How do you run a sale process with no M&A experience?

everyone welcome back to fundraising demystified today we have Connor tonis with us welcome to the show Connor hey guys Jason thank you for having me I'm excited to have you on as a a fellow post exited founder you have a fascinating story you have your own podcast uh you're very influential in the post exited founder community and I'm excited for you to share your story with Founders but to to kind of lead us into the the right topic I think most not your background being at support ninja being the founder and CEO there I would love for you to just share the the brief story of what support ninja was and you what was your food strepping Journey there yeah for sure I had a previous company called embarkvet it was a dog genetics company that got co-founded by two brothers of Cornell and uh we were trying to figure out how to manage support and we were having a really hard time as a small company trying to find International Talent um and so we partnered up with a couple co-founders and we launched support ninja essentially to make it easy for fast growing tech companies to find International folks and um at the time there wasn't a lot of people doing it so we were kind of like a new wave of Outsourcing providers helping with International recruiting training managing and um lucky enough this was something that we could bootstrap like if you think about The Upfront Capital involved in this this is something that uh you bring on your customers you make the right hires and you can scale it pretty well and so it took it took you launching a company to realize you had to launch a new company so I guess what was the outcome with AAR Fett I think that's mostly the case right is you're you're working on a company so hard day after day and you you have a little bit of like um an eye out the side of your head being like Oh that's interesting that's exciting or I could do this and then you kind of feel like the wave kind of like pulling you in that direction right and so Embark actually did really well we were on Good Morning America we sold out of most of our um initial order of kits and um the initial founding teams I don't think is involved right now but uh they raised money from SoftBank as 750 million valuation um and so they're they're doing okay they're doing all right but uh I left after the first year and a half to start support ninja so I kind of spun off and started doing my own thing um and it's for a few reasons I think I'm was super excited about what was happening at Embark but I really wanted something I could have a bigger part in and actually own and run and that's why uh support Ando is the right move for me that makes sense and what was this scaling light you know it's effectively a staffing model but when it comes to managing cash managing resources and to stay on the bootstrap path you know what were some of the hurdles that you experienced what were some of like the lessons learn that you had it's kind of like walking a tight RPP and what's a little intense about this is that you have um at the time support ninja had thousands of employees and if you miss payroll it's profound like it's not like you can cut SAS expenses overnight right and I remember when we first started the company I was at my wedding and we were close to not making payroll and so I'm on the phone trying to figure out how to coordinate payments with different clients and how to make this work um and it's stressful but at the end of the day you're a lot more efficient with your cash you know where every dollar is going you're very particular about your bets um especially from a marketing standpoint you're testing everything you're making sure that everything is kind of yielding fruit where if you have a decent amount of cash in the bank you can kind of get by on some less than solid bets yeah so that's basically what I've seen a transition in the last couple years is people going out and raising Big M you know big money in 2021 2020 and not really having the wherewith all where that money's going and where we seen a massive after the last two years towards bootstrapping cash efficiency like when you got bring up the example of you know walking the tight rope sacrificing probably a good time at your wedding or at least a portion of your good time at wedding to as a business um or any the other things that you felt that you probably could have benefited from raising money but you know bit the bullet and you know kind of kept it the so candidly I don't think we grew as fast as we could have because we had some times when we had had a really good CAC we found a good Channel we were getting really good customer acquisition costs meaning like we were putting in $ and we were getting two out and at that point I should have gone out and raised cash um a couple other companies like uh tasus and some other bigger players in the space um they're at almost a billion dollars in Topline revenue and they rais capital and one of the bigger differences between tascas and support ninja is that they had enough cash in the bank to be able to cap I whenever they found something that works they were able to hire more sea level Executives and be able to test and find who's the right person in the right seat where we really could only test one or two things whether that's a high level hire or a new marketing channel we had to be very careful or very particular um and so I think we probably could have grown larger um if we had raised cash at the right point in time um we still grew a fantastic company and we it grew very large but um I think we didn't quite hit that Venture scale do you have any regrets with that outcome or you satisfied I think it was a right thing for us to do at the time and there's