The Pomp Podcast - #1257 Peter Pham on How To Raise Millions For Your Startup

Episode Date: October 10, 2023

Peter Pham is the co-founder & managing director of Science, an incubator based in Los Angeles. This conversation was recorded at the BUILD Summit in New York. In this conversation, we talk about the art of fundraising for founders with startups, materials to use, timing & process, how to create a bidding war, and why up & to the right charts are so important. Peter is one of the best fundraisers I have ever met, and he drops insanely valuable information in this episode.  ======================= Trust and Will has simplified the process of creating and managing your will or trust online. They leverage a data-driven, design-first approach and amazing customer support to help you protect your legacy from the comfort of your home starting at just $159. Sign up today for 10% off using ⁠⁠⁠⁠⁠⁠⁠⁠https://trustandwill.com/pomp⁠⁠⁠⁠⁠⁠⁠ ======================= Get Better Crypto Data: Do you want faster, easier crypto data? Sign up for Velo Data, a new product that we have been working on to solve this problem: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠velowaitlist.com⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ======================= Pomp writes a daily letter to over 250,000+ investors about business, technology, and finance. He breaks down complex topics into easy-to-understand language while sharing opinions on various aspects of each industry. You can subscribe at https://pomp.substack.com/

What's up, everyone? This is Anthony Pompliano. Many of you know me as Pomp. You're listening to the Pomp Podcast, which is my effort to find the most interesting people in the world and sit with them for hours while I ask questions in an effort to learn. So it would mean the world to me if you would subscribe to the show on your favorite audio platform, watch episodes on YouTube, and tell your friends and family about the podcast. My goal is to help millions learn from the world's most interesting people. So let's get into today's episode. The following episode is with Peter Pham, the co-founder and managing director of Science, an incubator based in Los Angeles. In this conversation, we talk about the art of fundraising for founders with startups.

This includes what materials to use, the timing and process you should pursue, how you can create a bidding war, and why up and to the right charts are so important. Science has incubated companies like Dollar Shave Club, Liquid Death, and many others. Peter is one of the best fundraisers that I've ever met, and he drops insanely valuable information in this episode. So I really hope that you take notes and you take away things that you can go implement tomorrow. Here is my conversation with Peter Pham. Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments.

You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only. Today's episode is brought to you by Trust and Will. I've gone through a number of different changes in my life over the last few years. I got married, I had a kid, and I had to start thinking about how could I ensure that my wife and my child would be okay if anything ever happened to me.

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difference between someone being taken care of and someone not. Go check them out today at trustandwill.com. Before we get into this episode, I also want to tell you about a brand new product called Velo. Velo is faster, easier crypto data. Everyone in the industry is always looking for what's the price what's going on on the exchanges where are assets flowing or not flowing how is things like open interest and derivatives actually playing out in the market well that's where velo comes in it's faster and easier crypto data you can go to velo waitlist.com today myself and a couple of friends we invested in the business we're advising the founder and we think it's pretty cool this one is something that keeps me informed on a daily basis

So you should check them out at VeloWaitlist.com. That's V-E-L-O Waitlist.com. If you want to raise money, need to raise money, or trying to figure out how to raise money, this is probably one of the best fundraisers I know. So buckle up, Mr. Peter Pham. So Peter and I met a couple of years ago. We were in Puerto Rico at a conference.

I don't know if I really cared about the conference or he did. I don't know how either one of us got there. We looked at each other and we said, hey, you want to go get dinner? We went and got dinner. And about three o'clock in the morning, we were like, man, we're still not at dinner, but we are dancing, drinking, having a blast all throughout Puerto Rico. And somehow we stayed friends, which may be a testament to you. And along the way, I've watched you do some incredible things.

You run a product studio, for those that don't know, Science. is probably the leading product studio in the country and you guys have incubated dollar shave club liquid death many many other companies can you just tell us the dollar shave club story first specifically between great marketing great product and funding something that was different and you had to do a lot of work i think to kind of make sure that you guys had the capital you needed to scale that to a billion dollar business uh yeah so raising money it turns out i'm just really good at I think I've put the microphone like raising money is fairly easy to me now, mostly because it's a repetition, right? I've had somewhere between seven to 8,000 no's at this point.

