaker
I would say seed metrics do matter.
00:18:24
Speaker
They should not be the primary thrust of your pitch for a few different reasons.
00:18:29
Speaker
I think one is sometimes I see the fallacy or the bias towards premature optimization, meaning a founder comes in and they start building a company and metrics and dashboards before they found a market and a product that customers really love.
00:18:44
Speaker
does anybody actually want what you're selling?
00:18:47
Speaker
Because that has to come first.
00:18:50
Speaker
And so I do think that if you get too much in the metric vacation, if that's a term that we use, you can fall into that battle.
00:18:57
Speaker
The second thing is, from an investor buyer standpoint, the mistake I might make with something with traction is I immediately go to benchmarking and heuristic thinking.
00:19:05
Speaker
I think, okay, if your cohort's this,
00:19:08
Speaker
30% is best in class.
00:19:09
Speaker
So 40%, oh, it must be really good.
00:19:10
Speaker
I'm going to start anchoring on those things hard because it gives me some piece of data and it becomes more scientific than the art side of it.
00:19:18
Speaker
They certainly matter in the high-level metrics around growth and retention matter to the extent that they show, does the customer really love this product?
00:19:27
Speaker
And then the second question to that is, does this market and customer base represent a large customer base?
00:19:33
Speaker
Because what you can get is metrics that are really good and a really narrow space that only serves, let's say, boat owners.
00:19:39
Speaker
And so all that does is serve boat owners and the market size is never going to be big enough.
00:19:43
Speaker
So it doesn't matter how good the metrics are.
00:19:45
Speaker
That industry is just not going to sustain a billion-dollar company.
00:19:50
Speaker
I think the takeaway then is build the mystery box.
00:19:55
Speaker
Metrics can be one component or depending, they cannot.
00:20:00
Speaker
Yeah, we see a variety.
00:20:01
Speaker
We see companies that come in and see funds that have a deck, some that have a product, and some that have $2 million in revenue.
00:20:07
Speaker
And I don't think there's a jury.
00:20:08
Speaker
I don't think if we did a correlation analysis on those, that we would say one or the other is the most likely to be successful.
00:20:15
Speaker
There's a lot of different ways to do it.
00:20:18
Speaker
Would you say there are other things that founders focus on when they pitch that don't matter as much as they think they do?
TAM Slides vs. Real Market Understanding
00:20:24
Speaker
The first thing that comes to mind is the slide that I cared the least about is the Tam Sam Psalm slide.
00:20:32
Speaker
Because it just like, it never means anything to me.
00:20:35
Speaker
Not never, almost never, because it's just like such big numbers.
00:20:39
Speaker
I can't even conceptualize it.
00:20:41
Speaker
And so it's become such a...
00:20:43
Speaker
It's an academic exercise.
00:20:44
Speaker
Yeah, it's a road exercise that everybody's going through that I would much rather hear like, Hey, did you know that there are 10 million people that are doing this thing?
00:20:53
Speaker
And if we can sell them this thing, it's a hair on fire problem for them.
00:20:57
Speaker
It's a paint mess and not a vitamin.
00:21:00
Speaker
That's going to perk me up and make me think about the market.
00:21:02
Speaker
But if they just do like a top-down like Ibis or McKinsey reports that X million of people use this, it doesn't mean anything to me really.
00:21:11
Speaker
I recommend founders, if they get pushback on their TAM, to just stop the call.
00:21:16
Speaker
Just be like, no, we're not doing this.
00:21:19
Speaker
That's another hot take.
00:21:21
Speaker
There's a hot take embedded in a hot take.
00:21:24
Speaker
I don't know that I agree with that.
00:21:25
Speaker
But more power to you if you do.
00:21:28
Speaker
What I think I'm hearing said, but without being specifically said is, Tanner, what you're looking for most is a founder who can communicate that they really understand the customer.
