How do you turn a VC rejection into a $725M exit?

imagine selling your Tech startup to Salesforce not once but twice and also being a co-founder of a skin care brand that sells the Proctor in gamble well that's who we have on the show today Dan Reich a Serial entrepreneur who started his first business in high school selling bouncy balls to becoming a multi- exited founder who has experienced raising capital and building bootstrap businesses to successful exits Dan's secrets to success and this episode of fundraising be mystified the show where I interview Founders and investors that are actively raising or deploying capital in today's market I'm your host Jason Kirby and I have built and sold multiple companies as a Founder operator and investor across multiple Industries and this show is meant to uncover what's actually happening in the private Capital markets and help Founders and investors make better Capital strategy decisions this show is published weekly and to get notified of new episodes and access a few freebies like our guide on how to negotiate a term sheet or a free list of hyper relevant investors be sure to subscribe at join. thunder. BC again that is join. thunder. BC now on to the show hey everyone welcome back to fundraising the mystify today we have Dan Reich serial founder exited founder and investor joining us on the show today Dan welcome to the show hey Jason good to be here thanks for having me I'm excited to have you you have an impressive story of multiple Ventures multiple exits raising across you know over a decade um of experience can you just give the the audience a little bit of background on you know your first kind of entrepreneurial effort and kind of what that's evolved to over the last you know 15 20 years yeah certainly for me it all started in high school that's really when I started my first company what happened was I got really into the internet and Technology tinking around with AOL and all of the things from that period of time and this company called eBay popped up and so I went down a rabbit hole trying to figure out what I could buy and sell and I ended up buying bouncy balls wholesale off of eBay and I would bring them to school and I would sell them at retail to my friends and people I didn't even know big bouncy balls were 50 cents little ones quarters and I made a good amount of money I was selling them out of my backpack and locker and then eventually I made a good amount of money for a kid in high school I got tired of doing it I would give them all away created massive chaos in the hallways with bouncy balls flying everywhere ended up getting suspended for that but that was my first foray or one of them into let's call it hustling for lack of a better word and a friend of mine saw this and said wow Dan you know this thing called the internet pretty well what we now call e-commerce in particular and he said my dad knows a guy that has urban apparel that he sells also wholesale maybe we meet with him and maybe there's a world in which you can do what you did with bouncy balls sell them but we can use him as a partner to get the product and so I said sure let's go take a trip to meet with him uh at the Jersey Shore which is a foreshadow into where the story ends and so me and my buddy hop in my car we drive down to the Jersey Shore we get in to this warehouse and in the warehouse you have folding tables everywhere with clothing all over the place so think rockware jeans apple bottom Sean John Etc and we sat down with him and that was the conversation he's like look I've got all this product I know how to do fulfillment and Drop Shipping but I don't know how to do is that internet thing but you do why don't you build a website and you deal with all the sales and marketing and I'll handle the rest it's like great so off we went we created a partnership we created a company I built the the website I uh set up a computer a credit card processing machine in my office or my house I I hired a customer service rep to deal with all the orders and by customer service rep I mean my mom and I would get up at six o'clock in the morning and I would run Yahoo ads and Google ads and I'd go to school and while I was at school my mom would deal with all the orders and customer service and then I'd come home and I'd reconcile all of it the orders the ads and I rinse and repeat that each day and it was going really really well until we started getting a bunch of customer complaints and issues and after enough of them I went back down to meet with my partner and said you know dude what is going on and he reassured me it was just all circumstantial and it was all fine it would be better and so back to work and to school I went and play it forward a little more the customer complaints kept coming in to the point at which I remember getting one very specific customer complaint that was pretty much like a death threat which is like we if you don't do right by us and by the way we were shipping internationally all over the world and it was something to the effect of like if you don't do right by us we're going to come after you and we know where you live and insert very specific details here so at that point I was like okay we're not this isn't working I'm going to shut the business down so we we shut the business down and I I lost maybe or rather I should say my parents lost like $2,000 that they invested in that company and um few months later my father comes home with a local newspaper and he puts it on the table and he says look at page six or whatever and I opened the newspaper and lo and behold the partner was in a giant photograph of him getting arrested by the FBI for um Grand Theft Ste stealing Goods off the back of trucks like you would see in The Sopranos or something and so that was really my first lesson in business and more specifically I learned two really important lessons one man what a fun game to be playing building businesses and I loved it it was just addicting immediately and the second piece is the most important business lesson in the world in my opinion is choose your business partners wisely and so I was fortunate at a young age to learn that lesson the hard way and so every business I've done since then that's the number one thing I optimize for it's who are my partners my co-founders my colleagues because if you get that equation right not only are you set up for success but you're also set up to avoid failure and you're also optimizing for fun and engagement and avoiding kind of misery and you know work so yeah that was my first company or legitimate company fast forward a little bit gradu high school I go to college I study electrical and Computer Engineering and along the way um joined a frat our frat got kicked off