reasons why uh we ended up selling when we did and there's reasons why uh we didn't end up raising capital and ultimately I didn't want to go chasing uh different Venture capitalists at the time I wanted to be focusing on growing the business raising money is a big uh a lot full-time job it's a lot of work and um so I don't regret not raising Capital because I don't know what the opportunity cost was was it uh what operations have fallen to the Wayside would our employee retention go down because I'm allocating the resources to go raise this Capital it's hard to be um it's hard to go backwards and say that I would do things differently um but it definitely would have helped at some point with uh with scaling our marketing efforts and our our operations I can just for the audience say can you speak to this scale how big support ninja got uh whatever numbers you feel comfortable sharing yeah for sure so we were um middle uh a figures so we were bringing in a decent amount of Topline Revenue um and now it's reaching towards nine figures so by all extent and purposes that's a pretty good fast growing company um and we did well um we had a good wave as far as we were for many companies the first people that they would think of when they they were Outsourcing for the first time and so we were in a good position for that that time period so timing was very important but speaking of timing like what ultimately led to you deciding to to sell the company so raising capital is important to uh keeping a company going I I think one thing that a lot of people don't think about is the relationship that they have with their team and their co-founders and in this case we had um there's three partners and one of the partners was looking to exit and so part of the exit was um getting this partner his exit and then bringing on a private Equity Firm to help us grow and scale and and take over that piece of equity um and so that's one of the reasons why we decided to sell when we did and it worked out really well for support ninja it was a right thing for us to do at the time when it came to managing that process were people coming to you were you you telling the world that you're running a process you try your Banker like what was your strategy when that that co-founder was like I went out what was the process from there to do kind of go about selling the company well this is interesting I mean most Founders we don't get any education on how to sell a business right like you're uh you're kind of at a loss you're you're talking to some people and sometimes you might get an offer in your inbox and you're like you meet them for coffee you're flattered that someone's interested in your business because I didn't know what to do I ran it like a marketing funnel so I built a confidential information memorandum and there's templates that you can have online most of the time this is what the banker or broker does for you me and my co-founder we sat down and we actually built it oursel so we were at the airport we we answered all the 50 different questions we put it together in a document in a PDF we pulled together a list of bankers and Brokers that sold similar companies or uh work with companies our size and I I essentially bccd them and I said here's my company here's what we're doing attach to the confidential information memorandum if this is interesting to you let's talk and a lot of them jumped on it because for from their perspective they're like oh they did a lot of the leg work they know what they're about they're answering a lot of my questions ahead of time and for us we were able to see who actually did the leg work of reading the confidential information information memorandum that's a mouthful and uh and really knew their stuff kind of going into the conversation so we were able to find the right banker and broker we were able to get an idea of how much we would sell for if we were to go to market how they would present us and then we ran a competitive process from there so basically what you you told me is you ran your own banking process and good as to you that is one of the most important things to do is run a process because you're right most people just get an offer they're flattered they entertain it and they don't really know the true value of their company um so being that you set up a you have people signing ndas they have they see your sim or your you know confidential information random um you I guess what how long did it take from the point of setting that up and you how did you learn about all that you know like well too many questions but from the point you said it up to the point you close the deal I think that if you run a tight process nine months so like I'm going to sell my company you go through the process of vetting your banker and your broker you pull the list of potential people that are interested you have an intro call you have a secondary call you get into Lois you get into closing and due diligence 9 months is roughly the time frame and then I think from doing the intro calls with the bankers and Brokers I was able to learn quite a bit because they were giving me material they were giving me feedback on the questions I was asking I was understanding what questions they were asking of me and I understood that their perspective was to get the highest amount of return for this company and their time that they're putting into it so I'm like understanding how they view me and my and my company is really the the key piece here and I think what helped is I was treating it like a marketing funnel and this is true for fundraising versus taking your company to a market is everything's a fundraising like a marketing funnel essentially is you have your Outreach you have your pipeline you have your flow and you're just