Transcript 0:00 When you left investment banking, why did you decide to go into startups in the first place? I love startups. Startups are kind of glamorous, kind of sexy. 0:07 There's that creation of a new company with the potential lottery ticket element to it is, even makes it more exciting. Yeah, no better chance to get a grand slam, right? Totally, right? 0:17 You know how these economics work. I mean, most venture returns are driven only by a- Hmm... small number of portfolio companies. That's kind of how the model works. 0:24 But when you catch a, a rising star, right, it's pretty exciting. Welcome to the Purpose Driven Capital podcast, where we help you align your money with your mission and maximize your impact. 0:35 Here's your host, Matt Johns. If you're considering investing in startups, you've come to the right place. The wingman of startup CEOs, Nathan Beckord, is more than an expert. 0:46 He's one of the foremost leaders in the startup world. In this interview, he shares insights on how the startup ecosystem works, what to look for, and how to invest. 0:56 Nathan has made a huge impact on many startups as the founder of Foundersuite.com, one of the first platforms to help startup founders connect with investors. 1:06 He's also widely recognized as the host of the popular How I Built It podcast, and a regular host of various startup networking events around the country. Nathan acquired his experience honestly. 1:17 He started in investment banking before unleashing his inner entrepreneur. His most recent venture is FundingStack.com, a platform to help the broader investment world raise capital. 1:28 Nathan has a lot of wisdom to give, and a lot of passion behind it. Welcome to my conversation with Nathan Beckord. Pickleball, really addicted to pickleball, like half the country is at the moment. 1:40 Sailing, motorcycles, family. Maybe not in that exact order. Put family up top- [laughs]... just to make me look like a good dad. But, yeah. [laughs] Yeah. It's awesome. 1:49 So okay, so you're a sailor, motorcycler, and now an avid pickleballer, a founder, and doing all kinds of incredible stuff here, it really in the entrepreneurial space. 1:58 But among founders and among those in the startup world, you've really become a powerhouse. And I, I wanna hear the story, 'cause I love the story, but I wanna hear it again. 2:06 And if you can tell it to me from, like, maybe an investor's perspective of what does that look like from the development of Foundersuite? Yeah, I mean, I'll tell you the story of how we got here, right? 2:15 How we got to Foundersuite and then FundingStack, which is our newest platform. But- Yes... so I'll tell you the story of kind of how we got here. 2:23 I mean, the, the short version of a somewhat long story is I went to school out here in California, grew up in Colorado, came out to Santa Clara University 'cause I wanted to be in Silicon Valley and see what was going on out here. 2:36 Graduated and wanted to be an investment banker, 'cause that was in the late '90s when things were really kind of popping in technology. 2:44 And, and so started working in investment banking, helping companies go public, and then went to Texas for business school and did some investment banking after that. 2:54 Worked at JP Morgan in their New York office, doing later stage fundraising for Series B, Series C companies, private placements, things like that. And it was really exciting, right? It's like I'm a capitalist. 3:06 I, I love kind of how capital flows to worthy companies, right, both in public and private markets, right? It's a pretty efficient market. I mean, it's not perfect, and so it was fun being part of that. 3:17 But I didn't really love investment banking. I mean, it's grueling hours, especially when you're at the lower levels, you know? I just remember, like, 3:25 being at home on a Sunday morning, like, chilling and getting the call, "You gotta come into the office. We got a deal that needs to be done by Monday." You know, and like, okay, that's gonna be an all-nighter. 3:35 You know, it was just like your life is, you're on a s- a s- a leash kind of the whole time. So anyway, didn't love investment banking and always wanted to be an entrepreneur. 3:44 But what I learned how to do is raise capital, and so came back out to California and started working with early stage startups, seed, Series A companies, and we'd package them up. 3:57 You know, something you learn doing investment banking, how to build a pitch deck, how to build financial models, things like that. So we'd package up these companies and then build investor lists for them, right? 4:08 Here are some VCs to go after, and then sometimes we'd actually go out and attend the meetings down on Sand Hill Road with these companies and coach them, you know, along the process. 4:19 And then at one point I'm like, you know what? I really wanna be an entrepreneur. Why don't I build some software for doing this process, right? 4:27 Like, 'cause people are using spreadsheets and things like that to, like, track an investor pipeline. I'm like, why isn't this software? 4:34 You know, there's, there's 100 different CRMs out there for managing a sales pipeline, and fundraising is really just another sales process. Why not build a, a fundraising dedicated CRM? 4:46 So long story short, that's what led to launching Foundersuite, and this is 2016, so we're, been in the market for a while. 4:54 And we launched with an investor CRM and came out and added a bunch more products to it, investor database, pitch deck hosting, data room. We've just been kind of expanding the, the tool set. 5:06 And then just to connect the dots to kind of the present, we've had 87,000 startups use it, 17 billion raised by those startups, but we started to get some VCs and some advisors, funding advisors using Foundersuite. 