campus for few yeah we got we had a huge Halloween party we got kicked off campus which was a bummer because the college version of me was super sad that he had nowhere to go now to go out on the weekends and so went to a local restaurant that let um 18 plus year olds in where many of the venues there you had to be 21 and up and so I said look um I'd love to throw a party here my BR got kicked off campus we'll throw a party here I'll sell tickets we'll donate the proceeds to the Red Cross and he's like sure go for it so we throw this party and it was a huge hit people had such a great time the next say was getting texts from everybody dude that was amazing when's the next one and so I'm having this conversation with a with with my friend that I was studying engineering with and he goes dude that's amazing we should do more and we should turn that into a company oh and by the way my father is an attorney he could help do all the legal paperwork for us and get it stood up as a company it's like say no more great game on and so we started a company called The Runaway Productions which which started as a party company but then eventually evolved into an events and marketing company where we would throw these parties and events but we would then bring in local and National advertisers to pay for the events in which we promote other brands and services at the parties that college demographic and we did a handful of those not only in our college but at other colleges as well we franchised it out and it was a ton of fun I mean I remember every year I would go to Las Vegas for the consumer electronic show with uh my my boss I I was building computers in high school and I remember stumbling into this booth and I was just fascinated by this company I was in there for an hour and they were making speakers and speakers and backpacks crazy cool headphones and the founder of the company was like Dan why don't you come and work for me I was like dude I'm in college I can't my parents will kill me I Cannot drop out of college um but he's like I'd love to work together and I was like well look I have this events and marketing company why don't you send me product and I'll like promote it and give it away at a party and he's like we haven't done that before what else do you need I'm like I don't know can you make a banner or something I'll hang it up behind the artist he's like sure no problem so I get a bunch of headphones shipped to me in a cardboard box and we throw a huge party I hang this banner up and that was the first live event that uh Skull Candy had ever done and since that time that became a huge part of their marketing plan I remember years later I was at a big concert in I think it was Pennsylvania there were like huge Skull Candy banners and I was like I remember Day Zero for for this so that was second company it got to the point where my college roommates who were helping me promote the events and sell tickets they were kind of like well we want to do this too and compete with you which as you can imagine we were four people in one room two of us promoting one event and then the other two competing with us would make for an awkward and weird dynamic so we were like look why don't you just become partners with us I'll give you half the company we'll be part Partners you do all the heavy lifting and then I'm going to go on and build another company um with my my friend that I was doing engineering with or two friends that I was doing engineering with and so that's precisely what we did and we started another company called the campus atlas.com and the campus atas Vision was to create a student portal so that any college kid Under the Sun would have everything they need in one place on this website everything from class schedules Professor ratings drink special kind of weather email like you name it all in one place we roll that out to about eight college campuses and at that point we were in fundraising mode that was like okay we're going to make this a real startup with institutional venture capital and and go for it like it was right around or shortly therea the Facebook phenomenon was happening and we're like we could be Mark like we can do that um so we started to run at that and um graduation was coming around the corner and I ended up connecting with somebody that was working on another startup in the advertising space online advertising space and he's like look I helped build a company called advertising.com we sold that for $535 million to AOL I'm working on a new Next Generation version of that company with people from that company and others for example one of the early partners of his was the number one very first sales guy at Yahoo like the founder jar Yang would sleep on his couch when they were inventing display ads and the way the internet makes money so that was just too intriguing to uh like not do anything with so I I put that startup my campus Atlas on hold um and then became an intern at this company called lomy um and we went from maybe 10 employees and by the time I left we were maybe over hundred sub you know million in Vue to many tens of million in revenue and I got to see what a high growth Venture back company looked like and it was incredible and that was the point at which I was like okay I got to get back to really what I wanted to do and build my own company so I left and reconnected with two buddies from college we started to work on this company called spinback and the the idea for spinback remember this is Facebook error um everybody every brand knew they needed to be in social media and on Facebook in particular but they didn't know how or what it meant for their business or how much money they were making and so we solve that we helped online Brands and retailers measure how much money they were making from Facebook and we raised money on a convertible note from friends and family embarrassingly little money we effectively bootstrapped it and got it to the point at which we were going to raise Venture Capital there's a crazy story in that whole process process um we were pitching people we were told no we ended up getting a yes from someone that told us no um specifically I remember we pitched first round Capital that was the firm we wanted to work with and the feedback they gave us was like you guys are you know too young to be doing B2B Enterprise sales um if you're going to be doing B2B sales you need a real Enterprise sales expert like John do like they gave us a specific specific person that did sales I think at PayPal who lived in the valley and you don't have any Enterprise customers and so we're like okay so over the next month or two we tried to do all the things we said they said we could not do so we actually flew that guy