How do you create custom acquisition narratives for buyers?

welcome back this is episode number 45 of fundraising demystified 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've built and sold multiple companies as a Founder operator investor and adviser across multiple Industries and business models and this show is designed to uncover what's actually happening in today in the current private markets and help Founders and investors make better Capital strategy decisions the show is brought to you by my company Thunder a tech enabled Investment Bank for Founders by Founders where we help Founders and companies get funded or acquired whether it's debt Equity or the pursuit of an acquisition our team can help identify what's the best strategy and help get the deal done for you to learn more about us be sure to subscribe to our newsletter at join. thunder. VC again join. thunder. VC now if your goal is to sell your company one day this episode is for you today I'm excited to introduce to you Colby McKenzie an m&a attorney turn founder who decided to start a cannabis technology business who raised over 12 million and ran a phenomenal process to sell his company to wheat Maps we get a master class on how to strategically sell your company in this episode Colby walks us through the key lessons he applied in his company after being being involved in over $280 billion in transactions as an attorney and a big law firm and even talking to Colby brought up a lot of memories of my exit to Walmart and how Founders have to really dial in their narrative differently for each potential acquirer when trying to sell a company and run an incredibly tight process to make sure that you're able to get it across the Finish Line you just never know what might be the one thing that causes you to blow up the deal and miss out on a wealth generating opportunity now as a reminder to get notified of our Weekly Newsletter and podcast be sure to subscribe at join. thunder. VC now on to the show welcome back everyone to the fundraising demystified podcast today we have Colby McKenzie with us today welcome to the show Colby happy to be here happy to be here my friend I'm excited to to have you on you and I have had a couple chats you know prior to having you on the podcast you know I find your background incredibly interesting starting in law going into launching a a VC back startup and then coming back to law and investing in startups uh I think you have an interesting story that has a lot to you know to our audience that can learn and kind of hear from your background it'd be great for you just to share a little bit about your story you know starting as a lawyer and kind of what gave you that urge to to start a company and then we'll we'll take it from there yeah yeah happy happy to run you through it I definitely have what I would say is a bit of a unique Journey um but it's given me perspective that I think few have and I've started as a m&a attorney at Wild Goa for for those of you that don't know big New York base Farm one of the top in the country and and being at while was really unique and that it gave me access to things in my 20s that you typically wouldn't get access to I'm sitting in boardrooms of multi-billion dollar companies now granted that's as the minute taker but still having access to to these types of things was incredible and then got the opportunity to work on deals like Verizon AOL and the uh 280 plus billion dollar divesture of uh GE Capital like really awesome things to get to soak in in your 20s and that said like I knew all along that I wanted to take a more entrepreneurial Journey so walked in like a crazy person one day and said this has been great but I quit I will stick around as long as I need to to keep everybody good graces but I'm going out on my own and everybody kind of looked at me uh like I was crazy but I jumped out started my own Boutique Equity Fund uh like many people that have a small boutique VC fund I got pulled into actually co-founding a company uh and ultimately got uh that to an exit so I became an exited founder got my letter jacket and everything and all of this took place in like a five and a half year span so really hard Sprint uh a lot of learnings along on the way uh and it was something that I had always wanted to do and and reaching that kind of Pinnacle was was awesome and so it was well worth kind of jumping out of the and building the airplane along the way so to speak well kind of having that that pth label as we call it the post exit founder uh you background and opportunity opens up a lot of doors for you kind once once you've achieved it but let's take a step back a lot of our listeners are are still in that ground maybe they recently left their their job similar to to how you did it and they're taking that leap of faith and they're in the current grind whether it's looking to raise capital I think you you you kind of glossed over that whole experience so let's let's talk about your experience at enlightened the VC back startup that you built and you know share a little bit about what you did at that company why did you start it and and we'll dive in a little bit more yeah so quick quick background on it and and funny as side so enlighten was in the Cannabis space focused cannabis technology company and I still go back and catch up with friends at Wild like oh you're the weed guy which for anybody that knows me is like quite hilarious that's the title and tag that I have but uh I guess when you found a company in cannabis technology that's the that's the label that you get from kind of the the mainstream but Enlighten Focus was we were a retail mtek stack um we had gone in and built kind of a middleware solution where we could aggregate uh POS data and normalize that and then display it in kind of a clean way and it it helped because cannabis everything's so small badge so things are constantly going on and off of menus that you need kind of that real-time menu and so we would display that on digital menus inside the dispensary using that technology and we're smart enough to be early into kind of the retail advertising space and so actually had a unit on on those displays where we were running uh content and advertising and then ultimately built a more robust MCH stack on on top of that that allowed us to aggregate data from inside