ushering people through this flow except you're vetting them in this case and so you did interview quite a few bankers and but you decided to kind of run this on your own you got the education you needed and ultim so I did actually end up picking a banker or broker so we did end up finding someone that worked for us I interviewed 35 people and we ended up growing with a firm called growth point accelerators so we actually had someone helping us out but it was quite a process to find that person yeah 35 that's a that's a lot usually it's like two to four two to five but I guess uh just out of curiosity what was your decision criteria what took 35 interviews to get to one person or one firm well at the end of the process we had three people so we had one firm that was specialized in Outsourcing and international companies and bringing them to Market that was their thing that was their jam so I understood that they knew how to process um the information that we were giving them present Us in the best light and they maybe already know buyers in the space u the second one was a pretty large firm um that is probably one of the biggest firms that does this and then the third firm was um a small kind of Boutique firm and we ended up going with a small boutique firm because I liked how they were presenting us and uh they were asking the right questions the biggest firm said that they could get us like an outrageous kind of like a a really big number for the sale price and I actually felt it was not reasonable and they weren't asking the right questions so I actually went with the firm that promised Less in a way I see that happen with a lot of Bankers they kind of put a carrot out saying oh we'll get you the best number but it it you're right it's it's so unrealistic as far as what they're actually able to do and it's so much out of their control like you can run a great process but at the end of the day the market dictates the price um and I I see that often with Bankers just promising the big car they get you under contract and then it's like well hey you know we tried you know we put our best foot out there now expectations are miss the line everyone hates each other uh so you know small boutique firm sound like they did it right at the end of the day you're actually working a lot with the associate or the partner that's assigned to your deal so you really have to like that person that's a person that's quarterback everyone else is secondary um and sometimes that's not always a person that the person that you're talking to is not always the person running your process yeah exactly so it's you might be sold by the sizzle of one partner or someone else but actually who's running point and being sure to to know who that person is um but so out of curiosity being that you had a banker in the sale but you still kind of ran your own process you ran constructure drad funnel uh were they more or less just bringing introductions to it and you guys were managing the process or was it a you know cohesive effort what was that relationship like it was cohesive so we had a potential list of buyers that we were talking to um if you are a CEO and you are running your company today you should be talking to Partners bigger players in the space um if you're not already do it tomorrow um take them out to lunch get to know them and so we already had a list of buyers that we had pretty good relationships with what we told the banker is that we expect to get X number in for our business anything that you do above this will give you a higher percentage on that deal and anyone you bring to us that we haven't already talked to will give you a a kicker on on those leads on those people and they actually brought a great list of buyers and U we ended up with going with one of the people that they brought to us no that's awesome so you know sounds like you ran an efficient process sounds like those boxes were checked was there anything any curveballs that you think would be important for Founders to to be aware of what to look you know what what corner should they be looking around um you know in the m&a process there's a lot of little uh sticking points right like um making sure that you're aligned with your partners on what you're looking for before going in because any type of internal turmoil you just kind of have to keep contained right making sure that everyone's walking in lock step and the offers are going out at the same time you're collecting Lois at the same time you're deciding on the bids at the same time um really helps make sure that you get your price up one of the kind of like uh sticking points I see with a lot of Founders is that you have your legal cold for your company and they have theirs and they're going to go back and forth and the legal fees on this can be tremendous like after due diligence after all the different layers you're you're spending a pretty significant in some cases millions of dollars on on legal fees and one of the ways that we were more efficient about this is they usually go back and forth on uh Indemnity and making sure that the liabilities are are in place but there's a certain number of business issues that actually matter so to stop the legal fees from ramping up and getting out control list out the business issues on a spreadsheet put your your position in column A ask the buyer to put their position in column B and then discuss that on the phone call and that will cut a lot of time and cost on the legal side my advice to all founders in just about any circumstances never allow lawyers to talk to lawyers that's the most expensive for your dollars to go through the roof especially you know some sometimes sside you are paying for both sides um you know so it's like that bill you're not paying $500 an