John Doe out to meet with us in New York took him out for dinner told him what we were up to what we were doing got him incredibly excited to the point that he wanted to work with us but also told the investors that actually they do not need they don't need me they've got it kind of figured out we also ended up signing Enterprise customers like QVC which will become an important player in my next business and um the other thing we did is we ended up getting another term sheet from another fund so one day we just I remember my partners just showed up at their office and knocked on the door and we're like hey guys uh we know you said no but we did the things you said you couldn't we couldn't do and also we have another term sheet from someone else but we still want to work with you what do you what do you think and they're like we'll call you back and so they call us a few hours later and they're like okay we're in so they sent us a term sheet we signed it and turning a no into a yes we turned a no into a yes and we were stoked I mean we only wanted to work with them um as our lead because we knew of them we knew them through our other friends that had worked with them uh Chris frck and and Josh in particular um as like the Ecom Wizards out of out of Philly with the previous experiences that they had and and so we signed the term sheet but in parallel we had also been having partnership conversations with other players in the space that we felt were complimentary to us and in particular there was a company called buddy media that at the time we felt was the largest b2p company building on Facebook effectively making publishing tools for brands for Facebook and they had an incredibly large customer base and they had massive distribution amazing publishing tools what they did not have however were what we had which was um hardcore analytics that showed the ROI of Facebook so it was very obvious very quickly that there was a 1 plus 1 equals 3 scenario however we had just signed a term sheet with first on Capital and so very quickly Mike Lazo the founder co-founder and CEO of buddy media it was like look forget the financing why don't you come partner with us we'll lock in value now and together we'll add fuel into this rocket ship and we'll go for it and so there we were faced with effectively two term sheets and we locked ourselves in the room for like three days straight literally like I don't think we left the office for those two days debating what we wanted to do and ultimately what we concluded was the following we felt like wow Facebook is going to go public probably in two quarters and when they do it's probably going to be around a hundred billion dollar valuation plus and when that happens we're like man won't the market look around and say okay who's the leading B2B platform on Facebook and if that question was asked the answer would have obviously been Buddy media and then we're like okay through that lens what's buddy media worth is it like 1% of Facebook 2% half a but either way like those numbers were pretty big and we're like and there was that unique window with the Facebook IPO so we're like you know what let's go for it let's let's literally and we did rip up the term sheet with first turn capital and we called them back and said sorry but CL Canmore yeah and they were really cool about it um and then we ended up merging with Buddy media and then 13 months later we sold buddy media to Salesforce for I think it was like 700 25 million or give or take um so that was a really really amazing amazing ride Mike and Cass built such an incredible company um we were so fortunate to be a part of it but when the deal was coming up and we were targeting a close what I realized is I still didn't get a chance to build my company like I was super eager to do that and I could just see the writing on the wall that if I stuck around at Salesforce which is an amazing company I probably would have been in a situation where I would have done a good job hopefully got a promotion and more money done a better job and and on and on and on and that to me scared the out of me what was less scary was actually not having a job and being unemployed and free to go chase a new idea and so I left the same day we closed the Salesforce I didn't actually go over to Salesforce and I went back into the Wilderness for about a year and a half trying to figure out what I wanted to be when I grew up and what company I wanted to start and about a year later I said you know what I we actually had so much white space to run at with spinback we never got a chance to see it through I'm GNA effectively reboot a version of that but with a few different changes and so I went back and I reconnected with all my old customers from smth or many of them companies like La Satan under arour QVC and more but no both all right so Dan we we've covered quite a bit um as far as your your early career getting to the acquisition uh buddy media po you know the Salesforce life you know it sounds like Salesforce is you know or just say the corporate life is maybe not your life it be as cushy as it could be um it wasn't the path for you which I completely resonate after wmart acquired my company Walmart wasn't the place for me even as cushy as they might have made it um so looking beyond the Salesforce acquisition you kind of started realizing you never really truly got to built your your true Vision so kind of continue telling us like what led to the you know the next company which ironically was not a SAS company but actually cpg so tell us about that for sure so I left Salesforce I knew I needed to get back to building my own company I wasn't sure what it was I had a few ideas in the healthcare space which I ran out for a little bit didn't work out for a whole host of reasons but eventually realized and concluded that even though he had just sold our company that ecosystem that we now call social media was still only beginning and in particular e-commerce was going to really benefit from that wave and we hadn't again we hadn't even seen the full effects of that so I felt like there was still a lot of opportunity to build a an software company in that space and so that's what my plan was I reconnect connected with a handful of my old customers companies like bobos QVC latan Under Armour and more and I pitched in my new software idea and most of them were in and very excited in particular QVC was really really excited about it and and then they said Dan actually can we get your thoughts on a strategic initiative that we have and I said sure you're the third largest retailer in the world I'd love to hear you're a strategic initiative do 10 billion a year in sales go on and what they told me was interesting but not surprising