the dispensaries know who was in there and then retarget them outside of the dispensary to kind of close the loop on the ecosystem so really cool Tech and the interesting thing there is we actually were early and and I think this leads into like why we raised Capital we really want to move quickly we were early in cannabis we wanted to rapidly seize kind of the opportunity and as you know like a land grab is super expensive so we needed to be Venture backed to give us that ammunition to actually capitalize on being early and and having the superior Tech stack but um as I'm sure you talked with a lot of your clients like when you take VC money it comes with strength right so the second we took the money it means okay you're going to have to Blitz scale and really overweight growth and it means that you're going to need to build with an exit in mind and kind of within that five to seven year Harvest Horizon of the Venture Capital groups and the second you take the money those are those are kind of the the strings that come with it but uh lucky for us like I had just come out of my stent as an m&a attorney so it was easy for me to build to exit everything we did and and the interesting thing is the narrative from day one with our investors was like really granular around what an exit might look like and how we would get to that Harvest and kind of the interesting thing is almost to the day I delivered on an exit that was to a strategic that fit the profile that we talked about five years prior uh and actually did it right at the fiveyear Mark so it's pretty awesome to actually have it come to fruition which is rare with startups to actually have an exit in mind and then five years later have it play out like you thought uh yeah that uh that is definitely the anomaly but it sounds like kind of given your experience seeing so many deals prior to doing your own deal you kind of have that map in mind but let's let's talk about the fundraise and what that experience was like you and kind of give the founders uh that are listening a little bit of the timeline in terms of what year you know this company has founded when you guys exited just so people can kind of get an idea of what that experience was like and Tim ultimately how much you you raised for the company and over what what time period yeah sure so fundraising was 100% on me I I for of that weight uh my co-founder was a tech seant an incredible operator so he was the one that was really kind of leading the charge on that piece of the puzzle and it was in coming on me to say all right here's the vision go raise the money so no pressure I had to go out there and knock it down so this would have been late 2016 when we founded the company it was a time when cannabis was still largely taboo and so I basically said I got this I'll go raise money I have tons of PE friends and and Venture Capital friends and I'll just make a few phone calls and naive as I was as a first-time founder walk out every door slams in my face nobody's touching cannabis uh in 2016 2017 so I had to to reset and I think tell me if this story doesn't sound familiar I had to start and just aggregate $ 25 $50,000 checks anything we could get to keep the engine on and keep the momentum so it was really just grabbing Small Checks as fast as possible aggregating those and then once we got a little momentum with those I was able to get deeply into conversations with an emerging fund manager that was launching a fund in the Cannabis space so they got it there obviously wasn't an issue with it being in the Cannabis space and I courted them over a period of time and and I think this is something that a lot of firsttime Founders don't think about it's like you don't just make a phone call and then they said why are the might right like I courted them for months they got to know me personally I got two trillion diligence questions including like all kinds of random stuff we went into the wild to see our product and we're having dinner and talking about how it fits and things like that you really go through this like courting and and before you get married you have to actually feel confident of that and then once we were able to get that group to join first significant check all of a sudden we're feeling good and it would never happened right if we didn't get those first couple checks we wouldn't have the product in the wild and none of this would have taken place so it's all kind of the part of the process but from there it became race on we raised uh another large even larger fund uh that was focused on cannabis jumped in and joined that allowed us to close a little over a $5 million round and then when it came to our next round it was all of like eight seconds we raised our hand said hey we need six and a half to get from point A to point B uh it was largely internally funded with kind of the the funds that were in and then we grabbed one extra cannabis specific VC fund that was a way to a get another strategic in the loop but also uh as is super important with a lot of these funds validate the fund rounds by having an outsider join um and the the beauty of it and what I always like to joke is like had we not taken that group it may have presented problem because that last group that we let in actually gave us a nice Bridge round while we were in the throws of working through the exit that kind of bolstered the balance sheet and allowed us to not lose any of our leverage so they came in as advertised strategic at the Finish Line to really help us and so first round little over uh five million second was a little over six and a half so across the two rounds approximately $12 million and what was about a two and a half year a fiveyear total exit Horizon I I'm just so glad I asked that question because you hit on the like and you're you're coming from the perspective like you have ctions this will be easy and this is what I found her oh it was so it was so brutal just doors in the face H especially in cannabis Tech you know it's and every everyone's got their you know industry they go into and they're you know talking to the wrong people essentially but you found you found your crowd you found your people you built those relationships also it's like all right perfect you have alignment they invest in you you know cannabis check size all that kind of stuff but like