And the way science works, I've run a venture fund in LA. I help our founders raise money. So we're basically helping them co-found the business. They move into the offices and it's a grind. And so Dollar Shave Club, friend of a friend, introduced us, Michael Dubin, and we'll get to similar story he worked at an agency super creative had this crazy idea um through a random friend of a friend ended up with a little warehouse full of razor blades that was being stored at a church um and i think that i you gotta we could wind back the clock a little this is nobody had ever shipped there was subscription did not exist on online right it was built on Magento. So this is pre-Shopify, right? This is like Stripe had just started and nothing existed

for consumers to buy stuff online to get shipped to the house. So here's the pitch. Dollar Shave Club. Today, people go to Razor's at the CVS, spend $30. It's locked behind a cabinet. You feel like a criminal now i'm sf if it gets you by eggs it's behind you know locks and we're going to ship to consumers direct but humor drives everything so my basis of everything is always culture and he is just funny and creative in that video that original cost 6500 right and youtube adjust this is like early youtube days and the ideas was like well can we drive virality let's put the video on the homepage him and i actually argued to like five in the morning on launch day homepage autoplay homepage autoplay he's like absolutely not absolutely not six in the morning

he relents he put on the homepage it autoplays it crashes the servers and that like that was the moment right it's like that's for me the moment and understanding like okay social drives commerce. And so back then, the idea of raising money for the video and selling razor blades online, we got no's everywhere. Kirsten Green at Forerunner, she hadn't even closed her fund yet. I begged her to invest. Eileen, who essentially is Cowboy Ventures now, she was at Kleiner, begged her to invest. 250, 250. I didn't sink it. Felicis Ventures. These are some of the best firms today begged. He put in a hundred. The rest was like begging and stealing 50,000, 50,000 to raise the first million. And I probably went through 75 to 80 no's. And like, these are

personal friends of mine. Trust me, this is going to work. This is going to work. So that first million, right? And so it's one of these things where you just got to hit it over and over and over. And I now, raising money for me is, it is not personal when someone says no, it's just not for them. That's okay. It's like music. I was at gospel last night until they close at 4.30. I don't know why. You either dance to the music or you don't, right? You hear a song, you're like, oh, who is that? I want to listen again. Who's the artist? Put it on my playlist. But then you hear songs like, oh, that's not for me. Metallica is not for me. They are clearly one of the best heavy metal bands in the world. That's okay. And I don't want that investor. So when people say no,

that's okay wake up there's always another another another i know you were out late because i was in the whatsapp group while you were planning and then i saw i got removed at 12 30 while i was sleeping and i was like damn they're still planning a lot in there i guess for me it's only 1 30 times i'm from l.a so um let's talk liquid death i think a similar story and uh what's interesting is you called me and were like hey we're gonna do water in a can i said peter i love you. Uh, no, that's stupid. And then you were like, no pump, seriously. Like, trust me. And I was like, eh, let me think about it. And then I saw you in, uh, Austin, Texas, South by Southwest, uh, Flynn and I were both there and you literally had a cooler of liquid debt that you were carrying

around and you were handing them out to people. And I'll never forget, uh, we were in a bar and you handed one to both of us. Um, she drinks slow. So we were leaving the bar. She still had hers and we went to leave and the bouncer was like hey you can't leave with alcohol and it hit me i was like holy shit every single person is going to think this is alcohol but it's actually water and then you explain kind of the social component of you want to look cool at the bar you don't want to have the dasani bottle blah blah whatever what was that fundraising experience like because it took me multiple times and a personal relationship and you basically twisting my arm and then it finally was like all right fine here i had um so i was an angel investor in ring

and jimmy simenoff i called and i said if you invest i it's the only person i did it for because he made me he made me money yeah you didn't offer me this deal go ahead and i said if you invest i will personally guarantee that you will not lose money i will i will write a check out of my pocket if this thing doesn't work please invest and so i knew so my thing is about culture which is honestly why i excuse why i go out last night is understanding in the moment when i got pitched this idea you know i was doing this similar talk for snapchat's accelerator so spiegel had asked me to like they were doing early days of their accelerator hey talk to entrepreneurs how to raise money and uh sky michael who was running the accelerator said hey there's a company that