5:19 And like, we're not really building this for you. They're like, "I, I, you know, I've been using this with one of my portfolio companies. I like it, but I've got a couple other portfolio companies. 5:28 How do I work with those guys?" 5:30 And so a little light bulb went off like, oh, let's build a version for VCs, investment bankers, and that's what led to FundingStack, which is only a few months in, in the market, so pretty new product. 5:40 But that's kind of the, the 20-year journey. It's awesome. It's an awesome journey, and you've created something that's really helped the industry in a totally unique way. 5:49 And, and really spurred momentum, I think, in a way that otherwise would not have existed. But when you left investment banking, why did you decide to go into startups in the first place? 5:57 You, you've dealt with all kinds of businesses. Why startups? I love startups. Startups are kind of glamorous, kind of sexy. 6:04 Uh, there's that creation- You know, it's creation of anything is, is exciting, but, you know, the creation of a new company with the potential lottery ticket element to it is even makes it more exciting, right? 6:17 Startups are just fun. They're exciting, they're dynamic, you know. I mean, I could go on about why startups are awful, a terrible business. They go out of business. 6:25 They f- most fail for a variety of reasons, internal, external, right? I mean, startups are very hard to build a business around. Mm-hmm. They're cheap, they're poor. But startups are just exciting. It's fun, right? 6:36 It's like if you want a, a thrill ride as a career [laughs] startups are it, right? You want something a little more stable, secure, point you into a lot of, lot of other directions, right? So. Yeah. 6:48 No better chance to get a grand slam, right? It's hard to get a lot of singles, any single, but getting the grand slam is always the most exciting, uh, opportunity with them. Totally, right? 6:56 You know how these economics work. I mean, most venture returns are driven only by a handful of, you know- Mm-hmm... a small number of portfolio companies. That's kind of how the model works. 7:05 But when you catch a, a rising star, right, it's pretty exciting. We've had a few. I mean, we haven't... 7:11 It wasn't, like, early on Facebook or Google, but we've been involved in a few pretty early that have gone on, do some good things. So that's always fun. It's exciting. 7:19 So when you're thinking about startups, you, you obviously hit a pain point. You knew that there was a pain point with fundraising and getting that initial capital, which i- is a huge pain point for any startup anyway. 7:28 When you're looking at that, though, as you're assessing that need, what was it about that relationship between investors and startup founders that you felt you could solve? Yeah, it's a good question. 7:37 So as I mentioned a minute ago, you know, raising capital is basically a sales process. It's very learnable by anyone, I believe. But most founders, you know, 99.9% of founders have never raised capital before, right? 7:53 They- Mm-hmm... it's new to them. So it's very learnable. It's very trainable, but it's not, like, innate to being a founder. 8:02 You're probably, if you're a startup founder, you're probably either a product developer, an engineer, a coder, or maybe you come from the business side and maybe you're a salesperson or, you know, marketing person. 8:14 Not many people come into the startup world having raised capital, right? They're not coming out of investment banking. Not many investment bankers go on to start startups. Mm-hmm. 8:23 But those are the ones that do know how to raise capital. Anyway, so the pain point is really founders do it wrong all the time. And so you, you launch the startup, you put your life savings into it. 8:34 You realize it's time to go raise some money for this. A lot of founders screw it up 'cause they don't know what they're doing. They haven't done it before. They haven't really been trained. 8:42 And so I guess the opportunity is to provide these tools that kind of provide the guardrails or guide rails, whatever you call it, to keep them on the right track, doing it the right way. 8:52 There are a lot of small nuances to raising capital that can trip people up. You know, we talk about fundraising being a numbers game. You've got to talk to a lot of investors. At the same time, you can't spam investors. 9:06 Each one has to be kind of a direct one-to-one relationship building exercise. 9:10 So it's like there are a few nuances and contradictory things that trip people up, and so we're really trying to just make it a little more efficient, more process-driven, you know, using tools to implement best practices in fundraising. 9:23 That's kind of the opportunity right there, help founders do a better job. Now, not every startup is fundable, of course. Mm-hmm. 9:28 A lot of startups still won't be able to raise money because they're just not really a fundable business. 9:31 But if you are a fundable business, we like to think we can make that process of raising capital way, way easier and more efficient for you. 9:39 And I'm imagining that it probably eliminates a lot of the risk from the investor standpoint, too, because you're guiding the startup founders on how to engage in that process. Yeah. It, I think so. 9:50 I like to think that if you have kind of gone through and, you know, done some of our best practices, you're going to be a better, better prepared to go talk to investors. You're not gonna waste their time. 10:03 You're gonna be a little more vetted, right? 'Cause hopefully you've got your pitch deck polished up. You've got your numbers, your metrics. 10:10 You've got, like when I, I do a Funding Hacks talk, and there's a lot to it, but one of the things is, you know, preparing a data room, getting all your diligence documents ready. 