they didn't just come in and write a check like took months and months of diligence and yeah we're talking probably six that first that first one was probably six months of cording them so it's took significant amount of time to get them in while while you're grinding you know uh to go out and build business while probably chasing and accumulating those smaller checks with that person knowing that they could probably solve your problem but they're they're still like on the sideline like the whole ter yeah uh it's absolutely infuriating and I think part of is like they want to see you trial by fire right like prove to me that you can aggregate a couple checks prove to me that you can go from the pilot to something that has some some momentum like they're just sitting there watching like yep you're doing it all right check the next box check the next box here okay here's the money yeah and especially in these early days like there's there's nothing else for them to go off you don't have historical financials of up and to the right you know for the last four years like it's it's hard to underwrite a deal so they're ultimately making a bet on you and and trusting you and the easiest way for them to do that is to build a relationship over a period of time and and also if you don't have five other term sheets being thrown at you you know this is the game you got to play and it's it's a kind of a write a passage as a Founder that every founder hates going through but It ultimately makes you stronger faster better and drive to successful outcomes so appreciate you sharing as a first-time founder you just you have to know that's coming right like second third time Founders you probably have traction maybe a little easier first time you're taking the Hard Road it's it's steeper it's bumpier like you just got to grind it out and and get through it because it's always a little more difficult at the first time unless you have have some outside help well said and and again like a lot of people think oh like I didn't grow up with a network and everyone has it so easy when they have a network even if you have a network it's not easy you know it depends on what you're building context your stage where you're at somebody in Texas backwards falling into building a kantech company you can do it from scratch trust me I had no ties into that space no insight and still was able to pull it off so if you if you kind of work hard enough at it I think anybody can make it happen makes sense so let's talk about the acquisition so you you built up enlightened you get it to a point you raise some money you're grinding away get to you know the table with weed maps and you get that kind of Saving Grace Bridge round let's talk about kind of what that experience was like and how you manage it as as an m&a lawyer who had know how those deals get done how did you approach it yes so the experience was it was really incredible honestly it was it was my Mona Lisa I I had this ability to say this is a true test of my career and the skills that I've accumulated to date the ones that I've been touting to get the investors to back us like time to actually put it out there and prove it so I was the banker and then I fully ran an informal auction for it I was our founder and executive having to go to all the key strategic meetings with the target kind of leadership and and I was our in-house Council actually running the transaction behind the scenes and so at the time here though it was my company so it made it all the more special and made me work all the arbor at it um for the listeners though to get into a bit more granular and strategic level on it like we only were looking at strategic acquirers our company purposely was built it was like the perfect Tucket in uh it would allow the acquir to get kind of broader access to a bigger marketing play we had non-cannabis advertisers like door Dash and FX yes of course that's who we had in the Cannabis space I guess um and and then let these guys get kind of further embedded into the physical retailers and so uh with strategic exits it really becomes more about fit integration and the specifics of of your company and so you're painting this Narrative of life as part part of the acquire and using kind of products and financials to to Really back up that narrative but it's a little different uh as you know like a financial buyer that's just digging into kpi after kpi here it's like how do you fit with the acquiring that's really what matters the most and that was our Focus yeah the the Strategic acquisition is ultimately the ideal outcome because there's you know in most cases not always but like a higher markup on the opportunity because there's strategic value ads you know we coming together so it's not just mark up on your revenue or eida but when it came to like actually architecting that narrative because really that's what it comes down to is convincing senior leadership at the potential acquir of that postacquisition life and how that will drive their outcomes um and what that will ultimately look like and how you know your team will come in or your Tech will come in and solve whatever problems or objectives they're looking for how did you gain insight to to you know the prot you know the perspective buyers that you were bringing to the table so obviously we maps with the one that want the deal but obviously there's some others um how did you go about identifying what narrative to build and to to pitch yes so from from our perspective we got to a point and I said hey I promised a five-year exit I back in it's seven months prior to that and it's like okay if we're going to deliver seven months from now I need to start that process now which I think a lot of people mess up on and don't think about it far enough out right so we're about s months out and I go first and I build a list of like who in cannabis or outside of cannabis would be even interested in buying us and buying us like you said at that premium due to the kind of synergies and where I landed was most of the targets were already partners of ours whether that was somebody that we were integrated with whether that was somebody that was white labeling a piece of our puzzle like I went and said hey like a lot of people that are already working with us that know us that know the team well are probably best