applied it's not for us it's for snapchat but i think you'd like it liquid death here's their facebook page and it was just a three it's a this image of a can on a facebook page and a fan page and people just commenting how stupid it was this is idiotic etc and i just knew it was gonna work mostly because i have experience of dollar shave club but comedy works and just is this video where someone's like liquid death it murders your thirst but here's how water kills you waterboarding surfing drowning like people die with water all the time let's do liquid death it's just this funny commercial where at the end of it she's waterboarding somebody right dark humor obviously and but we just banned plastic straws the atlantic had just wrote an article on how china's not

buying our trash anymore to recycle plastic bottle water bottles to me were like the next generation cigarette butt it's like ew why and i don't drink right as much as i dance i just don't drink and i think we did just become legal in denver i was like oh psychedelics like friends are doing shrooms ready and mdm is a party i i go to edm it's like nobody's doing alcohol it'll work pitching liquid doesn't can that's insane like it it just didn't make sense to people because it's a two dollar can of water but for me but once i had invested i think that maybe it was i was paying more attention but also they started to kind of figure out like they literally were building a cult right we've heard from a couple of people in terms of like really, really doubling and tripling down

on the people who believe. And so people were getting tattoos. They were taking the haters comments and turning them into rock songs. Like they really went and were like, we are going to build something that people feel an emotional connection to. Yeah. It's, if you look at today's culture, we have two sides, right? People just automatically pick a side, just like human nature. and if you know what you are and you own it people respect that way way more right and you pick that side we picked one side like it's fucking funny you know who's our audience people who don't take themselves seriously that's it some people take themselves too seriously and they they don't like it that's okay and so mike cesario dollar shaped up right this is liquid death also of mike both

worked at an agency both did creative work both had this crazy idea while working at a creative agency say hey all he did was he was making these commercials for like brands that were good for you but it's always extremes and grass and it's like well why is a red bull and taco bell and mountain deal just like the worst thing for you in the world but like exciting why don't we make something good for you but exciting and also by the way if you think about the biggest impact that tesla like it's like my stress is always tesla the biggest impact is they made electric cars cool and guess what every manufacturing world is now making electric cars we're making beverage in a can cool water so it's not that look we'll sell hundreds of millions of cans and eventually

billions of cans but coke and pepsi produce like a billion plastic bottles a day right so culture to your point why this over time the seed round million dollars in big still okay at this point i have a fund so we funded it and every single round got harder and harder and then it got easier like everything else right and what i say is fundraising is the world used to look like this so the tips of always fundraising is the format is the world used to be like this the world now has this i'm building this thing that's taking advantage of this and this is how the world will be over here right so repeat this again so this is the format that you guys use in the pitches and in the decks and just for context when i say that peter is one of the

best fundraisers i know any major venture fund is probably invested in one of the companies uh literally he many times goes and raises the money not the ceo of the business because he is so good at doing it and it's the same exact formula every single time yeah my favorite was i was in bench i was sitting up we were raising for dog vacay and um at benchmark and bill girley looks at me and goes peter what are you doing in the meeting like like you know what you're doing he's first time founder like i'm here to translate like half the questions you ask he doesn't even understand right and bill girley eventually invested and was on the board we merged with rover it's now public but it it's a communication right they're asking questions i can read it i

know exactly what's happening in the room what questions why they're saying no i can read a no a mile away it's always but think of all the biggest companies in the world it was before uber right it was well the people call taxis but because of cell phone and gps and smartphone i can now hit a button and then people cars will come and because of ebay because of this idea of an anonymous person but well we'll have five star reviews this person i'm going to start trusting right i actually think about like ubers and the doordash and lyft actually ebay started it oh this anonymous person lots of reviews five stars i'll send money and they might send me stuff uber was the same thing right and so this is now how the world looked liquid death well the plastic

water bottles alcohol the world now doesn't want plastic they don't drink they want something fun and it turns out the insight of this and i've handed out personally somewhere between eight 9,000 cans out of my hand, is that when you hold it, people talk to you, that's it, when you hold this, people, oh, what's that, this is either the stupidest idea in the world, oh my god, that is so dumb, or it's funny, and it's awesome, right, and that's it, and so this stranger, we're not talking about the weather anymore, we're not like, what you do during lockdown, like, what's your startup, what do you do, which is a fucking terrible question, we're talking about something funny, You know, like that human interaction of, ha-ha, funny, connection.