hour you're paying $1,000 an hour um yeah that's terrible yeah so it's you know for for one call you could C like five grand for an hour call because you got too many partners on the call um so yeah I'm glad you brought that up and that's something that you lawyers are just they're they're drisking the outcome for you they they serve a purpose and they need to be there but there are lots of unnecessary negotiation points that are very quickly decided between you know the two decision makers on either side so you know good good point to bring up yeah you don't want to it sucks when you're like all right we're selling for x and you're like oh before anyone gets any payout you know lawyers get paid beggar gets paid you know debt or whatever you know closing costs get paid you're like oh that's a that's a smaller number yeah you're just seeing it you're whittel away piece by piece yeah you should definitely know your your water waterfall your closing expenses you know like what are some of the things that are going to get into your number at the end yeah yeah and that's something that you know oh we're selling for whatever x amount that's $50 million but you know what's the actual waterfall to win then what's your split from there of you know maybe after closing and all the other fees and pre stack or whatever is there if you raise money it's like oh you're left splitting 20 it's like oh that's not what you went up to you know sell for so um a good Banker good lawyer should be able to educate you give you rough estimates of where you fall in um so you sell a company you know this a couple years ago what have you been doing now and kind of what has guided you to the work that you do today after selling the company we sold to a private Equity Firm which I like because in some ways you know exactly where they stand what they're driving for they have a three to five year Horizon to sell the company again um but I like the idea of creating a different type of structure for a holdco that helps essentially this hold holding company buys companies and then those Founders become post exit Founders and then they co-invest onside me uh so I made a company called operator equity which is essentially a holdco where we start buying other companies teaming up with other entrepreneurs then we buy companies together essentially and this little ecosystem is almost like um self-supporting right so you buy a marketing company they help with marketing for the rest of the portfolio you hire uh you make a a hiring company that helps with hiring for the rest of portfolio right so you're creating this little mini ecosystem and so I've been working on that for the past year year and a half um we also did something called the entrepreneur Cooperative which is uh focusing on helping Founders scale and then exit their business um and so we've been doing a lot of educational seminars and uh the podcast the made of podcast that you mentioned in the beginning is focused around interviewing post exit Founders hearing their stories trying to figure out what are those little tidbits that you can pull out that will save you a lot of Heartache down the road you're likely having trouble raising money or selling your company personally I've had four exits and I've raised over $145 million if you want a free coaching session with me just like subscribe and leave a comment down below letting me know what you think of today's video for a chance to win a free coaching session with me I'll select three winners every single month you just have to like subscribe and leave a comment down below for a chance to win now onto the video and so going back to the entrepreneur Collective I think that's the kind of hold Coe correct entrepreneur Cooperative is the kind of like the community with the business education piece and then operator Equity is the whole sorry operator Equity sorry so operator Equity you know what what type of transactions have you been doing now that you're you're basically flipped in the script you you were selling your company and now you're like okay now I seen it from that perspective now you're buying the companies you know what do you look for like what what Lessons Learned have kind of prepared you for being on the other side of the transaction I think every holdco has its own thesis and what I've seeing what I'm seeing as a trend across hold Coes is um pushing an easier process so more transparency quicker to Loi more found founder friendly terms for some hold codes they have a longer holding period and I'm in that camp as far as like I don't want an immediate exit so if you want to work for founder work with Founders for a longer period of time in the form of like decades instead of a few years then this can be a more favorable structure um and all hold Co have a thesis that's like underlying that holdco and for me I run on entrepreneur operating system EOS and I buy other companies that run on EOS and so I know that all the companies run the same way that they meet the same way on a weekly basis and that they plan their quarterly planning on this on the in the same way um so that's the underlying thesis of essentially operator Equity is they are all operating on the same Bas layer the same operating system okay so this is this is fascinating I've been familiar with EOS and I model for I it's been around for a while like 10 plus years or so um how did you come across that being your strategy how were you running support ninja under that uh just and maybe give the audience a little bit of context of what EOS is and kind of the what it provides the entrepreneur operating system is a book um called traction by gin Wickman but it's also a um an organization that helps with quarterly planning and structuring your leadership team uh tracking what