00:21:40
Speaker
Tell me about your customer and help me understand why you understand that customer more than any of your competition does.
00:21:47
Speaker
Is that fair?
00:21:48
Speaker
Yeah, absolutely.
00:21:49
Speaker
It's tell me about that customer that you really understand them and whatever anecdotes, stories, metrics help do that.
00:21:54
Speaker
Tell me that there's a lot of other people that are just like that customer.
00:21:58
Speaker
And then tell me that that customer has a wallet that will actually sustain this business.
00:22:03
Speaker
I'm thinking about those three things.
00:22:04
Speaker
And so a lot of times, yeah, if you go from first principles up, you'll answer those questions and not do it in a rote way.
00:22:12
Speaker
Yeah, thanks.
00:22:13
Speaker
Taylor, any feedback to that before we jump to the next one?
00:22:15
Speaker
No, I'm really excited to get into the next one, actually.
00:22:18
Speaker
Okay, then let's get to the next one.
00:22:21
Speaker
I feel like we need a drum roll with this one.
00:22:22
Speaker
But hot take number four from Tanner is that most founders do not research the VCs they're talking to.
Researching VCs for Better Investment Chances
00:22:31
Speaker
Explain, Tanner.
00:22:33
Speaker
Self-explanatory.
00:22:35
Speaker
Let's just say sometimes in life, there are areas where the bar is actually quite low to delight.
00:22:41
Speaker
And we had a founder come in recently that had memorized the names of all the team members at Kickstart.
00:22:47
Speaker
And I think I may have told her that that was the first time I think that anybody had done that.
00:22:53
Speaker
That 15 minutes of preparation to know who you're talking to, what their background is, what they're interested in, what kind of companies they invest in.
00:23:01
Speaker
Not only, A, does that help you get to the meaty stuff instead of saying, hey, here's what I am, here's my background.
00:23:08
Speaker
Obviously, you don't want to appear stalkerish.
00:23:11
Speaker
But I think a lot of times I've noticed founders don't really understand the theses that the investor has, what they're focused on.
00:23:18
Speaker
And if you just look at their LinkedIn, their company website, what boards are on, what companies are interested, you can pretty easily intuit or infer what they're interested in.
00:23:27
Speaker
And that will help the conversation go much quicker.
00:23:29
Speaker
It will help you also to say like, hey, I know that you're interested in IoT AI devices.
00:23:34
Speaker
Like, here's how I'm thinking about this.
00:23:36
Speaker
And that way you're going to connect quickly and it's going to feel personable.
00:23:40
Speaker
What do you got, Taylor?
00:23:43
Speaker
I think that it may be true that most founders don't research the VC as they're talking to.
00:23:50
Speaker
It may be true that founders do not research VC ahead of time.
00:23:55
Speaker
I am not sure there's a correlation between having conducted 15 minutes of LinkedIn research and a positive outcome for that company.
00:24:05
Speaker
That being said, I recommend to founders to do that research as well.
00:24:11
Speaker
You may learn something, you may not.
00:24:12
Speaker
But what I do not recommend is coming out and demonstrating all that knowledge in the form of, hey, let me repeat or just read your LinkedIn to you.
00:24:21
Speaker
What I do instead recommend is level setting with that particular investor and hearing from the VC's mouth what their thesis is, what they're interested in.
00:24:32
Speaker
Every VC wants to jump in and dive into the company.
00:24:34
Speaker
I'm like, whoa, hold on.
00:24:36
Speaker
Once we start talking about keys, I know it's going to take up the rest of time.
00:24:39
Speaker
So I'd really like to hear, Tanner, how you come to this, what's your experience investing in consumer generative AI, and how you found yourself at Kickstarter in the first place.
00:24:49
Speaker
That'll open the spiel that probably is stuff that I already know that I have confirmed or read already on LinkedIn.
00:24:55
Speaker
Tanner's going to be like, well, I went to BYU for undergrad.