Well, Pavlovian response is when I'm at a concert, right, we're the official Water for All Live Nation. When I go to the concession stand, I'm just, you're just thirsty. You're not actually caring. When I grab a Coke, nobody talks to me. Grab a Bud Light, definitely nobody talks to me. I grab a Liquidex, I always meet somebody funny, and it's fun. Why not?

So cultural insight, so telling that story and showing people and the reaction, that's how you kind of get the story told and for fundraising is how the world was how the world is now what's happening and how am i taking advantage of that moment and this is the way the world's going to look now the secret of all fundraising seed otherwise usually passing seed is i'll say the the worst thing for your pitch is numbers like like like everything is worse once you actually have revenue because now let's do multiples and let's do discounted cash flow like storytelling of a story right it's all about storytelling and if you tell people i hate this like oh and i'm a seed company here's my revenue in five years like i know you're making shit up

like why are we making why are we making shit up right tell me a bigger story in fact you might be limiting yourself so what the secret is you say oh i'll be doing 100 million dollars in two years So now as an investor, I'm like, oh, so that's capped. What if that's too small for me? We have this whole story about Masa and SoftBank. That's way too small. Let me, give me the tools for my imagination to run wild. And oh my God, he doesn't know what I know.

And if I invest, oh, it's going to be so much bigger than that person knows. That makes me feel like I want to invest, right? Does that make sense? Like I'm almost, in a way, kind of taking advantage of young buck over here. Let me give him some money, and he doesn't know what he's got. But if you tell me what you've got, I get to judge, and I'm like, eh, too small. In fundraising, there's three things people always focus, for me, I always tell people, focus on the three things. Meaning, you have a current business, whatever it is.

If you are in the moment where you actually have users, acquisition, retention, revenue, strip yourself back as a founder and say, three things that go up and to the right. When I say up to the right, it's this link. This is what I call linear is flat. Linear flat is I'm doing $100,000 in revenue a month, every month. I'm like, great. Call me back in 12 months and you do 1.2 million. Well, it'll come from me more expensive. Of course, that's fine. I will, you're telling me I'm going to reduce my risk by 99%, right? I reduce my risk and pay 2x all day but if i tell you my revenue was well six months ago it was a hundred thousand dollars and four months ago it was 250 last month's like 800 i i can't mathematically calculate what's happening in 12 months so i have to i have to invest now does that make sense so but it doesn't

always have to be revenue look at things so hold on these are like insights that he can unpack very deeply um the the idea of creating urgency by having charts that go up and to the right and it doesn't have to be revenue yes explain this correlated rep it can be correlation so um enterprise sales well it used to take me six months to close a sale six months ago six months it took six months three months ago we got it down to like a month last week people are like clicking on a button and signing up automatically without talking to me whoa something right like something's happening every scenario is like well um users used to use the product six months ago they'd come in and they use the product for like two minutes three months ago 12 minutes last week

like 48 minutes i don't know what's happening right you tell them what's happening but in a way right you're showing that if i give you money if i as an investor give you money what's your job to get smarter and faster right and what's great is as an investor oh you took you took his money and got smarter and faster and i get to jump on the coattails of that make sense so it makes me feel like oh all right i didn't do it the last round and instead of me thinking oh that investor got a better price to me it's like no no no i got i'm riding the backs of the last investor who took all the risk and that's founders now figured a lot of shit out and if i give them more money that means they're going to continue this acceleration path of figuring it out it's

faster so a lot i call velocity any metric in your business doesn't matter doesn't have to not be revenue anything that has velocity right so enterprise sales to consumer products it used to take x right six months used to take this long to do this thing three months ago and a month ago, and I always tell founders, for the next 30 days, if you just do that thing manually, I don't care if you've got to go flyer cars and talk to people, you need to increase your retention. Call your customers. Investors didn't know that you physically called every customer. They just, I don't know, people just start coming back. Like do the hard work, right? And I think Kat said the thing, do the hard work. You better know the entire stack, the whole experience, but

find little gaps in that business where you can say the whole team's going to focus on getting people to spend more money forget new customers i want to know people who spent money last month did they come back did they refer a friend fine convince everyone for six months ago two percent people would refer a friend three months ago if you know four last week i don't like 30 40 percent but acceleration velocity velocity because it doesn't have to tie to the right now so there's the story of acceleration but what about the visual yes in the deck which is i think one of your greatest hacks explain this so right linear is flat meaning like i said 100 200 right cumulative like i can predict this that acceleration curve six months ago it used to