certainly won't be surprising to you or anyone listening what they said is they realized the world is changing and moving away from traditional media television radio print to digital media I.E the internet and for their business model they have finite shelf space I use in air quotes where their shelf space is limited to 364 days a year minus Christmas 247 selling products but they believe that rightfully so the internet had infinite shelf space you could sell products anytime anywhere to anyone in the world but they had never done that before and in addition Beauty was the fastest growing category and so in short they're like what do you think about launching a beauty company with us as a digitally native launch and so for them it was a business model they wanted to prove and potentially for me it was a brand I would be building problem is although I knew their business well and I knew digital pretty well I didn't know anything about beauty but I knew somebody that did and so I suggested we all get lunch and so when they came back to the office that I was working out of at the time a firm called Great Oaks Capital founder is also a Wisconsin Guy where I went to school um they live their office is a couple blocks away from where I lived so incredibly convenient we were co-investing in some deals together um when I came back to that office there was another person that I come close with as a function of working out of the same office he was doing his own private Equity investing as a result of starting and selling a company called Bobby Brown cosmetics so I got to hear his story and hear about the beauty industry and so looped him in sounded very familiar in a way to how he started that company with his partners and lunch became several meetings later with their executive team and lo and behold we realized wow we have the third largest reteller in the world for bid and telling us they must make this successful and we feel like we've got all the pieces to be successful and so I decided to take my software business and put it on the shelf and go become a beauty entrepreneur and try this crazy crazy idea and so that's precisely what we did we started a beauty company we knew that unlike Tech it was a cpg company and therefore knew we didn't want Venture Capital knew we didn't want to raise money like a tech company evaluations like a tech company we wanted to try to build a profitable company and finance it accordingly and so we self- Finance it me and my two co-founders Ken Landis and Dr rashini Raj we all put in a little bit of money to start the company to start initial product development things were going well we then put in a little bit more money and then a little bit more and then I got to the point where we're like okay this is working but we still need more money especially for working capital when you're building a physical Products Company unlike software where the product is made up of ones and zeros in the physical world the products cost real hard cash to make before you can sell anything so we needed more cash so we did a friends and family round on a convertible note with an angel round with literally my friends and family like my brother my sister my parents my partners niece and nephew etc etc at an embarrassingly low valuation but I figured there's no way this is going to work like I've never done Beauty before so I don't mind if they get an amazing deal because this is super risky and we did that for the initial part of the company small friends and family round and and we launch with QVC we turned on our Ecom site that was going well and very quickly things started to work um we built out a team and um along the way I realized in a product development meeting as we're staring at eight lab samples in a conference room deciding if we wanted like citrus or lavender and the creams I was like what the hell am I doing in this room and with my life despite the fact the company was doing well and it was on its way I need to I need to not do this I need to like get back to technology and software and so um one of the folks that we were working with Julia Strauss the deal was like you're going to become CEO I'm gonna not be CEO anymore I'm going to go do software and you are going to build this business and so we made that transition fast forward a little bit more the business was really working we needed growth Capital because we were about to roll out into Ulta and so we got connected to a private Equity Firm called alcaton and they end up investing in Tula leading our growth round of financing and that was the last round of financing we we did for that business because we built it profitably and scaled it and at the time of exit I think it's reported we were doing about 150 million in sales when we sold to Proctor and Gamble um and so that's how we thought about financing for that business but as I mentioned I hit the eject button along the way as a full-time employee of that company to go start another venture back software company and so that's exactly what I did we along the way started a company called troops.ai with um three Partners Scott Greg and will and the thesis there was and idea was um you have all these sales people in the world that have to go out to the Wild and build relationships and convince those people to buy their products goods and services and they need to manage that process and the category that we know of that is managing that process we call CRM customer relationship management we know Salesforce to be the leader in the space we also know that the product is not always easy to use when you think about having to input data into a bunch of fields forms buttons and boxes all day long when sales people are inherently relationship people they're not data entry monkeys and so at the time six the top 10 most used apps in the world were messaging apps and we're like What if you could talk to your CRM much like you can text or chat with your mom or buddy like that'd be pretty sweet like what what if like Jarvis from the movie Iron Man what if you had Jarvis to Aid and assist you with all things sales and commercial job functions so that was the thesis we uh took a very contrarian point of view on what effectively database products and relational database products look like we ended up raising money ironically from first on Capital who letter her see round of financing so I finally got a chance to work with them which we were stoked the B and um we started to build a product that effectively looked like a messaging interface that sat on top of these database products and in particular we started building on top of Salesforce because they're the 800 pound gorilla that everyone uses and we're building this product and along the way we see