00:24:58
Speaker
I went to Harvard for my MBA.
00:25:00
Speaker
I like basketball and I'm a power user on Twitter.
00:25:04
Speaker
I'm like, okay, great.
00:25:06
Speaker
What do I got there?
00:25:07
Speaker
I got nothing.
00:25:08
Speaker
That doesn't actually help me as the founder.
00:25:11
Speaker
I could have been told that or I could have researched it.
00:25:14
Speaker
What we have instead now is a doorway to walk through where I'm like, okay, that's very interesting, Tanner.
00:25:19
Speaker
Tell me now, if you really knew me, what are you currently investing?
00:25:25
Speaker
What is it that is keeping you up at night that you can't wait to talk about on Slack the next day?
00:25:30
Speaker
What are those things going through your head?
00:25:32
Speaker
And by the way, how is your fund actually doing that?
00:25:34
Speaker
Are you just researching things?
00:25:36
Speaker
Where have you been making bets?
00:25:38
Speaker
That, I think, is the real thrust around why you do research so you can have that kind of conversation.
00:25:46
Speaker
I could write down the names of all the partners, I guess.
00:25:50
Speaker
I just don't know what that shows.
00:25:53
Speaker
That's why we invested in you right there.
00:25:55
Speaker
I think that you're running a company that's about communication.
00:25:58
Speaker
And I think you're giving a model of how it could be done in a way that's both personable and applicable to what you're doing.
00:26:04
Speaker
Your goal is to connect and deliver the vision of that company.
00:26:07
Speaker
And there's a lot of different ways to do that.
00:26:09
Speaker
And the case that happens sometimes is you end up doing a pitch and the founder talks for 30 minutes and...
00:26:14
Speaker
You don't even get to questions.
00:26:16
Speaker
And so I think research to the end of helping the conversation to quickly get to the vision, who you are, who the investor is, and what matters to them, I think will get you to your point.
00:26:27
Speaker
I don't know if it gives you more success in terms of investment than I suspect it would.
00:26:31
Speaker
At the very minimum, I've noticed that I have more of a dialogue, ongoing dialogue with those founders.
00:26:36
Speaker
I'm more open to giving feedback because I feel some connection and I feel some reason to be more open in that way.
00:26:44
Speaker
And it keeps the door open for if you don't fund this round, there's later opportunity.
00:26:49
Speaker
That kind of did spur a question, Tanner, with most founders not researching their VCs, especially in the current fundraising environment, when it's really tough and they are kind of just going for volume.
00:27:00
Speaker
They're like, I need the money.
00:27:02
Speaker
I need this.
00:27:02
Speaker
I don't necessarily have the time to get into this.
00:27:04
Speaker
I just want to blanket it out there.
00:27:06
Speaker
Even if I'm not technically a fit for their thesis, it doesn't really matter.
00:27:09
Speaker
Maybe I can talk myself into being a fit for their thesis.
00:27:13
Speaker
What would you say to those founders about research?
00:27:17
Speaker
time-strapped people who really are kind of desperate sometimes.
00:27:21
Speaker
I think what I'm recommending is that just as you qualify your customers and you create an ideal candidate profile on ICP, you should qualify your investors.
00:27:31
Speaker
Try to find who the investors are that would be most likely to be interested in what you're doing.
00:27:36
Speaker
And so that may mean taking 30 initial meetings
00:27:39
Speaker
winnowing it from there and saying, these are the attributes.
00:27:41
Speaker
They invest in B2B SaaS, they're seed stage, and they like X industry.
00:27:46
Speaker
I think that way you're going to have much more success selling to people that are ready to buy versus trying to convince somebody to invest in something that they have a prior around.
00:27:55
Speaker
And let's just say there's some industry they don't like, or they have scar tissue.
00:27:59
Speaker
The chances that they're going to invest in that are very low in changing somebody's prior.