matters there's a whole uh kind of like a system for how you can run your business and I thought this is was uh exciting because whenever I was first listening to the book while driving in the car I was like oh this actually practical tangible advice that I can Implement inside my business tomorrow and a lot of time whenever you're creating a business you're doing things that feel right you know and you're kind of going based off Instinct and logic and you're building this kind of like um you're building your own operating system so it's kind of nice to know that something already exists and has already been tested that you can Implement into your current business and so we implemented it into uh support ninja and we had um support ninja is really large it has multiple thousand employees and so we had uh an EOS implementer in different countries at helping different levels of management essentially build um um their quarterly plan uh each quarter and that really helped us be aligned and help everyone understand what is the company what are our core values our mission plan our 10-year Target our three-year uh road map and um that's very hard to convey if you have a larger organization it's much easier to hand someone a book saying like this is how we operate then uh teach them something from scratch yeah I find that fascinating because it's just I'll be I've seen so many of these Frameworks over the years and they all kind of add a a flavor piece of knowledge if you kind of pece meal but you know I see ones that kind of really dive into one framework over another and really kind of Stand By it similar to what you do at EOS and so effectively you found this you know now I guess a deal flow you know tool or you know community of like all right does it check this box and do you require any in all respect Ive deals to already be on EOS and you only look at those deals or do you look at you know maybe they implemented after connecting or you know what what's kind of your thought there yeah so most of them already ran on EOS and then the ones that didn't implemented it after um and that's a good process because you're sitting down with the founder and you're going through they call a vision traction organizer which is essentially a two-page business plan and you're helping build that for them together um and it really make sure that you as the uh partner and the holdco and and the entrepreneur the CEO are on the same page and ultimately what what companies are you trying to buy like where what what boxes do they check is it sector I know you're trying to create the ecosystem but like what's your prioritization and you know what are you looking for the vast majority of them are uh recurring Revenue SAS companies that have a pretty big base uh revenu is very Diversified um Topline revenue is usually south of of $10 million and they have have a decent profitability to help support the acquisition in the first place gotcha uh so sub 10 million so they could be a million five million anywhere in that range as long as it kind of check those their boxes yeah for sure and we do find that like 1 to two million is usually a little too small um they don't have enough profitability or um to sustain them if something bad was to happen usually they don't have as much dep in the leadership team um so it's something that look at if you are thinking about launching a hold Co is what does that deal box look like for you what are the parameters that you're investing based off of and then kind of going yes or no uh do they check that box or not um and if you have a thesis stick to it don't uh don't break your your deal box essentially yeah once you come up with I I I run across a lot of hos as we do deals and seeing some that are wishy-washy on the box can be a clear indicator that you know it's probably not worth the effort to engage them for the deal just because you know it's like it's a flavor of the week and even if they do move forward what's the stability of that opportunity moving forward if they aren't really clear on their their buy blocks um yeah it's easy to be uh tempted or just be like oh it's so exciting it's $800,000 in profitability less than your your dealbox of 1 million in profitability it's very easy to like yeah cross over yeah justify it and from your experience being on the other side now and kind of having these more founder friendly terms as you mentioned you know what are some of the mistakes that you've seen maybe some of the the companies that you've been buying what mistakes have they been making that you're recognizing as an opportunity there's a lot of distraction it's very easy to look at the shiny object and and chase after it whether it's a new service or product line but most of your revenue is coming in from this one single service or product so have having that focus and carrying it through is is pretty important marketing is pretty key right now um the marketing landscape is changing so rapidly that um a lot of times if they only have a single channel of Revenue coming in from say Google ads and something changes like Ai and they Google gives them the first quarter of the page then your AI spend uh shoots up and your yield goes down uh so having more diversity in your marketing channels being able to capture more leads as they go into your site um I usually see like whenever you buy a company you look at their revenue concentration in terms of clients but you should also look at almost like their acquisition channels in terms of concentration and do they have other uh plans and systems in place to be able to generate new business and when you're buying these companies are you looking have any of these been vack companies that are no longer vable like have you only been looking at bootstrap like what's