suited to be the buyers and so what would happen is organically the next time we would have like a catch up with that partner like by the way like now that everybody else has dropped on the call would you be interested in buying us and all of a sudden you start formulating this list of like all right they they said maybe they said yes and once I had kind of that short list of maybe seven or eight that that raised their hand and said yeah this is interesting I went found two that were outside of cannabis just to make sure from the board's perspective we had opportunities both in and out and could compare them and then basically pitted them against each other and said we have a lot of interest we plan on exiting in the calendar year like start making offers and people started pulling together term sheets and we started comparing them and kind of playing them off each other and and had a number of actual like term sheets when it came uh came down to it and narrowed it to two and from that Point said hey this is this is the one and it's funny because a lot of people just look at like one factor our board was pretty sophisticated and you kind of have to look at the the opportunity and the deal holistically including what you may gain on the other side of of the transaction and so that was where weed maps ended up being a great fit for us you're you're a deal architect that's that's all I'm hearing is like how you like you know strategically think about the end in mind and had executed you know of course we're maybe glossing over maybe some of the ups and downs and the experience but you know you drove it to an outcome and that was ultimately led by by you and your vision and what you were taking the the company to so it's impressive just leveraging that lawyer background in the m&a space and being able to truly drive that outcome is a very rare skill to which most Founders they they hire people like you as their lawyer to do this for them or their Banker or you know this type of stuff to get that inside and experience because it it shows that that experience pays off uh substantially so totally and and the funny thing because you touched on it is we actually at the time I would never have admitted this right but we had different narratives for all the potential acquirers because our fit had different value different ones so it wasn't like we created a cookie cutter Sim and and sent it out it was like every single call I was explaining stuff in a completely different way to the one I was going to have two hours later with a different potential acquir because you really have to highlight what your value is on the other side of a deal to that group and I thought that was something that we did a really good job of was like really custom bespoke narratives to each of the target acquirers to help prop up our value in their mind did you sleep at all during that time uh no and my wife will hold it against me for possibly forever she she said you disappeared for about uh five months there yep that's uh that's about what it took yep now had a similar experience when we we sold liquid Sky to to Walmart it was just an absolute NeverEnding Relentless grind of one maintaining the house of car making sure nothing falls apart in the organization so that you don't lose leverage and that you have options but then creating a narrative for the potential buyers at the table that were completely bespoke like almost no overlap in terms of right what we're gonna end up doing like underlying technology yeah still there but you know as far as what comes of it under each you know choir it was uh very different narrative and it's you know my my advice to the founders listening here is if it sounds like it's going to suck to do it it's probably the right thing to do if it sounds like it's gonna be absolute nightmare to manage and to do it the right way that's you you might be on the right track uh like like and the funny thing is I I somwhat glossed over it but you touched on it is like Tada you have a business that you're running at the same time that you're running this process right and if if the business gets shaky if it doesn't stay on that rocket ship J curve trajectory all of a sudden you you may lose the deal so like not only do you have to be perfect in the the auction or the exit process but you have to really be on your aame and running the business because it has to stay on that same trajectory it's like oh man talk about pressure and you can't lie about anything you can't fake your numbers you can't you can't tell something that isn't true because like you're going to sign all these liability waiver yeah not W uh not so much waivers but um you probably know yeah your reps and warranties right they're GNA come back yeah and you could you could have everything called backed if something you said wasn't real or something you provided was you know not to what they thought it was going to be and so there's there's still a period of like Yay you got the check deal closed but you know there there's still ways for like clawbacks and um escros and things of that sort that you you you have to manage it all this is it's not something that just some magical fairy comes and says hey I want to give you $50 million for your business and you say yes okay here's your money bye it's a It's a Grind for sure and the thing that I always tell people is like in most cases you're going to have to you're not going to just have a clean break you're going to be a part of whoever acquires you right and what I always tell people is like do you really want to fudge or make something up or embellish something when 3 weeks from now you're going to be sitting in room with these people and have to to say oh yeah my bad like it's just not a great way to start off your relationship on the other side of a transaction it's not worth it ever not at all uh I think that's incredibly well said so all right you sell the company you're now weed maps but you you check that box you're you're officially a post exited founder what's going through your head and you know where where does that take you to where you are now yeah so I it it's interesting because when you're a Founder for at least most of the founders I know it gets tricky to go back right you're in control you're the founder and then all of a sudden you're not but that's