00:28:03
Speaker
So I would be trying to sell to the qualified leads.
00:28:08
Speaker
100%.
00:28:08
Speaker
My job as a founder when fundraising is first and foremost, not to find an investor, it's to qualify an investor.
00:28:17
Speaker
It's to screen people out.
00:28:18
Speaker
It's to look for no's that we can identify, whether that happens from them saying no or me saying no more quickly.
00:28:26
Speaker
I think there's two stages of research.
00:28:28
Speaker
There's researching whether a fund or a particular partner is
00:28:31
Speaker
or a particular investor analyst is a good match for your company.
00:28:35
Speaker
And there's, I think, personal research into that person's background and what they're doing.
00:28:43
Speaker
I 1000% agree with spending as much time as you can allot to making your CRM of potential VCs look exactly like the profile of investor that would invest in companies like yours.
00:28:58
Speaker
That is time well spent.
00:29:02
Speaker
understanding and learning about maybe the hobbies of somebody, I might take issue with.
00:29:09
Speaker
Speaking of our intros where we're like, what else do you like to do, guys?
00:29:14
Speaker
So hot take number five from Taylor.
Importance of Personal Story in Pitches
00:29:18
Speaker
Your story isn't where you worked or where you went to college.
00:29:22
Speaker
That's called background.
00:29:24
Speaker
So instead, you say, tell me about your company without actually telling me.
00:29:29
Speaker
All the time you hear, and I remember this as a early founder in the pre-seed and seed stages, VCs want to hear your founder's story.
00:29:39
Speaker
They want to hear how you came to this.
00:29:42
Speaker
That's really important.
00:29:42
Speaker
That is one of the things that they latch on to.
00:29:46
Speaker
And you're like, okay, great.
00:29:48
Speaker
What is a founder's story?
00:29:51
Speaker
Nine times out of 10, I'd really like to hear, Tanner, what you think about this, like the frequency.
00:29:55
Speaker
What people leap to is some version of rattling off their CV.
00:30:01
Speaker
All of that is called background.
00:30:03
Speaker
A founder's story is something very different.
00:30:06
Speaker
It's a five-second moment that dovetails why you could not not start this company into the vision of the company itself.
00:30:17
Speaker
Here's how I tell mine.
00:30:20
Speaker
If you'd asked me when I was eight years old what I wanted to be, I would have told you a lawyer at Wilson Sincini.
00:30:26
Speaker
They're a big law firm in the Bay Area.
00:30:28
Speaker
They took Google and Apple public.
00:30:30
Speaker
Fast forward 20 years, I'm a lawyer at Wilson Sincini, just starting to think about going for the partner track.
00:30:36
Speaker
The part of the job I love is communicating, talking to other founders, understanding their pains, what's working.
00:30:41
Speaker
And I get approached by my partner mentor to give a presentation on communication best practices, how to talk to founders.
00:30:49
Speaker
Turns out the senior partners were losing deals because they didn't know how to talk to founders to other hip young firms.
00:30:55
Speaker
I'm floored by this.
00:30:57
Speaker
I'm just starting to get noticed at the firm.
00:30:59
Speaker
This is my opportunity.
00:31:00
Speaker
I've looked up to these people forever.
00:31:02
Speaker
Here we go.
00:31:04
Speaker
I stare out at a sea of whiteheads and I cover all the greatest hits about communication.
00:31:09
Speaker
Being an intent-based communicator, starting with an outcome and working towards the role that things like punctuation and grammar and mirroring have to do.
00:31:17
Speaker
And this senior rainmaker comes up to me afterwards.
00:31:20
Speaker
He shakes my hand and he looks me in the eye and he goes, Taylor, you rocked it.
00:31:27
Speaker
That'll come in so handy when I have to cancel plans with my wife.
00:31:34
Speaker
All the color drained out of my face.
00:31:36
Speaker
Nobody cared about communication.