kind of the history or like kind of the capital history of some of these companies that you're looking at all of them except for one I think as bootstrapped and it really helps from like more of like a profitability standpoint there are some companies like tiny and a few others that are looking at kind of like Venture distrust uh companies where they raise a lot of capital and they're not able to continue the fund raise and they need to restructure that's not something I've messed around with much I have worked with a lot of Founders where like a partner wants to step back and there's a spot open on their cap table or they're not actively working in the business each day and so I work with a lot of those companies as far as like I'll come in and be a more active partner for you and help you scale in different ways um and help that partner uh essentially get their their earnout or or their uh chips off the table so it sounds like has a flexibility in terms of what position you take it's not a 100% buyout in some cases it's you're flexible as a majority often or minority it has to be a meaningful stake so normally it's between 40 to 80% right and I still want the founder to be very heavily involved in the business at at the end of the day you're working with these CEOs and you're really betting on them like uh I'm not the CEO of these companies and they're running point so it's more like how can I give them the resources to um hit that next stage of growth yeah it's it's it's fun hearing this just because I deal with so many companies that come to me and they're like I want to raise money I want venture capital and they're more on like a path for something like you where it's like well what about this other option of take some chips off the table you know be property capitalized bring in some governance and you know still have some upside you know down the road uh it's just so funny how so many Founders have been drinking The Venture Kool-Aid for for so long that they don't realize like wait I get a multi-million dollar paycheck but yeah it can be really nice like OHS are a great way to be paid too like that's a earning money from your customers and being able to build a sustainable life around your business is something that um is underrated who would have thought um we didn't talk about this but my I had a company in college called delegated and I was focused so much on raising capital and doing pitches for a bunch of different contests I was pitching three or four times a week that the company wasn't nearly as successful as the other ones and it was because I was so focused on the Venture route that I felt like to be successful I had to raise multi-millions from these investors for for my idea and it ended up being a distraction so if you are a younger entrepreneur there's a lot of different ways to get where you want to go um and hopefully this will kind of help highlight some of those paths yeah you just gave me PTSD um I did the exact same thing uh first company went to every single pitch event paid to pitch you know pitched every accelerator every Angel group and traveled and spent so much money just going up and down the Coast and West Coast and just wasted so much time where it's like if we spent all that time just talking to customers we would have realized oh this is probably only a $10 million year business but probably like two million a year profit is like that probably would have been a good business but we try to be like oh we're going to be a billion you know billion dollar company it's like hindsight is like that was never a billion dollar possibility ever um we've had to own like 40% of the market to uh even be close to it um and it's just so funny to think about like I see so many Founders I just had a call the other day with a Founder just fresh out of college like once to raise Venture on a very saturated Market with you know no Venture scale potential and just you know trying to give that feedback as early as possible just talk to customers if you're GNA like talk talk to investors versus talking to customers talk to customers you know if you if you haven't hit any kind of velocity or breakout U the post exit Founders I know they have like a 100 conversation with customers and they identify the paying points and they're like if I was to make this how much would he pay for this and then they come back to them a month later being like I made that thing that you were looking for do you have a a stripe blank or a credit C C information I can receive um like it's a better way to start a business and some of the most established well-known Founders I know um function this way is they essentially have their customer base before they launch yeah yeah it's have those relationships have those conversations and know what you're building towards and who you're building towards uh and gr of there there are some businesses like working with a couple right now like you have to raise millions of dollars just to even have a shot like there are some you know more technological Advanced you know companies or you have to have a million dollar GPU Cloud just to test your theory um but the outcome is moonshot you know it really is if it works it works and it takes off and you grab market share uh so VC's love betting on what looks like a terrible idea you know to a normal business operator someone that you know is profitable in making money um but or Venture investors is like yeah this could return the portfolio so I rather bet on this than you know what looks to be a healthy sustainable business um yeah for sure they might see it be like oh this is too sustainable this is too uh uh what was it from like Silicone Valley they're like uh always be pre-revenue it's like yeah it's like it yeah because like that was