REAL AF with Andy Frisella - ASK ANDY: How to Pitch an Investor (And a Question About Supply and Demand)

Episode Date: August 20, 2015

In this ASK ANDY episode of The MFCEO Project podcast, Andy Frisella answers two questions: (1) What do I do when the demand is more than the supply of inventory my company possesses and (2) How do I pitch an investor? Co-host Vaughn Kohler joins him in the studio.

All I do is work, work, work. Never run to sidelines, I only hustle. I'll never take a day off, I only work, work, work. I don't mess around, kid, I only tell. Lordy never seems to get you. All I do is work. All I do is work. All I do is work.

What's up, guys? This is Andy Frisella. You're listening to the MFCEO Project. Welcome to our Thursday Q&A. MF QO Project. Welcome to our Thursday Q&A. MF Q&A. Okay. MF Q&A. I stand corrected. Welcome to our Thursday motherfucking Q&A. How about that? That's perfect. Otherwise known as Ask Andy. Okay. Today, we're going to go through some questions. Vaughn's going to hit me up.

Yeah. As always, I'm here with my co-host Vaughn Kohler. Yes. What's up, dude? It's good to be here. Can I do the stuff that you hate that I have to do, but I got to do it? Yeah. Okay. So for those of you who like to get full extensive show notes and links and all good goodies such as that, the link, the specific custom link for this episode of the MFCEO Project is themfceo.com slash QA3, I believe. It might be four. It's either QA3 or QA4. You'll go there. Trial and error. Yeah, trial and error. Anyway, you can go there. And then, of course, our social media connections.

You want to go through yours, Andrew? Yeah. At Andy Frisella on Instagram, at Andy Frisella on Periscope. If you want to see some behind the scenes shit, MFCEO-1 on Snapchat. Vaughn? Yeah, I'm just at V-A-U-G-H-N-K-O-H-L-E-R for everything. Periscope,

Snapchat, and, well no, actually Snapchat. I'm VKO-MFCEO and then at Von Kohler for Instagram. And I've been telling people I am going to debut on Periscope. And I think what we're going to do for me, I'm going to start the first couple ones I'm going to do are going to be MFCEO focus groups. So I'm going to get some feedback from people. Periscope's badass, man.

If you are not on Periscope, go on Periscope. It's like watching a live television broadcast, but you can answer, ask questions live or comment live and they can see it. It's really cool. If you haven't checked it out, download it. Follow me at Andy Frisella. You'll see what it's all about. It either is or isn't for you, but it's a good thing to check out. Yeah, definitely. Let's get in to the Q&A. Yeah. So the first Q&A or the first question is actually a pretty easy one. And that is that in a previous episode, you talked about your great love for Lamborghinis and actually talked not just about your love for the car, but for the company itself and the whole culture. Great entrepreneurial story.

Yeah. So you mentioned reading a book that you thought was pretty helpful. And I mean, obviously, I think if people wanted information, they can look it up on Wikipedia, but you mentioned a specific book. Yeah. I mean, you could either Google the company and read the history if that's all you're interested in. But there's a book out there called Lamborghini 40 Years by David Jolliffe. Yeah. We'll throw the link up on the website. That sounds good. So that's the easiest thing to answer in this episode. So now we go on to

the next one. You ready? All right, show's over. We're done. Thanks for tuning in. Yeah, let's get down to the real questions. Okay. So just as, you know, normally I throw the questions out to Andy with no previous knowledge, but I'm going to tell you right now that I actually read him the entire email for this question. And there is some backstory, but I think in order to understand Andy's question or answer, you don't need to have the whole backstory. However, I will be throwing up the backstory on the show notes if you guys want to hear a little bit more about this particular person's question and their business background. But anyway, here's the question. All right. Dear MFCEO, as a new, less than one-year-old company, how do we grow our inventory? We are in the fortunate position to have more demand than supply. The unfortunate part is that we lose customers due to lack of inventory, which means

that they have to go to our competitors instead. Banks won't lend to us because we are too new, and investors don't find us appealing because we aren't a hot tech startup. In other words, how do we overcome a demand is greater than supply problem? Okay. First of all, there's plenty of investors out there that will invest in your company, either for an interest rate, typical standard loan, or an equity position in your company. You don't have to be a hot tech startup.