00:31:38
Speaker
It became a running joke where they're like, oh, you need to set up lunch plans with your daughter.
00:31:42
Speaker
Get Taylor to text that.
00:31:44
Speaker
And it killed me because I found out that the people that I looked up to didn't value communication the same way I did.
00:31:51
Speaker
And it was at that point that I was like, for the first time ever, how can I help everybody communicate better?
00:31:57
Speaker
Not these people.
00:32:00
Speaker
So some version of that is what I coach founders to do.
00:32:05
Speaker
Mic drop.
00:32:06
Speaker
There's nothing better to get an investor engaged in a presentation than a personal story or an anecdote.
00:32:16
Speaker
I've heard ones of like, hey, I was in the hospital.
00:32:18
Speaker
I was watching my dad go through a stroke.
00:32:20
Speaker
I was seeing what was happening.
00:32:21
Speaker
I was seeing problems here, here, and here.
00:32:23
Speaker
And at that point, I knew that I had to solve this coordination problem because it was meant life or death.
00:32:29
Speaker
Something like that that drags the personal into the realm of the entrepreneurial world as well as it just is so clear why this person started that.
00:32:38
Speaker
Those often are the most electrifying pitches that we hear.
00:32:42
Speaker
I think the thing you said, Tanner, there that really sticks out to me is what is the moment you didn't jump into the company, the company dragged you into it.
00:32:52
Speaker
You were forcibly thrust into this where you had to be doing it.
00:32:58
Speaker
What was that?
00:32:59
Speaker
I call it the five-second moment.
00:33:00
Speaker
When did that happen?
00:33:02
Speaker
And then work backwards from there.
00:33:05
Speaker
I want to tie that into our hot take number six because they kind of are tying together at this point where Tanner says that he... Basically, that's what he wants.
00:33:13
Speaker
He only wants to invest in entrepreneurs who could not do anything else.
00:33:17
Speaker
You want to invest in entrepreneurs who are deeply interested or embedded in the space rather than, as he says, trendpreneurs.
00:33:24
Speaker
Talk to us about that, Tanner.
Passion Over Trends in Entrepreneurship
00:33:27
Speaker
Yeah, I think we have a perfect example here with Keys.
00:33:30
Speaker
Taylor started working on Keys how many years ago?
00:33:33
Speaker
Three.
00:33:34
Speaker
Three, and integrating generative AI before that term existed.
00:33:38
Speaker
And it was clear that he had a mission, which was to change the way people communicate.
00:33:42
Speaker
And generative AI was a tool to get there.
00:33:44
Speaker
That was an example of somebody that was mission-focused, that was clear and intent on changing the way that people behave.
00:33:52
Speaker
And what we see sometimes is when Web3 rolls around or Gen.ai and entrepreneurs see that these are opportunistic moments to go do a business, instead of starting with the first principles, they choose some problem that they're mildly passionate about and then they slap on generative AI or they slap on Web3.
00:34:10
Speaker
And you can generally sense this.
00:34:13
Speaker
There's a thousand ways to be a good entrepreneur.
00:34:15
Speaker
So I would never limit the ways in which you could do that.
00:34:18
Speaker
But for me personally, I would rather invest in somebody that's a missionary on a cause rather than a mercenary.
00:34:25
Speaker
what founders are doing is really irrational in so many ways.
00:34:29
Speaker
They're signing up for a 10-year journey to go build something really, really big that has a high chance of failure.
00:34:35
Speaker
And so for almost any person that have the grit to stick through that, it has to be a deep why undergirding it.
00:34:41
Speaker
And so I think that's really the first principle thinking that I'm trying to get at is really why are they doing this and what's motivating them to do it?
00:34:48
Speaker
And how long have they been interested in this?
00:34:50
Speaker
Is it just like the last year or has it been like the last 10 years they've been thinking about it?
00:34:56
Speaker
I'm curious about so many things, I'm going to limit it to one at a time.