another startup building a very similar chat product and in about one week they announce their open API developer platform they announce their growth rate in terms of users which was insane I never seen numbers like that in uh rather the last time I saw numbers like that was from Facebook and the third thing they announced was an $80 million corporate Venture fund and at that point we're like hm this company looks a hell of a lot like Facebook but it's not a social network for the consumer it's almost like a social network for the enterprise we should probably go all in on this company called Slack and so we were I think the first Venture back company to go all in and build on top of slack as an underlying platform and we ended up raising money not only from first-term Capital other great investors like Vander Collective fisus Ventures NEX Ventures aspect Ventures great o capital and more but also slack fund so we were there first series a and series B and follow on investment part of why they invested Jason I remember spanel who ran the fund said this to me he's like look this is so obvious where the world is going either we're going to need this or Salesforce is going to need this or someone else is going to need this this is a no-brainer and and so we built the business we ended up working with some of the most amazing companies in the world like slack like Salesforce Shopify Spotify twio and more and for the majority of the company it was like chewing on glass because we try to convince the world that you should use CRM products in this crazy new modality when that was not at all how people were trained and so it felt very much like swimming Upstream but then all at once Salesforce buy slack for almost $30 billion and the whole stream and Tide shift and then shortly thereafter we got acquired by Salesforce and slack to help add fuel to the fire and accelerate that vision and and drisk the the integration so um you know for that business it was we knew we were doing something crazy and kind of in the camp of research and development is and so we knew we knew we needed some outside Capital to accelerate that so we raised Venture Capital pretty much from day day one um did you know that most Founders waste days of their lives chasing the wrong investors well as a Founder you know your time is your most valuable resource don't waste it on the investors that aren't going to write you a check here at Thunder we built a free tool that identifies exactly which VCS are worth your time to pursue we score your company against 3500 BCS and family offices that have been vetted and are actively writing checks into companies like yours get your AI recommended list of investors that will look like this absolutely free by creating a free profile at thunder. 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VC now let's get back to the show so question here I just want to kind of unpack a little bit so you've now you've raised multiple rounds for for troops AI um and slack leading the or participating in the the series a but you already sold the company to Salesforce through buddy media and what was it like kind of coming back uh after that you know selling again to to Salesforce what was funny is when when it became obvious that the Salesforce slack deal was happening and that we were going to our posture might change from kind of antagonizing Salesforce and trying to keep people out of their system to perhaps aiding and assisting with their new vision as well I I was able to reconnect with former colleagues that I worked with at buddy media in particular there's a guy named my friend Patrick Stokes who at the time at buddy media was the chief product officer who literally came to our office and sat down at our desk with us to look at product together and help do due diligence for Mike and Cass before they ultimately acquired us but Patrick had been running platform at Salesforce and was a key executive there very instrumental in and everything and so we were chatting with him about what does a partnership scenario look like and he's like look clearly publicly now you know this is a priority and yes certainly there's a way we can be helpful to one another and in addition to that after slack went public which by the way was amazing we were invited to go to the New York Stock Exchange for their direct listening which was such a cool exp fun experience yeah it was super cool um but be leading up to that and after on their earnings calls I remember Stuart Butterfield the founder and C of slack he would pretty much always mention troops in the earnings call as almost like exhibit a for the power of the platform and how slack can progress from not just the messaging interface but really power meaningful Mission critical business processes not just for developers and it which is historically where slack was winning but also for commercial users for sales users for Revenue leaders and so on and that's what we were doing and so we were in this situation where both Salesforce and slack obviously they did the acquisition they both knew we can play a role there so the partnership conversation quickly evolved to hey maybe we just go do this together and it was really really fun and exciting for me because at that point unlike buddy media we had already been working with slack as a close partner they were an investor they were a customer we were powering their entire Revenue team globally for 40 years up until that point and with Salesforce we knew a lot of the people all over there already and at that point they had also become a customer we were also a channel partner of theirs so we had already built a great relationship with both companies and so by the time the acquisition conversations came along it wasn't like a cold start it was just a natural progression of the relationship to date so it was a very easy and natural conversation to have with them and then kind of that post exit um you know you're now multiple exits in and what was your kind of tenure at Salesforce thereafter were you just post acquisition you were done did you kind of keep building troops yeah what was that experience kind of the the post exit and correct me if I'm wrong but also sounds like this is what you you built the company you wanted to build you wanted to have that experience did you feel that's what happened with this transaction yeah yeah totally it was it was such an incredible experience we you know looking back on it when we were doing the things we were doing many people thought we were crazy again it was a hyper contrarian point of view to take and then when Salesforce bought slack you can imagine how validating that was for us at a moment when years before everybody thought or many people thought what we