the case with everybody and and funny enough in a group that you and I are both in this is like half of the threads are about how to deal with what happens after you sell and you lose some of that control to the buyer and things like that we all go through it but from my perspective weed maps was by far the biggest company operationally that I had been at and so I was just trying to soak it in I had a one-year run there that was kind of the the deal and so I was just trying to spend that one year focusing on soaking as much as I could in from like operational expertise and things that I wanted to take away from it and it was great like I I really learned a lot and I had value in that year and ultimately jumped uh and did another year as a public company uh seite executive just to kind of round out that piece of of what I viewed as my journey and puzzle and kind of gain that skill in full um but at the end of of that two-year Sprint which was here at the start of this year I sat down and said that was great I had this journey but like I really wanted to get back to my superpower and what I viewed as my superpowers is the ability to negotiate high stakes uh negotiations and handle complex uh what I'll call complex issues that companies are dealing with and a lot of times that's in the guise of what either fundraising or m&a and and I wanted to get back to that and the way that I could really unlock my super bar was was going back and opening up uh a law firm which I grabbed a couple really talented attorneys that had worked with me uh along the way and at the start of the Year launched transition Point law um did so kind of with the entrepreneur spirit and really entrepreneurial focused in mind and you will appreciate this having been an exited founder as well and I'm sure you probably use this but I sit down with a prospective client and I look him in the eye and say I have been you I have been in your shoes and because I have been in your shoes I promise you I will understand what you're going through and probably help you through it in a much better way than most and all of a sudden you start getting these nods and it's like okay like this guy gets me and it creates like this really harmonious relationship that probably wouldn't exist if I hadn't have jumped out and been an operator and actually experience what that feels like because it's a lot like you're selling your baby there's a ton of stress and you're going through lot and it's a it's a unique situation that I now can provide kind of uh my own my own lens into 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 35 500 VCS 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. BC you can upgrade to premium to download this list exported to any tool you wish and get their contact information and access the data on their portfolio companies to map out a path to warm intros and build your founder Network sign up for free at thunder. VC now let's get back to the show yeah I I completely agree because obviously I'm a similar about of exiting a company and then I jumped around in terms of executive roles and Leadership roles and visor investor all these kind of different flavors of different experiences and then ultimately driving back down to what I felt my superpower was which was raising the capital putting together the narrative the strategy and you know ultimately now it's we're hell Founders and it's the we're the Investment Bank for Founders by Founders uh with that you know kind of similar mindset and you know part of the reason why I think you and I hit it off so well and you wanted to bring on the podcast in terms I was just gonna say that like I think our ethos are totally aligned exactly um and you know I just think there's such a unique perspective that as as again being in their you know founder shoes and being able to relate and still you know technically we're still Founders you know still building stuff you know we're not we're not resting our Loyals you know we're not an employee somewhere and you know being able to to dive into the weeds and and get it right off the GetGo I think that's probably one of my favorite things when founders should be like oh oh I don't have to explain from like point A to point Z in every great detail like you just say A and Z and I can fill the gaps like it's just it's a rewarding experience to be able to have that with with other Founders that are and and honestly probably the most difficult part of their you know business of just navigating a very difficult challenge whether it be fundraising legal transactions whatever it is there's always an incredible you know what appears to be an unsurmountable challenge as a Founder that uh you go through probably too often once you get over one you're like all right yeah we did it and then you can't even like celebrate that because you're you're at it again um you dealing with a whole new definitely broken in that you you don't F celebrate you just get to the next one but I think you said something that's interesting and I yeah I I agree it's it's in the DNA but also I think that there's this language that Founders have that you can't really fully appreciate and understand unless you've been a founder and when people talk all of a sudden it resonates with different points of your career and you just get it right and so we all have kind of this unique language that we're able to speak and it's in part why you and I have hit it off so well it's because we're we're serving Founders in in new capacities but we kind of speak that language having been them ourselves so let's talk about about how you know you're servicing Founders now and kind of what you're doing at your law firm and you know some of the examples of of work that you that you're working on yeah happy to jump in I think it marries really nicely with a lot of stuff that uh that you guys are doing at Thunder and so one capacity is serving as leg legal counsil on outside funding rounds um another one is really helping people to prepare to execute m&a whether that's hey I just raised a series A or series B and we're about to get aggressive in our corporate development or hey we're ready to have an exit ourself and really helping people through that process uh a third one would be we have a fractional GC model for Venture back companies pretty limited number that we work