So you think they just haven't beat the path? No, I think that, yeah, I think it's an excuse. Okay. Okay, that's an excuse. People won't invest in us because we're not tech startups. I mean, there's a million kinds of businesses out there. All right. That's an excuse.

You're not beating down the path hard enough. And I'm going to be honest. I read the whole question. I understand what your business is. And if you don't go beat that path out and find somebody to invest, you're not going to make it in business because you're, you're going to be passed up by the industry. Okay. The technology industry, which you guys are a technology company. Um, what they do is certainly related to it. They make cell phone repair parts, screens. They figure out, uh, all the little things that you can repair a cell phone with or a tablet or computer.

All right. And they have those parts. But here's the reality. The technology is going to pass you guys up if you don't get some funding to fund your inventory. That's the bottom line. There are certain situations where you have to have funding. We, my business, we were one of these companies who constantly reinvested, which you're going to have to do too. But we didn't have to take money from somebody and we didn't have to get banks to support us because we just went without pay and reinvested all the money in it and grew it that way.

We maintain all our equity. We're in a good position now, but it also took 16 years. You don't have 16 years to wait. In 16 years, the products that you're making aren't even going to be fucking made anymore. That'd be like saying, you know, you're going to be the, you're going to be the eight track in 16 years. Okay. You have to go out and find funding for your inventory.

You don't think we're going to have cell phones in 16 years? Not the, not the kind that they're making parts for. Oh, gotcha. Gotcha. And maybe not. It might be something totally different. Yeah. You know, who knows? Yeah. But the point is. That makes parts for. Oh, gotcha. And maybe not. It might be something totally different. Yeah.

You know? Who knows? Yeah. That makes sense. I was just clarifying. Yeah, the point is you can't – when you're in a fast-paced environment market segment like these guys are, you are going to have to find funding. This is one of those cases where you have to find it. There's plenty of people out there that will invest in a company like yours if it's showing the numbers. Now, I agree, you have only been in business for a couple years and banks are going to be hard to do. So you're going to have to find somebody who is a person

who invests their own money and it's probably going to have to be an equity position in your company is what's going to happen. But the alternative to that, which, you know, nobody likes that. Nobody likes giving up part of their company. But the alternative to that is this. You're out of business. Okay? So don't be too proud to go take those deals. They're out there.

You just have to go look for them. So, because I listened to you. There is more people out there looking to invest in deals right now than there ever has been before. Yeah. Ever, ever, ever, ever in the history of earth. So your answer was basically either reinvest what you're making back into inventory or find an investor at all costs. My answer was do both of those things. Do both of them.

My answer was they better do both because they're brand new. You're not going to get paid for a few more years. Don't get paid. They said in the email that they're not getting paid. Okay. Invest everything you have, go find somebody and show them that you're investing everything you have. You know, there's nothing worse than somebody comes to somebody with a deal and they say, Oh, well we need money, but I'm paying myself X amount of dollars to live on, blah, blah, blah. You know, it's, it doesn't look good, right, you know, it doesn't look like you're all in right, you know go be all in you'll find somebody

You're gonna have to beat down doors to make it happen It's not gonna be me just so we don't follow up the email and say hey But I'm telling you there's people out there that do this right, you know And you're gonna have to go find somebody or you're gonna be out of business, right? So Don't sit here and put the mental block up of we're not a sexy tech startup. You know what's sexy? Make a fucking money. And that's what investors care about.

Right. So if you're making money, if you're making margin, if you have a legit business plan, there will be somebody out there that finds you quote unquote sexy. You just got to bang down the doors. You can't quit. Yeah. You know, the first, there's an excuse in there. We're not a sexy startup.