were doing was kind of kind of insane so very validating um and I think help play a role a key role in how even enterprise software at work exists today and so after the deal I was really excited to kind of roll up my sleeves and work closely with leadership at Salesforce and slack and um but also there was still massive change happening at Salesforce and slack so some of the key leaders at Salesforce left and then shortly thereafter some of the key leaders at slack left and um you know there were conversations for me on what my future role would look like and um were presented with opportunities that while bigger in nature and in title to me felt like would not has would not have been as fulfilling as the mission that was building the troops product and that um and that focus and so I made that very clear very fast to my boss that I don't I wasn't interested in a bigger role I just wanted to do what I wanted to do and so fast forward they do a bunch of layoffs I get included in the layoffs probably because I made it very clear I wanted only what I wanted and um and it was totally fine and amicable and in fact kind of thankful for for the the exit and um and so left but but I also knew that I could not sit on my hands and do nothing or play golf all day I needed to be building companies because I just love I love the game I love the journey and so at that point I had funded and incubated another beauty company which now is called dibs Beauty um also private Equity backed El certon is an investor there as well and I get to help build the company and work with my partners that are running it full time Jeff and Courtney doing an amazing job and you know now I'm in this mode where I'm trying to build and start more companies with amazing people and act like turbo fuel to the co-founder and CEO yeah so that's a an incredible experience that you walked us through in terms of the journey from you know selling bouncy balls to to getting you know wrapped up with some shady characters to having a SAS exit to a cpg exit back to SAS and then now back to to cpg and your your next venture you know it's an experience and a journey that obviously is very bespoke and unique to you and I would say most Founders are lucky to have one successful business and and you're now trending on multiple when we look back you know this show is all about fundraising you know and uh Capital raising exits things of that sort and you touch on a little bit of the numbers but it'd be helpful to kind of share with the audience like across the different businesses that you've built how much have you raised in an aggregator across each each entity yeah so um you know for spin back I think we raised in the few hundreds of thousands of dollars before we exited to Buddy media for Tula I think we rais raised um let's call it north of $10 million um and with troops I think we had raised about 2324 million with dibs Beauty um I'm not sure it's public I think it's confidential but I can say elcat invested so do with that information what you figure and then and then I'm launching another beauty company later this year um where we did a seed round of financing to the tune of a few million in an early round of financing and then um and so those are the ones that I have a heavy hand on but then if you factor in other companies that I was not the guy or running a show or just like a smaller player like buddy media for example I think Buddy media raise Mikey Cass rais I don't know maybe like a hundred million I might be wrong but much much more and and low to me at the time I think maybe at that point had raised 30 or 40 million or something like that so so I had seen the movie before and lived it in terms of raising capital and what I'll say is especially over the past few years what I think most Founders get wrong and I've been guilty of this too is they think the fundraising is the end game like you go raise a lot of money at a big valuation and that's the thing to celebrate and oh by the way the reason you're raising a lot of money at that valuation is to get X number of months of Runway and I just think that's just completely the wrong framework to think about it I think the right way to think about it is you're raising money because you feel like there's a milestone you need to hit and the only way you can hit that Milestone is with outside capital and you just rinse and repeat that and historically you think about those milestones we forgot this I think but like preed is you have an idea and you want to kind of cook it and bake it to get it something tangible seed is you want to get it into Market a is it's in market and you want to prove that you can scale it to sufficiently finite group of customers that you know it's repeatable your series B is you know it's repeatable now you want to scale it your series c is now you want to scale up so you can be in a position to IPO and then maybe you IPL or maybe you need to introduce another skew or whatever in a d whatever but like those are really Milestone base and I think the past few years when money was free most people forgot that and it was just let's just raise as much as we can on on the biggest valuation we possibly can because by the way they were optimizing for dilution and ownership but I think what many people forget is the goal is not to raise a lot of money at Big valuations the goal is to build an amazing successful company that's profitable so that you could sell it period either privately in an acquisition or sell it publicly in an IPO to retail investors like that's the goal if you're taking outside Capital you have to give that money back and more to your investors and there's only really two effective ways to do that and so what you then really need to be doing is optimizing not just for you but also your outside Capital investors so that you're always treating that round of financing fairly so that you always can have a honest conversation together and say okay is now the time to sell or do we need to keep going or do we want to keep going and if you raise in a way that you get ahead of your skis you create a broken incentive structure with the board which makes it really really hard to run the business or exit or or hire great people and so I think many many Founders just lose sight of that and forget like you're in business to build a great product and service sell it do so Su sustainably which means being profitable so you can take the profits and reinvest that to create better products and services and rinse and repeat that model and so I think every company are is unique all the circumstances unique I don't think it's a one-size fits-all and um and and so how I think about the world today especially in software to me I think there's clearly emerging