with but it's a way to keep me in the fold on day-to-day matters and really let me apply my experience as a tech founder as that in-house capacity and the last one and I think this one's probably my favorite honestly is just being being available and supporting the broader founder Community it's something I'm super passionate about I had people help me along the way in kind of the the Pay It Forward which I know is something that you and I kind of really hit it off on yeah no that's great that's great to hear and I guess what are some of the common you know pitfalls that you're seeing Founders make whether it be clients or some of the Investments that you made and that's something we haven't talked about is also you know the the Investments uh side of what you do um so let's actually maybe go let's start there and then we'll go to kind of the advice side um let's talk about kind of what you're what you're doing as an investor and you know is it a fund structure is it just Angel Investments how how are you going out and identifying companies to to invest in personally yeah I have uh two vehicles one is a holding company McKenzie group that invests into the legal space which makes sense because that's the ecosystem that I live in now uh so whether it's the pick and Sh shovel pieces or or funds themselves we have holding company that does direct investments into those and uh McKenzie Ventures which I mentioned at the outset was kind of the boutique uh BC fund uh is still kicking here in year year nine and so I make a number of Investments through that although at this point more have gone indirect through other funds or uh more strategic like micro PE plays uh on that side than the traditional V VC I woke up one day and said good Lord my port my personal portfolio is overweight Venture I and Seed stuff I got to cool it um but that's kind of the the two pieces there and now I'll tell you a story on one because you you mentioned there what's what's one of the things to to kind of watch out for and I think one thing that happens a lot and Venture and I'm curious if you've seen this as well is somebody will come in and say I'm strategic because I'm strategic I want a discount or I want some warrants or I want something for that and I feel like a lot of times particularly with first-time Founders they'll just say sure you say you're strategic great I I trust you and you are which I would caution Founders to be so open to just accepting that as as true and I say that because I just am in the process of making an investment and said hey I did it I said hey I'm strategic and because of that I want X Y and Z uh and this founder did it exactly right he said cool give me multiple references where you actually did this I'll call them and if they are if you are who you say you are then great I will honor and give you that value strategic and I I just started applauding him on the spot I was like good for you like nobody actually backs that up and validates it and this is why I love you as a Founder because you actually say prove it if you say you're strategic so that's one thing I think Founders should really think about and be cautious about because it happens a lot and you probably see it as well dealing with so many DCS you know I'm so glad you actually bring this up uh because one the validation aspect you know like who is this person on the other side cuz you know the the bad story of my experience on this front is with liquid scy we had pulled in way too many advisors way too early all promising the world to which naive Founders we just expect them to show up and do stuff they don't do anything because we're not managing them and they all got fat stacks of equity that we couldn't claw back we couldn't do anything against they were just Equity grants effectively and you know it's one thing to kind of do reference checks which of course people in our Network were saying like they're good you should trust them but you know we didn't we were so young and naive we didn't know how to manage them so that's the other aspect to it is if you are going to give up a little bit of something extra to an adviser like how are you going to manage them what's the actual plan and what's the what how do you claw it back if they don't perform yeah keep keep that stick right make sure you hold something to make sure they stay in active yeah and it could be you know it's hard to kind of like you know sometimes people just want to name you know like oh this guy invested in us or this guy as an adviser and like cool but when I see that as an in you know as a investor you know put my VC hat on I'm like if I don't if that person's not notable in the industry like a tier one name it doesn't really have much value name dropping them so you just kind of gave up a little bit of something for not much value if you were only doing the the name drop but if they come in and actually get their hands dirty you want to make sure they're rewarded and compensated appropriately but also in the event that maybe you outgrow them maybe you know they did their part and time has gone on having some kind of vesting schedule around it uh what is it called the fin uh founder Institute has the fast agreement uh as an option for for Founders to kind of have like an off you know a template and also um I'll have to see if I have to cut this or not but I invested in a a company that is focusing on solving this problem verbatim in terms of having those uh checkboxes of like did you do this yes or no okay yes you get your Equity Grant no you don't get your Equity Grant uh and to create transparency and you know kind of a management experience across that overall I think is something that uh you know obviously invest in this company because I see it's such a huge problem because it's either leaves such a bad taste in Founder's mouth down the road um you know is usually you know pretty negative outcome uh because they just didn't manage that relationship as best they could so it's it's good that you brought that up I think that's a super valuable point that a lot of Founders just don't really think far enough ahead and there's certain tools out there that you can use to to mitigate those problems and I think you said something that that is so true and that's like you need different advisors at different points in the journey like some