I read that and cringed. Right. What do you mean? You think that's the only business that gets funding? If you have a viable business, people, you'll find the money, period. So a comment and then a follow-up question. The comment is that, you know, you were saying, hey, don't send up a follow up email because I'm not investing. But the reality is, is that they shouldn't be super offended by that

because you don't really. You're extremely, extremely. First of all, you can't look at a situation like that like it's offensive. Right. Well, no, what I'm saying about what you just said is I'm not going to invest, but you don't at this point, you are extremely, uh, focused, focused. And you're, you're just, you just haven't gotten into that yet in your life, right? Like you don't, you don't personally invest in any startups, right? Not in startups. No, no. All right. Um, I will, I will invest in businesses that are established for an equity position that I bring a certain expertise to their company and I have done so. But I'm not a startup guy.

I'm just not that kind of guy. And I'm very good at what I do and I like to invest in myself. That's my position. Which was my point. You're very choosy and you're very focused. A lot of these guys who are investing, they invest because they sold their business and they're looking for new things.

I'm not at that point in my life. Right. I have a lot of growth to do on my own. And no offense, I trust myself better than anybody else outside with my money. Right. At this point in my life. Makes sense. So that's why I'm saying it's not me.

I'm not trying to be a dick and say you have a bad plan. Yeah. You know, that's just not what I'm doing right now. I think that's what you're trying to get me to say right because you don't want these guys to like you upset no no no no no no no i i just wanted to point out because i think there are probably a lot of people who listen to us who have thought and i know because i answer a lot of the a lot of the emails i know a lot of people that are doing that and i and i just i'm using this as an opportunity to tell everybody listen guys it's not that andy doesn't believe in your product or your, or it's just that

you are, that's not what you're doing. Right. You're not, you're not in that, in that area right now that you're very focused. Right. So my followup question, and you know, I've, I've said this for other questions and I'm going to say it for this one too. Don't be too thorough. I know that's your. I know that's your default is to be thorough. But give me the nuts and bolts answer to this follow-up question, which I would like to become an eventual full-length podcast. And that is, in light of what you said about them not beating the pavement and working to find an investor, why don't you give me the thumbnail strategy for how, what is the best way to pitch an investor?

Okay. I'm going to tell you what to not do because I just dealt with this this morning. It's funny that you bring this question up. Learn the phrase, have your shit together. Okay. Know what you're going to do. Know what your end game is. Understand that 100%. But be humble in your approach. Know the phrase, I don't know. I got this email from this guy this morning that just really, honestly, pissed me off. Okay? It's this guy.

I'm not going to say what company he's's with but he's been trying to get our business and he keeps telling me how he's gonna save money on producing our product and i'm like look dude we produce our own product our fucking raws come in on fucking rails you're you're telling me that you you're gonna save us money by rails i mean a train you're gonna we're vertically integrated you're gonna save us money on on money on our production by us sending it out somewhere else? It doesn't make sense. But my point in saying this is this. Don't go at somebody like you have the answers to everything

because most people who are going to consider lending to you are going to test you to see what kind of person you are by the way that you react to certain things. And if you go in there trying to high energy, you know, overly sell them and act like you have all the answers and this and that, they're going to know you're not coachable and they're not going to give you any fucking money, right?

They're going to, you need to come in humbly and say, this is what we know. This is our numbers. This is what we know about our products. This is where we want to take it. And we're going to go here, here, and here. And then when you ask something that you don't know the answer to, be like, hey, look, I don't know the answer to that,

but I'm going to find out. That's a great question. Don't act like you know everything. Don't act like you know more than the person about your business. Because very well, they may know a lot of shit that you don't know that you can learn from and improve. And that person, personally, I'm'm never ever going to invest in somebody that has that that mentality because it makes me think they're uncoachable all right so be humble you know be confident have your shit together have a plan but be humble about