take this long speed speed speed and all of a sudden think oh my gosh like if i don't invest right now, in three months, they're going to figure that out. And the conversion is going to go up to 70%, right? And like, there'll be such an obvious investment. I can't miss out. FOMO is real. If this goes to the point of when you read a room in investors, if they do not respond in 24 hours they're not interested think about all like if you met somebody out last night if they text they don't text you you know for a month are they interested in you no of course not like if they're liking your instagram post like that night that's good right and i take any signal i will take any signal of investor interest within 24 hours

it could be a retweet it could be they checked out my linkedin profile ideally they actually email me thanking me asking me follow-up questions right the reality is when investors say oh it's too early oh you know come back when you're there's just not just try and be nice right or 24 hours we're not that busy well i am most vcs they're not that busy think about it how many investments do they do a year you're telling me you do six a year and if you're really really interested you can't like text me email something in the next day that you're in hey right they're not the moment you get off the room they stop thinking about you so they're done don't waste your time move on and so that's the pace is like don't get drowned out and chased and spend so

people spend so much time chasing the no it's not gonna happen move on right then you start Just like everything else in the real world. You start looking desperate. Game over. All right. So, you know, you want to go fundraise. You come up with a story, right? You've walked us through that formula.

You make your deck. Deck looks pretty. Anyone who wants a hack, the number one FOMO metric in any deck, you can put your little bar chart and then just put a big fat fucking arrow on top of it and really hammer home. This shit's going up and to the right. Works like a charm. You can even, people are going to get mad, squeeze it. Remember in college where you'd like widen the margins and shit so that you could get that three-page paper when you really only wrote two and a half?

You can do the same thing. Yeah, look. Humans are stupid. And they're like, oh, wow, that's a really steep curve. It's all storytelling, right? Now, of course, people always say it's not fraud. You just have to tell the story. Find things in your business that are just moving faster.

Whether, you know, it used to take you months to recruit somebody and it's fast. Everything's just fast. Everything just feels faster in the business. And again, let me make this connection. User growth is connected to this velocity that's really happening. They're figuring it out in the business. It doesn't matter what it is, but there are moments in the business. If you focused on it, you can show me this game.

Especially, this room is all early stage seed. There's no numbers. You have no numbers. Nothing ruins a raise better than numbers. Just remember that. Nothing ruins a raise better than numbers. The moment you have users, it's like, great. Customer acquisition costs, retention, like I should start digging in on that actual number.

But you start talking about your user experience and how, again, you're getting smarter and faster around that customers getting to that customer or driving the time it takes for customers to consider the purchase, right? Or the time it takes for them to refer, the time it takes to renew, the number of cancellations got reduced, whatever it is. Like, these are the things, forget the top thing. Focus on the underlying part of the business. And then less is more. Every deck I see, every single deck, there it is. Like, 20% less words.

That's it. Like, nobody wants to read. It's a telephone game. If you pitch me, no matter what, I need to tell somebody. I need to tell somebody the story. And if it's a lot of words, I'm not gonna remember it like and then I start feeling stupid so think about

that telephone game means when I go home really I'm out and networking I talk to my colleagues my significant other I took my partners I need to explain why I'm excited about this deal and if it's not simple a couple people pitch me and like what does it do me using all these buzzwords buzzwords like I don't understand what do you do how do i explain the elevated pitch is really about if you can get it concise i can then go tell somebody else that's it just remember telephone game is they have to tell somebody else if they can't tell their partner what why they're doing the deal and what the company is they're not going to do the deal and the moment they feel stupid again the moment

they feel dumb because someone says well why about this they don't have the answer they're like oh you're right it's not that good idea anyways so simplify less words the deck just short adhd use chat gpt for god's sakes just like shorten the thing up bullet points how the world used to be this is what i'm taking advantage of and this is the way i look at the world here's why i'm a badass this goes back to early stage super early stage the founder the founder the founder your product will evolve why are you a badass like tell people why are you badass so why is here's why is your team a badass and that tells me that you're going to be figuring shit out like you will not survive if you can't figure things out i met the nba player last night it's