two different camps um that I think are interesting one Camp are the founders that are building software companies that know they can go really far with really little and don't need a lot of outside Capital it would look more like spin back it's a few hundred thousand dollars in your friends and family round they can launch they can get profitable and and control their own destiny and build a great company and I'm an investor in a few of those companies and I see the updates and they start with we're profitable we have Runway all the months like that's incredible and I think those guys set up for success I think there's another bucket which is you need and this is really where Venture Capital was born but it's the bucket where you need a ton of capital to get to Market so think semiconductors or the fiber cables or increasingly today the humanoid robot category or cars like or or um or genetics like deep Tech deep science needs a lot of capital I think that is perfectly Justified to raise meaningful rounds of financings uh at meaningful valuations because then once you're live you have a sufficient advantage over the competition because you've hopefully got a deep Mo around Tech or IP or whatever but then like there's this middle bucket which could get really easy to get really really wrong which is you raise a bunch of money to build a SAS company and now you've got 30 copycat competitors because got all the other VCS throwing money to copy the leading company and now there's a race to the bottom of price and there's feature copying and and and and and that is a world which it's very easy to become a zombie company where you're not growing you're not dying you're kind of just floating along to me that's worse than than dying like it's almost better for Founders to quickly decide and see if they're going to win or die and die and move on to an idea or a new business that has a much bigger and better opportunity so I wish Founders would take advice sooner rather than later there's so many of these companies where Founders just they feel like they can't give up and they have to keep going and keep fighting even though the signs are very very clear that they should probably give up yeah and and what's tough is there's companies where there are those signs but there's also signs that point to the contrary and suggest that if they keep going that you'll have a big big win Chris freck at first turn would remind me all the time at troops he'd be like dude Roblox was flat for like eight years like he would show me the data it was like literally flat and then in one year just parabolic through the roof and for a period of time at troops we felt that way but we would we would get indications often that like actually this is really working like our net dollar retention expansion the customer feedback like very clear this is the future and there's always there's often a timing Dimension with these companies too but but more broadly yeah I think too many Founders are optimizing for the wrong things in these financing scenarios and are not thinking about first principles and fundamentals of what it means to build a successful business that's some Sage advice and I agree wholeheartly as I see hundreds if not thousands of companies that you know that focuses give us more time you know we'll figure it out or you know not so much like we're going to build a profitable business when that should be the path for many businesses and Venture is not the the vehicle to to use but Venture is sexy venture's validation Venture is like I've made it checkbox oh I'm worth way more than I probably should be on paper uh and that usually is the kind of false flag or you know kind of false North Star that they pursue for more of a vanity approach as a opposed to head down build something valuable that customers truly love and ironically it's you know it's the companies that do what you're talking about that actually get the Venture Capital have VCS chasing them because it's a more sustainable business Al be VCS may say they want the next shiny object but in reality they do ultimately throw money at um you know the Better Built businesses by in your case serial founder multiple exits so one thing I would like to answer have you answer is just when it comes to you first round Capital you brought multiple times uh you you said no to you said please come to me they said no and then you came back to them and then they said yes and then you change your mind and then next venture you come back and you know it works out you know maybe first round or other uh invest relations how do you manage your your relationships how how do you stay in touch with them over such an extended period of time to where when you're ready you know the money's there yeah I mean with all these with all the businesses that have worked I found that the ones that have worked well worked because there was just a great relationship within the team and by team by extension I also mean investors so you know first round for example Chris he's I consider him a good friend and just like a great guy and independent of working together that's just somebody you want to stay in touch with not from a work perspective but because they're just a good person to keep in touch with with and um look it's impossible to do that with everybody but yeah certainly there are a handful of people that you just want in your life and it just so happens that sometimes some of them um can be can be the you know point guard to your forward or wide receiver to your quarterback investor to the founder um and that you know that's that's really it it's just you want to stay in contact with great people and it just so happens that sometimes some of the great people may also be your business partner Partners again it also helps if you've had a win like let's just take Tula in alcaton for example if you have a big win with investors they'll also want to work with you again which was also the case most recently with with elcat and Tula to DSE Beauty that's great to hear and you know glad you Shar that and I think it's important for everyone just to you know keep those relationships vibrant and and have have a reason to have those relationships other than the hope of them giving you money and I think most investors can sniff right through that uh when you're only around when you want money uh it's going to be a much more difficult uh relationship to maintain and add value to over time so speaking of investors you've had success but I think you've also had success on the capital allocation side of making Angel bets and making investments into funds uh can you tell us a little bit about you know what it's like kind of being on the other side you know you're still building