taking feedback and that's the biggest thing i see about people pitching ideas yeah they think they have this awesome idea and there's no holes in it. Be welcome to people poking holes in your idea because if people could poke holes in your idea, that's an opportunity for you to improve. And if I poke holes in your idea or somebody that has the ability to invest in your product, service, or business can poke holes in your idea and you're not willing to hear it, there's no way you're going to get the money. Because they know that you're too, you're not, you've lost the ability to learn. Okay. Yeah. So, you know, I've been around you for a long time or, well, at least it feels that way. And, uh,

that guy must've really gotten under your skin cause you were talking about that earlier today. But you know, I, I have to say in fairness to you, I mean, you, you, you know, you listen to you on the podcast and you're this intense, you know I have to say in fairness to you I mean you you know you listen to you on the podcast and you're this intense you know swearing guy but the reality is that you're actually a pretty nice guy so for him to get under your skin like that just don't come at somebody Tyler's laughing do you not think Andy's a nice guy he has his moments okay my point is this don't go at somebody like you know everything you know what i mean yeah that's that's the biggest thing that you make a mistake on you know you don't

know everything i don't know everything there's a lot of shit that i don't know right but what i do know i fucking know really well right okay and that's the attitude you have to have do you think the idea is? When people are pitching investors, they're thinking if I don't have every single detail Ironed out then I'm not gonna get this guy's money Yes But what they also couple that that that idea with is that they're gonna somehow bullshit this person into fucking investing Mm-hmm, and that's what I'm talking about Don't bullshit people don't lie to people if you don really fucking know, don't say you don't know. Right. You know what I

mean? Don't go in somewhere. I mean, okay. You've got a guy sitting across the table from you. That's let's say he's worth a hundred million dollars. You're trying to get 2 million bucks for him to start your business. This guy didn't get a hundred million dollars by fucking accident, most likely. And even if he did inherit it, let's say his family money, this and that, he's probably been around business his whole entire life. Right. Okay? He's not stupid.

So don't think that you're going to come in there and somehow enthusiastically bullshit somebody into giving you money. Your job is to take their money, go out and grow a business and give them a return. It's a business arrangement. They don't care about you. They care about getting their return. How are you going to get that person their return? It goes back to my talk on sales. It's not selling it's helping. How am I going to help this investor get their money back?

That's what you need to answer. And that's how you need to think. You don't need to think like, Hey, I'm going to get my 2 million bucks and run off and I'm going to do my thing. They want to hear how you're going to get their money back. Focus on that. You see what I mean? Yeah. Makes total sense. Makes total sense. So if I would offer my pithy summary of what you just said over the last 15 minutes, it would be if you have a greater demand than you have inventory, there's no question you find an investor, you reinvest your revenues. Before you get into this Vaughn, there is an exception to this. Okay. Like let's say you're

a different guy's kind of business. If you're a, not a tech company or you're not in an industry where it's going to pass you by, you can choose. Let's say you're selling lumber. In your certain area, you know you're selling more 2x4s than you can keep in stock. You can choose to not take somebody's money if you're in that industry because in 10 years, we're still going to be using two by fours. You know what I mean? And you can grow your company slowly. Are you going to lose opportunity? Yes. Are you going to lose customers? Yes. Are you still going to grow? Absolutely. And it will take time. So if you're in a business that the industry is not going to pass you by and you choose to do it the slow way, good for you. It takes discipline. It takes heart. It takes grit.

I respect that. That's how we did it. That's a good distinction to make for people because in this particular instance, this is a company that it's a very timely thing. That's right. It demands a sense of urgency. Right.

Okay. And that's why I wanted to clarify. Yeah, no, no, that's good. That's good. But if you're in that situation, you have got to find an investor. You have got to reinvest your own money, do whatever you can. And when you look for an investor, not only have it fully prepared,

but in those areas where maybe there are some holes, be humble. Be open to improvement. No question. Okay. That's it. Well, that's it. That's our Q&A for today. All right, guys.

Thanks for listening. We'll hit you up again on Tuesday. I'm not sure what topic will be this Tuesday, but we'll figure it out between now and then. Thank you, guys. We'll talk to you soon. Outro Music