like i love athletes olympians think about olympians they train hot like the whole lives for this one day and then they're done and wait four years resilience is like resilience has to show up in that personality trait right cat yesterday like talk about resilient that inspiration is like oh instantly tell me your story why and then everything else like doesn't really so much matter because if you tell me your story why you and then show me that you're strong when people give you money you figure shit out you're smart you figure it out faster faster faster it's like okay that's somebody i should back once you have the deck the story the great graphics what's the process how do you create fomo how do you make sure you're talking to enough investors

what does that look like it's changed i think post covid because of zoom so it used to be that i'd fly up to sandhill and you can only i kind of knew everybody every firm and i can it's like red points next to sequoia's office and ivp's upstairs got menlo's over i can schedule them 15 minutes apart drive across streets and recent right like this is loop but now on zoom the assumption is we'll usually do a call every 30 to 45 minutes remember the investor you also have remember which also means the investor that you're pitching has a little bit more FOMO these days Because the assumption is once I hang up this Zoom, this person is pitching 10, 15, 20 people a day, right, all over the world. So the process for me is still relatively pitch early, call it friendlies, people that probably wouldn't take their money.

They're not that great. But, like, they're going to ask some good questions, some dumb questions. And the goal is after every meeting, what was the question that you can kind of see emotionally they got hung up on? How do I answer that into my story so that it's answered? That's super simple, right? But not a lot of people do this. What were the questions that they got hung up with? And I felt like I spent too much time explaining myself.

How do I incorporate that into the story in a deck so that question doesn't come up? It gets at, right? It's because the whole goal in a, if you get an hour or 30 minutes, if it's an hour, get through the story in 25 minutes, ideally, so that the rest is just discussion, right? It's just to get through.

But if you're all the way an hour, 58 minutes, and you're barely going to the last slide, it's not going to work you have to finish early which means you're you were concise 20 slides 25 minutes ideally like 17 16 slides 25 minutes like you know you're just coming it through and then you're inviting questions when you know they're layups but if you get questions they're like i don't know what about this what are this oh you know well i used to figure out put that in the story early answer it put it in the deck and the goal is early investors that you wouldn't put you to take money from are really small checks they're gonna you're gonna they all kind

of think alike to be honest so they'll have the same questions answer that and then second thing slow investors so there's slow yeses and fast yes investors you're gonna pitch every single firm every i know every gp at every firm i know the person I know the slow people and the fast people. You pitch the slow people first, obviously, because it's a horse. At the end of the cycle, I call 30 days. Give yourself 30 days to pitch, 30 days to close. Going back to the three points up and to the right, whatever those three data points that you do, you spend 30 days getting it there.

But you've got to make sure for the next 60, they continue to go up and to the right. Okay, I repeat. The next 60, here's why. A FOMO update. 30 days why are you raising well you know it used to take this long and then this long but the last 30 days it's like it's really exciting it's working it's working so you know i don't so i should raise some money while i'm pitching during the follow-ups that week next week there's reasons for the follow-up oh my god you know we met two weeks ago and i told you that conversion

funnel and retention went from here to here now it's this FOMO starts kicking in does that make sense and then term sheet diligence is 30 days it better keep going because you won't get to the last right money in the bank is what you need 30 days of grinding that data 30 days as it's coming up you're pitching every week there's something interesting new I feel like I'm missing out it's it's going to get away from me. I give you a term sheet. I feel good. We're talking the data and things are still going up. During that, if it's still going up, I might start trying to bring more people into the round, right? Like get me motivated, get me into the story. So that's a really important thing over the next 90 days. Slow investors, fast investors. There are some

people who are like, yes, let's go. But you don't want that yes now. You want it when everyone else is at the same. Imagine a horse race. Some horses start off slow, some fast, but the slow ones goes first. Fast ones catch up so that you're all kind of finishing up close at the same time. Your negotiation window for a term sheet is at most two weeks. You are rude and an asshole if all of a sudden you're like, I gave you a term sheet and you just don't answer. Well, here's how you slow game the term sheet very simple let's get to know each other hey this is marriage can we go out to dinner oh i can't this week next week like think about the things of like you you you gotta you have a week two weeks max but you cannot just sit on term sheet because bird in hand right like