you're still a Founder but you clearly make time to to invest in other things you know how do you how do you think about when it uh that when it comes to making investments into into funds or into companies yeah I remember when we were building spinback or any of the companies for that matter where I was raising money I I just remember sitting on the other side of the table in many cases wishing praying that I would get a yes and I would get an investor to lean in and invest in my company um and I also know the majority of the time the answer was no um so I know that feeling all to well and it's exciting to me to be able to kind of give back and and be not all the time but for the sometimes be the yes for those Founders and try to help them because yeah I was once in their shoes before it in a way I'm still in their shoes and um it's really exciting to think about helping people go after their dream and being a small part small part of that so so for me Angel Investing is is actually less about the money although yeah these like these are really ultimately all lottery tickets hopefully some work and and you make more money but to me it's just really a great way to continue to be part of the ecosystem and give back hopefully make a few good bets that that work but also help create a foundation for some of these new startups uh to win and for Founders to hopefully be successful and if uh Founders were you know listening to this you know podcast what would you tell them if uh if they wanted to reach out to you or they're looking for you know an advisor or investor that brings as much experience to the table as you do you know how would they approach you the uh advice I used to give and in way is still due to people raising money is if you want money ask for advice and if you want advice ask for money and it kind of goes back to the relationship thing which is if you want to build a great company you want to work with people that aren't overly transactional I think I think often you'll find if you work with people where it's incredibly transactional or there's deadlines and expiring dates and term sheets and it's hyper competitive like it might feel good in the short term but in the long term you might find yourself in a really shitty marriage ultim um and so why I say you ask for advice is because it's a good way to like mutually date people that may or may not be your partner and truly get a sense of a are they good people and B can they add value and is it a mutually beneficial relationship and and so you know with me what I love is when people don't email me with the ask of hey we're building company a and we're raising money it's much more interesting when it's hyper-personalized and thoughtful there's an interesting discussion that could be had because in those moments that's when I get to see if there's a way where I can truly be value ad and not just a check because I really only want to invest in companies where I can be some help otherwise I'd rather just keep my money in the public Equity Market um and not say or do anything um and have it be liquid so I want to be able to know that there's even a small set of unfair advantages I could potentially bring to the company and the only way that can happen is through a kind of introspective dialogue between the two people so the advice I would give is like um be very personal with the Outreach not just to me to anybody and at least for me in particular you can find me on social media um I'm just Dan Reich I think are most of my handles if not all of them and we'll throw those all in the the show notes for people to to check out but yeah I think you say very very simply in the sense that like make it personalized I feel like the the cold the spammed cold email or hey we have mutual friends here's my company we're asking for 500k and you know just like it's just so easy to say no to that when there was clearly no effort put into it to you know ask for me you know ask for you know my experience my background like okay if I have that value because that's ultimately what a lot of angels care about uh if they're looking for transactions they invest in funds and they do follow on when all the research is you know done and stuff like that but if they're you know going to write that individual direct check they they want to add value that's very much my sentiment as well totally and they still they still might get no get a no but at least it's like a real honest conversation and not a cookie cut or copy paste email to 4,000 I usually will respond you know with mostly no but at least you a response if you if I notice that you put the effort into acknowledge me you're not trying to use AI to skim my you know LinkedIn profile and make broad assumptions about the connection or whatever and it's actually like something very specific uh I will usually get a response give a response and and sometimes it's a meeting but sometimes it's you know just a quick now I I'll I'll still have people if you can believe this that will send me emails um inquiring to invest in troops for example it's like do your homework you know like do a little research before you start and there's a spectrum of that but yeah be like be thoughtful be engaging um be deliberate with why you're reaching out and who you're reaching out to can make a huge difference so uh yeah Dan this has been a great podcast you shared some insightful you know stories just your journey overall again very unique and Incredibly uh successful across multiple different uh Avenues so you appreciate you being on the show sharing your insights and uh you look forward to to getting this out to to our audience we'll make sure to have the the links to your your socials uh down below right on thanks Jason thanks for having me awesome thanks for listening to the show today we hope you learned something valuable and if you did be sure to let us know in the comments or by hitting that like button and if you're a Founder looking to raise Capital then join us at Thunder VC we provide a free tool to help you identify which VC family offices or lenders are the best fit for you using RI it will save you a ton of time from chasing the wrong investors and since launching our free tools Founders that have joined our Network have gone on to raise over $1 billion in financing again you can find these free tools at 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VC and as a reminder we release new episodes every week so stay informed by subscribing to our newsletter at join. thunder. BC again that's join. thunder. BC and if you or someone you know has recently raised around and want to share your story please email me at Jason thunder. VC and that's our show we hope you enjoyed it and we see you next week