00:35:01
Speaker
What advice do you have to founders that might think they are verging on that trendpreneur bucket?
00:35:08
Speaker
Are you dead in the water?
00:35:10
Speaker
Should you just fold the company?
00:35:12
Speaker
What do you do if you're new to generative AI and I think you found a use case, but you're pretty fresh?
00:35:20
Speaker
I think this is something my wife and I actually talk about often is with trends.
00:35:24
Speaker
Let's say khaki pants are the new trend.
00:35:27
Speaker
If you like khaki pants, just wear the khaki pants because you like them.
00:35:31
Speaker
Just because it's trendy, that doesn't mean you shouldn't do it or because it's trendy, you should.
00:35:35
Speaker
For me, if somebody's interested in a trendy area, it's making sure that they've really thought it through.
00:35:41
Speaker
They think, okay, if I'm going into generative AI, here's what the incumbents in this industry are going to do.
00:35:46
Speaker
Here's what the startup's going to do.
00:35:47
Speaker
I know that.
00:35:47
Speaker
I know that on a scale between less competitive and more competitive, it's likely going to be more competitive.
00:35:54
Speaker
We're not going to say, no, we're not going to invest because it's a trend.
00:35:57
Speaker
Trends have a lot of weight behind them.
00:35:59
Speaker
And to use the NFX term, fast-moving water is what you're trying to find.
00:36:03
Speaker
And so sometimes the space you're in is more important than almost anything else because you get carried with that current.
00:36:09
Speaker
But it's really being eyes wide open about what that means.
00:36:11
Speaker
What are the trade-offs of being in a space that's really competitive?
00:36:15
Speaker
Yeah, I think there's a lot of first-level thinking that goes on with these sorts of trends that people jump into it, even jump into the deep end and are chasing version number one of an idea versus version number two or three, which often is where the real value lies.
00:36:32
Speaker
That sometimes experience in a space is almost necessary to have done it wrong initially.
00:36:37
Speaker
Yeah, and the last thing I'll say is there's sometimes the solution in search of a problem.
00:36:42
Speaker
What is the deep problem here and why is this the right solution rather than inverse, which is anything like solution first, problem first.
00:36:49
Speaker
Why is it in the AI?
00:36:50
Speaker
Why is Web3?
00:36:50
Speaker
Why is blockchain actually the right solution here?
00:36:54
Speaker
And Taylor, any final comments on that before we segue into the last question?
00:36:59
Speaker
I do have a couple of final thoughts.
00:37:01
Speaker
One, so my company is in generative AI.
00:37:04
Speaker
We're helping everybody in the world be better communicators and the process have better connections.
00:37:09
Speaker
We were doing this before generative AI was generative AI.
00:37:14
Speaker
We were doing it really more on the cusp of GPT-2 and GPT-3.
00:37:18
Speaker
I hear all the time from people, oh my gosh, you killed the timing.
00:37:22
Speaker
You know what I have to say to that?
00:37:25
Speaker
If you nail the timing, it means that you were wrong on the timing for every single day until the day you were right.
00:37:33
Speaker
That means you were wrong about 99.9% of the time.
00:37:37
Speaker
There are 365 days in the year.
00:37:39
Speaker
You're wrong for one whole year.
00:37:40
Speaker
You're right.
00:37:41
Speaker
One third of 1% of the time.
00:37:42
Speaker
If you hit that is not very good.
00:37:45
Speaker
So it is overrated in some ways to be the current trendy thing.
00:37:50
Speaker
And the outcome is that it really sucks, frankly, often not being in that spot.
00:37:58
Speaker
When we were trying to get off the ground with Genre of AI, nobody knew what GPT-3 was.
00:38:02
Speaker
I was literally explaining to people what a transformer model was.
00:38:06
Speaker
And as a result, people often look at you and think your business is silly.
00:38:10
Speaker
They don't think that there's a there there.