what if everybody else says no so you but you want them all getting to the same point and all of a sudden you can start, if you want to get to the point of negotiation. Otherwise, I will say this, do not over-optimize your price. Startups are binary. When I say that, it either exits or it does not exit. You did not start this company because you want a job for the next 90, 11 years making 125,000 a year, right? The difference at the end game is if you made a hundred million dollars well if i didn't take that dilution i would have made 119 million dollars it doesn't matter if you really mattered you wouldn't live in fucking new york you'd go to florida true so think of that dilution so people focus so much do the spreadsheet i always encourage

founders to do this they're like oh 30 percent dilution is too much i really don't 25 it doesn't make a difference. Do a personal spreadsheet. Your equity over round C, A, B, C, D, E. At the end, it ends up being like 1% to 2%. It's not that big of a deal, right? So the best investors at the table, because they will help you, their job is to help you raise the next round, the next round, the next round, because you are always be raising, always, always, always be raising right it's like abc is always be charging always be closing always be raising so the pace is really important if you want this collective pressure at the end i'm also talking this firm i'm also at this firm and once i know you're talking a lot of firms and everyone's not finished

i want to close if i know i'm the only investor at the front i get to negotiate i slow down my decision process it's ball control it's ball control you do have um obviously it helps to have a good product a good company like it gives you the data it does all these things early stage look watering camp it's the story the story and belief the team right in some things that will tell the story of why now advisories sometime work i can't yeah it depends on the investor some investors love that you have advisors i hate it because it's bullshit unless it's real right if it's somebody i know or somebody who truly has that insight or has the connections that can accelerate that business it's the cheat code so-and-so's on my board so-and-so

personally invested so-and-so i used to work for so-and-so like last night's dinner the moment he told me he was on founding team butcher box and then he's building this company i'm like let me give you money like no yeah i know i love that company it's storytelling but it's understanding the business it's like oh why this person oh he's done it been there for one of the fastest scaling companies i know in the commerce and space the world used to look at this they struggle through all these things he helped figure all this stuff out and realize well that should just be a separate company and if that's a separate company here's the benefit it for everybody else oh the world used to like this now with this give me money because i'm

building this simple like literally is that's it that's the story you just want to get that person money it's not about the numbers so let's say that you're great at this and it works um now all of a sudden all these venture funds want access and i've seen this one time i was working on something and it was the number one app in the app store and it was right yes i knew it don't forget that would only be yeah and so venture capitals were literally sending this is a true story a pie to the office with a note that says we would love to get a piece of the pie real clever i mean like that's the shit that was going on right i've had i've no stories where like they'll send the private plane the whole thing yeah they will show up they i mean when it's game

time and there's competition between especially the major firms they will pull every single thing out of the repertoire to impress a founder etc how do you enjoy the perks but also balance not getting caught up emotionally and potentially making a bad decision or going with a investor that might not be the best one out of those that are interested so investors the whole your job as founder is obviously to fund the company, but honestly, spend more time on thinking about what's the possibility of this person being net negative, okay? Like, boards, the board, their job to remind you is to decide, is this CEO doing their job and should they get fired? Board meeting. This is what I'm going to tell you. This is how the company's doing. This

what we're going to do before now in the next board meeting. Next board meeting. I told you what I was going to do, and this is what we did. If you, three strikes you're out. If you show up to the board three times and you didn't do what you said you were going to do, time to go. So remember that, so I do

take that seriously. It's a marriage. So spend the time doing diligence. It's crazy that not enough people check references. Like truly, not the references they tell you to. Find everybody they said, look, people people behave the way they are all the time so find the people that they aren't telling you about

and there are stories we all know who they are you just got to find so i spend the time like who truly loves your song right going back to music obsessed with the song as a playlist truly can like understand you and want to invest not because they want to make money we can all make money somewhere, but they truly want to be part of the journey. But more importantly, they're not assholes. And there's moments, there will be moments in the business where the highs are highs, as you know, as a founder, the lows are low. And you want a person who's going to be supporting you and not just thinking about the money. Because the moment they start thinking about money, they don't care about you. And they make the worst decisions and they're pushing you

out of the business. And they start pushing to make decisions in the business that are the net negative so it's it's one of these things when yes great firms all this bidding war spend time with it spend time who's joining the board that's like my only advice just in due diligence for the love of god so you and i have talked on the diligent side uh the best founders to talk to in an investor's portfolio to get an honest assessment is go find the ones that didn't work because you basically see the downside and then the second thing is never believe the first bad story but listen to the second one right like like everyone whether you're a founder an investor whatever everyone just didn't get along with someone didn't like someone they you know