you need early stage product and flushing out some you need that one big introduction into your client based like some you need as you scale from operational perspective some helping with exits like you need different people at different stages so if you pay somebody and then they just get to hang around as an adviser for the life of of the company it doesn't always sometimes they're just in the way right and it's like I have eight people in this advisor call and it's like eight of you are here but I need three yeah so and that's the thing it's just you you set up a structure that allows the relationship to do its part but also have a cut off or have you know just think about what that relationship could ultimately lead to and and put check-ins you know don't just put it as like a forever Grant like oh here's your Equity Grant or here's your option Grant and it you know you're gonna get whatever one% or half a percent or whatever and have no actual written agreement or criteria that was a mistake that I made um we gave away way too much with no no strings to pull back or hold them accountable so it was you know everyone's fine money and you know no one's upset but it's just like kind of wish kind of wish we handled that a little bit differently um totally so you know going on that topic what are some other kind of areas in your experience especially on the you know the legal side that you see that you know uh is a common problem with Founders or or things that Founders should be aware of yeah I'll give you two one is and this is something every time I talk to somebody I preach swallow your pride and you have to get away from for measuring success in a funding round solely by your pre-money valuation like there's so many more important nuances that matter I think as you scale think giving up a little more dilution early and it one of those being like liquidation preference great the round was at some big valuation but if you gave up a massive liquidation preference like you may end up not making anything right and so like thinking about it more holistically than just the valuation number and I I'll tell you and and and this is one that I don't often and speak to but we uh Founders at Enlighten actually gave up pretty significant equity in the early uh round of fundraising but you really need to double down and focus on any place where you see control whether that's drag along rights veto Powers you give up or like even something more simple like you're losing control of your time because you have like really honorous or or strenuous reporting requirements each month take a ton of your time like you just need to think about like anywhere where you're seating control because I think that's something that Founders often gloss over in a term sheet but ends up like two years later they're hitting themselves for yeah and you know if you don't have that proper legal council that rep and also I'm curiously get your opinion especially at the later stage like pre you know not so much seed maybe but you know series a series B I often recommend Founders you have your your lawyer for the company but then you know to kind of represent the company but as a Founder you have now maybe a potential substantial amount of paper wealth you have certain control certain you know uh shareholder rights it might be good to have a lawyer look over your agreement for you and be solely responsible to you um as opposed to to the company because there there might be some points that you know don't necessarily align equally when it comes to the company and you know you as a founder and having personal representation uh to kind of look after you and your potential outcomes is something that I often will advise as founder especially at the later stage when there is that you know this company's not going under there's it's risk substantially and there is wealth generation that will come out of it in most most cases uh it's something that often I try to kind of poke Founders to like don't forget about yourself it's not wrong it's not wrong to do this you definitely you don't want to be bitter and angry and you know when you could have solved that problem in the early days of of that round um so yeah curious it's okay to I think it's a lot of times it's okay to put that money on the company too just like a lot lot of times an incoming investor will say hey x amount of my legal bill is being covered by the company right like if a Founder is looking at it in their own capacity like it's only fair that that's CED by the company as well so I think a lot of Founders uh kind of will be hesitant there it's like I don't want to pay this but it's like yeah it may not be a personal expense You could argue that it's an expense of the company but especially as more secondaries and more kind of uh opportunities to take chips off the table in these later rounds which has become extremely popular over the last handful of years maybe a little less so in the last 18 months than it was before but I think that's also a place it's like if you're taking any chips off the table you need somebody looking out for you because those are your chips not the company's chips yeah so I just think it's something that you know it's it's worthwhile investment whether you pay for a personally have The Company You Know cover the expenses which again you know you are the leader you are a sizable part of the company you are the company a lot of ways it's important to have that uh that look uh and that protection and I'll I'll tell you this I'm a lawyer of practice for many years sometimes you're too close to it I actually got my own attorney for my own deal like I was focused on the company stuff I said I need somebody that that's not so in the weeds that can look out for me behind me because I'm just running and gunning and I had uh a friend who funny enough now is is part of transition Point law actually kind of look over my shoulder for me personally in my capacity so even even in my case where I am an attorney I still did that and use somebody to kind of just look out for my interest personally you know you mentioned that in the weeds part like I think one of the reasons why I'm able to have such a high perceived value for a lot of Founders and you know similar to you as well it's just like coming from the outside and being able to not have