always the thing at least at least a couple years ago I got that all the time it's like before you make a dollar raise as much money as you can because once you make a dollar in Revenue then you're judged on you know how you'll perform there's so many other variables that go into the decision- making process and um we just rais 3 million for a client that you know built like an MVP but kept it free and started you know getting big corporations using it from like a free perspective just to start testing it and raised the money at a higher valuation than if they would have maybe charged minuscule amounts of money for it uh up front um and that's the better path because they really do need you know probably 1030 million dolls over the next two years to achieve what they're trying to achieve um but um you most companies don't need that much you know you start off with you know credit card loan you know so you know personal loan friends and family gets you know some something off the ground Moonlight uh so I always find that as like an important checkpoint for a lot of Founders just to kind of double check themselves before they you know spend all their time like you did Chasing You investor money going to presentations Angel pitches you know most Founders I see that are struggling if you're not winning every competition you're probably not fit your Packa and your pitch can be great I felt like I had a really good pitch but it doesn't it doesn't always matter right and um yeah I think there's if you're just getting started as an entrepreneur I think bootstrapping is a good way to or a good thing to consider depending on the idea if you're fundraising I feel like most the time it goes towards uh development and Tech or marketing to help you like scale and and hit where you need to hit um yeah yeah just challenging like put yourself in the shoes as a you know first-time founder early you know starting something new just what does the world look like if you bootstrap and what does the world look like if you raise money and sure raising money sounds easier but in reality it's not you know you could spend months with no success if you're not able to raise money very quickly rethink your strategy if you can't get the money and if you don't get enough people like signed within a few months then it's probably not going to raising money find not the best Avenue and talk more customers I think you're right for sure yeah the best investors are your customers guys um they're actually getting your product they're getting feedback you're getting profit building there's a bit of a fallacy I will say in that though because I saw a lot of venture back startups that were Building Solutions for the Venture community and like Meer community that oh yeah have no Venture scale at least in my eyes like they like Venture is the tiniest asset um uh you know terms of asset allocation and the private Alternatives it's like the smallest percentage and there's so many like SPV providers at fun admin providers all this kind of stuff and I'm like how are you going to be a billion dooll company in this market that already has so many players I money the other day and essentially they were pulling data from like Crunch basee and a bunch of different data sources and then they were working with startups to structure their data in a way that uh this AI um could interpret and and essentially do the work of like a junior partner at at a VC firm of like structuring information I've seen like a few of these in the past like four weeks of people that are essentially restructuring this information to make it digestible for VCS but then one of them took that information and then said like the information's kind of the same for private Equity just a different perspective right and so they took it and then they went to private equity and said I have this thing and that's a bigger market right way bigger or way bigger but they took that use case scaled it to then private equity and then you get in a position where if you're inside with a different private Equity um firms right that maybe you can help them from the lp standpoint maybe you can help them with uh like going through the due diligence process which cost them a million plus just to kind of go through and invent these companies so there's a little bit of Hope sometimes sometimes and it's one of those things where it's just like there when you think about this sure there's a lot of volume of money that gets moved in these markets um which I think is interesting but as far as like being able to capture a percentage of that is incredibly difficult with the technology that at the end of the day it's a people business you know it's it's a people business that get you know deals done you can have all the tech to give signal but you know at the end of the day you you're going to be shaking hands with someone uh that's that's the reality that I had as I entered into the space with some tech was like keep it a people business so Jason what do you see raising Capital the most or what do you see being successful at the moment as in terms of fundraising I'm seeing it go back to moonshots I'm seeing less and less of you know the the traditional SAS businesses get funded um through traditional Venture uh sasis hasn't performed to the expectations of multiples are way they're back to reality you know just I think you know reality is set in uh so PE can do these deals you know you can buy these companies that reasonable multiples um these lofty 10 20x you know multiples just don't really exist anymore um and so Venture is prioritizing like next Frontier you know and and trying to allocate Capital TR there's still some Legacy fun not legacy funds but funds that have thesises both based on SMB you know B2B s and all that