took something personal whatever but if you hear it twice then pay attention yeah yeah a lot of negative stories are just personal vendettas yes they said no so they're an asshole like no if they did real deep dark deep cut shit like that's the stuff you got to find out about um otherwise enjoy it while it lasts but remember that firm on that round their job is to help you get to the next round their job is to help recruit people their job is to open up the doors and help accelerate the business we live in a world now it's really interesting to me part of the story your moat this is the last thing i thought i told you about the world's changed this year i didn't think of it as much before but i do think about all the time now in the world of ai i don't

know how to code but i can probably clone every startup in here in a weekend right think about that like whatever product you have like pomp and i probably this weekend we can clone it literally with chat gpt the ui the experience etc and i don't so well how do you win right what's the moat the moat is so much more important so in a way the advisory stuff does kind of help right Well, I have access to this, right? I have exclusive API access here, or I already have customer base here, or so-and-so is investing in the largest distributor on the eastern seaboard for this.

Like, that's the moat. Otherwise, I can just think about whatever you're pitching, trust me, there's – it used to be maybe one or two, maybe another YC company. Now it's like 100 companies. The exact same thought you have. It's not that original. It's really not. Someone else is cloning.

So now the decision is like, okay, so much more now goes into why you versus this person and all these other hundred people who are using ChatGD built the same thing. Why you? And then what's the moat? Exclusive relationship with this Kaiser to roll out my SaaS software, whatever it is. Like it's got to have some moat in there. It's going to be a little bit harder these days. The only other thing I'll add before we end is I'm surprised. I've spent recently with two different founders, a bunch of fundraising meetings, and there's two kind of reminders, right? If you haven't done it in a while. One, every single venture capitalist will show up unprepared, like maybe late, right? But they get on, they haven't looked at your product yet. Maybe they looked at the deck and you'd be shocked because you're like, oh, I'm going to pitch them for money.

And like, this is like, you know, you literally block this out, you prepare, you did all this stuff. It's like the most important meeting of the day. Unfortunately, you're one of many pitches. And so you have to be prepared for them to be like, so like, how does the product work? Whether that's sharing the screen, whether it's having the screenshots, like you have to anticipate some of this, which I think you were kind of mentioning. But the second thing is, you can't have the same exact pitch for every single investor. And so it can take you 10 minutes. If you know you're meeting with X partner at a venture firm, go on their Twitter account, see what they've been talking about. Go look at their blog post. Go look at the industry trends. Show up. And guess what? They told you the answers to the test. They're interested in creator economy.

Our SaaS tool has a really big thing in the creator economy, right? And you can talk through it. But the more that you kind of relate it to what they're interested in, obviously, they're going to spend more time on it. Yeah, remember, one of the things about when you're talking to investors, like 7,000, 8,000, every round I've ever done, I've done somewhere like 150 rounds I've helped raise. Each round on average is 100 no's, okay? 70 to 100 no's for every single yes, okay? It just, you average that out. So just, you've got to keep at it.

but in every story you know ryan at flexport i remember his seed round was done his board member roy bahat is a good friend of mine he's like he helped he needs help raising a nobody wants to give him money i'm like okay i sat down with him here's how did the world do oh it's green screens oh god it all of shipping logistics world's green screens right and show the vigil of literally on the screen what a green screen is people don't know what that is it's like oh really what are you doing you're beautiful web ui software oh okay duh like that should like that pitch alone the whole world is working on literally green screen text-based logistics and you're bringing a visual interface where you can track chips all over the world and tell you where the product is

that's the pitch they raised a b round struggles again come back in it it's it was just storytelling flexports now you know 50 billion dollar company every story every founder has that story it was always about just how to tell that story the pitch it's just it's very slight tweak it has to be simple right what was flexport the whole world shows some green screens ui is like 10 years ago That should work. What do they do, right? It's not complicated. You don't need to do the intricacies and use all these bullshit web terminology. Like, forget the terminology. What does the product do? And let me visualize it so that I can tell the story to my partners and understand it and give you money. Ladies and gentlemen, Peter Pham. Thank you.