a horse in any race and just be able to kind of see the facts as they are and being able to provide that Clarity to Founders I think is something that um it's so immensely valuable and often I'll meet with Founders for 20 30 minutes I'll kind of re you know read between the lines cut them off at some point and just be like hey this is what I see you know you these are the issues that you're running up against and just quickly get to that that conclusion a lot of Founders they'll just take that and like it just pops you know a new light bulb pops up and they just start running in that direction as fast as possible uh it's it's rewarding to see it but it's also just a reminder for Founders to kind of make sure you're talking to people around you that don't have a horse in the race and what I mean by that is like they don't have skin of the game they don't have you know a certain expectation of you or the board like your board is supposed to be there for you but they all have maybe alterior motives maybe they want you to sell early maybe they want you to take a deal with their buddy and not necessarily the best deal for the company and like these types of things can happen so it's always good you have a peer network of you know F entrepreneurs in a similar stage or like the white poos and EOS and you know different groups out there that exist from forums or um you know close maybe some friends that you can you know that get it you know that get the founder experience or have been a Founder just to have these kind of conversations because it just it can help open up your eyes as a Founder to certain variables that you just can't do it when you're in the business every single day and you know way too much of how things were uh and how things are and not so much how they could be uh when you kind of get that outside perspective so I think that's a a good tip for for Founders to take into consideration it's super funny that you say that because one of the things that's becoming increasingly popular for for our firm is and this is in particular with technology first or like development first Founders is we will come in as what I call like a second so you're the first you want to be the face of the company it's your company you're going to be negotiating this key thing but we will be there behind you watching paying attention as like a independent third party so that when you come to regroup it's like hey you missed this have you thought about this what about that and it's like oh my gosh I didn't think of any of those things it's like yeah because you're in the throws of negotiating but to your point you're also so close to all of this that sometimes it's hard and it's been a really interesting I I wasn't sure if it would be something that would catch on as as a service but it's been one of those things that's like immensely valuable and like not it's like yeah it's we only needed you for 10 hours as part of this like key negotiation to be kind of our second but it ends up being something that changes the trajectory of the company right and so it's super interesting and admittedly like even when I was a Founder sometimes you're just too close to stuff yeah I completely agree and you know and and something that uh you know for for Shameless plug purposes so apologize to the audience but we got we got to knock it out here um you know Kobe and I are working on a collab for optimizing you know data room and just legal uh stuff about your Capital raise and going to Market whether it's for m&a or uh you know raising Capital there's going to be some other goodies that we're going to come out with but the the link should be down below in the description but uh you KOB and I have you know collaborated on a on a document that helps Founders kind of navigate some of the common pitfalls for you know de developing out your data room what to include how to how to manage it what's the difference between a teaser data room versus a comprehens of data room and things of that sort so I just want to you know do a Shameless plug there uh for for us and for Founders that are you know potentially exploring setting up their data room how to do it and and what they should take into consideration so they don't make common mistakes or get buried with you know one-off questions or look unprofessional or unpolished to to investors so you know be sure to check out the show notes uh down below and there'll be a link for for you guys to to download that for free so sorry I just kind of gotta throw that out there before we before we wrap up here Colby um most definitely the cool thing is like we both come out from such a different angle right like it's pretty comprehensive I have my my path that I've gone that's more legal driven you have your path that's more on the the Capital raising and making sure this from Investment Bank looks like it should and so I think I think it's pretty holistic so I will I will pile on that Shameless plug my friend shaneless plug shaneless plug um download now download now uh so it's been an absolutely blessed uh having this chat with you you know just feels like a just a regular conversation which has been a lot of fun um where where can people learn more about you and trans transition Point law uh where where should our followers and listeners go to to connect with you yeah you bet I I try to stay relatively active on LinkedIn so feel free to reach out and and connect with me there and then um we do a good job of putting up content and and things on transition point law.com which is the uh the firm's website so two easy spots to to keep up with kind of the content we're putting out and me personally awesome well make sure to include those in the show notes for everyone to to be able to reach out and connect with you and uh you just it's been great having you on the show it's been great having this chat and yeah look forward to to getting this episode out to our audience most definitely appreciate the time awesome thanks for being uh thanks for being here with us 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 the best fit for you using raai 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 do in financing again you can find these free tools at thunder. BC 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 are 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