kind of stuff and funding will still happen but where a lot of the capital's going is they're betting on big moon shots and so if you don't have that N More Hardware like software combined with Hardware I mean like the biggest fundraise this year was figure AI right or or at least one of them and then like uh looking at uh changing How We Do Transportation layers and and stuff like that inside our cities um have been raising DEC amount cash industrial defense Tech uh robotics AI um you know things that at least in now our common sense as these are big bads like it's here like it's not you know 15 years ago the technology the ability is here today and that's where a lot of the money is going in and I will probably have the highest yield of return now which ones will win but with these Mega funds like a6z I think General Catalyst a couple other big funds of these like huge early stage funds and they're just going to pile it into as much money as they can into the one winner in those markets um which I think is gonna be pretty interesting so it's how quickly can you demonstrate as a startup founder that you're on the path to the Moon I guess we have to move to Mars now seems to be the narrative yeah you know it's like how quickly are you on that path and what can you demonstrate or at least is the idea you know believable to be a part of those markets and be a part of those big potential before your revenue and or before you make revenue and you have a higher probability of raising money than a SAS business doing a million dollars a year I almost feel like there's a limit to how fast the businesses can incorporate the capital so like if you're raising $100 million the your HR team's not going to double overnight to be able to place the hires that you need to your onboarding processes are not big like like fast and big enough to be able to process those people coming onto your team like you only have so much bandwidth in your head as a CEO to be able to do that three-year growth plan plan so I'm a little curious what some of these companies are raising so much Capital their efficiency of deploying it like how quick can they take that check and actually turn it into a tangible product I think you brought up a good point earlier when you're kind of looking at you know if you could raise money back when you found something that was working and I think those are the companies that are in that position where they found something that works and they have a model that can consume as much cash as possible Venture loves that as like as insane as it sounds to you and I that prefer operational efficiency VC's love that you can you can consume a lot of cash put it to work show Topline growth and then you're going to need more cash therefore I will get a markup within an x amount of time and I get to go back to my LPS and say my you know tvpi or my you know is going to be or my moic is going to be this much higher you know in the next round and so that's Venture math it's what they need to see and if you don't fit the bill TR traditional Venture funds won't be interested um yeah if you have a 3X CAC on your customers and you're you're making money that way then like please let me know I like uh let anyone know we're all excited to invest in that well that's ideal but I would say some cases it's not all going to marketing it's like still in development like just can you consume cash towards a very large outcome like um so let you know figure Ai and you know what Tesla was for years and like you know these big massive companies open AI that consumed a servs amounts of cash before they actually materialized anything but it was a promise uh that working with really smart people in a what could be a very large Market um so that's that's the stuff that you know VC's love but uh you know Connor before we you know part ways here uh what would be the best way for for someone to get in touch with you or learn more about uh the different initiatives you have with entrepreneur Equity or sorry operator equity and entrepreneur Collective yeah so it's entrepreneur cooperative.com and then operator equity.com and then you guys can find me on X to at Conor tomies uh so I'm around guys and if you guys have any questions give me a shout should they try to sell their company to you should they try to raise money come well if you're selling a company operator Equity if you're trying to figure out how to scale your company and you want some business owner education and meet up with people inside your area uh we have cohorts in Dallas Austin New York and Las Vegas and check out entrepreneur cooperative.com that's the right place for that awesome Connor I've really enjoyed this conversation ation really appreciate you being on the show and look forward to get this out to our Network that sounds good Jason have a good one guys bye thank you for watching today's episode as a reminder I'm your host Jason Kirby I have built and sold multiple companies with over 135 million in transactions as either a Founder operator investor across multiple Industries I'm currently the managing director and founder of thunder. BC where we help companies and bounders at all stages navigate what capital to raise and who to raise it from and help improve company's odds of raising Capital if you need help reach out to us at help. under. BC if you like Today's Show please share with your friends give us a like or comment down below and as a reminder this show is published weekly and to get notified new episodes and our newsletter be sure to go to our website at join. thunder. BC and if you sign up today I'll send you a few freebies on how to negotiate a term sheet how to get a free list of relevant VCS and much more that's it no more Shameless plugs thank you and see you next week