00:38:13
Speaker
Investors are not kickstart, but notoriously not creative thinkers.
00:38:17
Speaker
And I guess I'm just really commiserating with everybody that's at the beginning of the next wave right now.
00:38:23
Speaker
All right, that was our last hot take.
00:38:26
Speaker
I actually kind of like this format.
00:38:27
Speaker
I think we should explore this moving forward.
00:38:30
Speaker
So thank you, Taylor and Tanner for contributing your hot takes and all the thought behind them.
00:38:36
Speaker
Taylor, there is one final question I'd like to ask you.
00:38:38
Speaker
We like to ask this to every guest on our podcast.
00:38:40
Speaker
And that is, what's an effective practice you've implemented in your work or personal life that you think has had a great impact on your success?
Rewriting Thoughts for Success
00:38:50
Speaker
This may come as no surprise after this podcast, but it's rewriting.
00:38:57
Speaker
I write a lot and it's not necessarily cohesive or coherent or intentional.
00:39:01
Speaker
I wouldn't call it journaling per se.
00:39:03
Speaker
It has to do with thoughts and ideas.
00:39:05
Speaker
It has to do with how I understand my company, the space I am myself.
00:39:11
Speaker
But the real value lies in the second time that I come around to things or the third or the fourth and make adjustments and tweaks and basically learn where I'm wrong and where the meat on the bone really lies.
00:39:23
Speaker
I didn't do that as a lawyer.
00:39:25
Speaker
I wasn't in a space that I felt like I had a lot of passion for that.
00:39:30
Speaker
Since moving over, it's been one of the primary drivers of my success in this space.
00:39:36
Speaker
I would say I've seen that firsthand.
00:39:37
Speaker
One of the ways with keys, one of the unique things that Taylor has done is with board meetings, instead of sending out a pitch deck, he sent out a full written report that I'm sure he's revised multiple times, which then the other board member and I end up reading through and commenting on.
00:39:53
Speaker
And then there's comments and revisions there.
00:39:56
Speaker
And then in the board meeting, instead of
00:39:58
Speaker
the point earlier on being on your first idea.
00:40:00
Speaker
We're now on the fifth evolution of that idea.
00:40:03
Speaker
We're not talking about the basics and the trade-offs of that decision.
00:40:06
Speaker
We're getting into the meat of the decision.
00:40:08
Speaker
We've had some of the most effective board meetings I've seen because of that.
00:40:12
Speaker
And the product you see with Taylor is the work that comes on the other side of those revisions.
00:40:17
Speaker
There's a quote that you're trying to get to the simplicity that's on the other side of complexity.
00:40:22
Speaker
And I think that's what revision and rewriting does is it gets you to that simplicity on the other side of complexity.
00:40:28
Speaker
Well put, Tanner.
00:40:29
Speaker
Thank you for that.
00:40:31
Speaker
This has been so much fun.
00:40:33
Speaker
Thank you, Taylor and Tanner, for being on the episode.
00:40:35
Speaker
Thank you for coming with your hot takes and just being just a delight to record with.
00:40:40
Speaker
Talk to you later, guys.
00:40:40
Speaker
Thanks, all.
00:40:41
Speaker
It was a pleasure.
00:40:42
Speaker
And of course, thank you for listening as we dive deep into what it takes to create the perfect pitch.
00:40:48
Speaker
If you want to learn more about our investor, Tanner Potter from Kickstart, or our CEO, Taylor Margo from Keys, we'll have a link to the company and a longer bio in our show notes at kickstartfund.com.
00:40:58
Speaker
You can listen to more episodes of Perfect Pitch wherever you listen to your podcast.
00:41:02
Speaker
And if you like what you're learning, leave us a reviewer rating.
00:41:05
Speaker
We'll be back next time with more insights from entrepreneurs and the investors who funded them.
00:41:08
Speaker
So be sure to subscribe so you don't miss a thing.