10:20 I mean, there's a lot of things you can do to really make the process easier- Mm-hmm... not only for the startup founder, but for the investor as well. Can you walk me through the process? 10:27 What is it like from that investor relation standpo- standpoint, what does that process look like going from we're ready to bring investors in to investors are signed and we're moving forward? 10:37 So, you know, again, continuing with this theme of fundraising as a sales process- Mm-hmm... which I talk a lot about, you know, step one in the sales process is building a target list of investors, right? 10:48 There are hundreds of thousands of investors out there. We have 150,000 in our database, angels, VCs, corporates, family offices. 10:56 But step one is identifying the 200 or so that are, like, a good fit for your business, right? The right industry, right stage, ri- right geographic location. 11:07 Ideally, ones that have a, a new fund or fresh capital to put to work. I mean, there's a lot of criteria what makes a, a good fit. Mm-hmm. But anyway, step one is always building that target list. 11:16 Step two is figuring out how to get in contact with them. And of course, the warm intro is always the best way, and there are multiple ways to get a warm intro. 11:27 You know, most founders don't come into the world having a huge Rolodex of investors. I mean, maybe if you went to Harvard Business School or something, you, you did come out of there with a large Rolodex. 11:39 But most founders don't, right? So they're, they're figuring out how to get the, the contact going. And then of course, getting momentum going for your deal, right? 11:49 One of the things I always tell founders is, like, investors can smell whether your deal has momentum or doesn't, or whether your deal's gotten stale, right, and does, you know, the opposite of momentum. 12:00 And so we talk about some different ways to get momentum going for a deal, getting investors kind of in a, a, a frenzy over your deal. 12:09 And then of course, closing the deal, getting through due diligence, preparing that data room I mentioned. Getting through that and then closing the deal on terms that are good for you. 12:19 That's kind of in a, in a high level view, the end-to-end process. You just mentioned the deal getting stale. What does that look like? 12:27 A- and, you know, investors can sense that pretty quickly, but what does that look like tangibly if you were to put it into words? It, it is one of these things, you sort of know it when you see it. 12:36 It's hard to describe, but you know it when you see it. But some criteria like, 12:41 the founder's been raising capital for, for quite a long time, maybe it's four, five, six months, and not really getting close to a term sheet with anyone, right? It could also mean the founder is just going slowly. 12:55 One of the things I, I tell founders, you have to pretty much push everything off your table and just go in and fundraise almost full time for a couple months, right? So, but founders are busy. 13:07 They've also got product- Mm-hmm... team, marketing. They're, they have a lot of stuff going on. 13:13 And sometimes I see founders come in and kind of part-time the fundraise, and so it just drags on and on, and there's never a catalyst for the investors. 'Cause investors will just watch and wait 13:26 if there's no catalyst to get them to take action, right? And so that's another factor. Either the fundraising has been going on too long or the founder's not really putting in a lot of time. 13:36 And, you know, definition of stale is lack of interest plus too much time. 13:41 And investors can smell like, oh, these guys have been raising, like, you know, John contacted me back in four months ago, five months ago, and we did a quick little intro call. 13:52 Now it's five months later and he's circling back up and he still doesn't have a lead or any term sheet. Like, this thing is clearly has no momentum behind it, right? That's- Mm-hmm... 14:04 another big definition of staleness, so. 14:07 Once you get past that and you, you realize that, okay, there, there is gonna be a deal to be made, investor wants to get in, what does that last piece of the process look like between negotiations? 14:17 What kinds of documents need to be signed? How does that all kind of fit in? Yeah, I mean, you know, first is obviously to get a term sheet or even better, multiple term sheets. 14:32 So I mean, if we think about it, right, you're talking to investors, you're pitching, you're probably coming back a few times, pitching progressively more people if it's at a venture fund, right? 14:41 Eventually it will be the entire partnership in the room that you're pitching. Maybe you started off with a, you know, just one person and kind of got up there. 14:50 And then it becomes, you know, term sheet negotiation of all the terms of the deal, and that, there's a lot of stuff there that we could get into. 14:56 But you're trying to optimize kind of for both valuation terms and probably most importantly, fit with the investor, right? Who really can help your business, 'cause not all investors are created equal. 15:07 And then, you know, you're choosing one good lead investor, someone who's gonna take the majority of the, the equity and put in the most money on the deal. 15:16 And then it's always nice to fill out that round if you're gonna have more than one investor with maybe two or three other investors that could add value. 15:25 Or like in our case, in our seed round, we had one seed venture fund lead the deal, and then we had a bunch of angel operators. 15:33 O- one of our angel investors was a early, I don't know if she was CFO or controller at Facebook, but people who have kind of been in the trenches, right? 15:43 So trying to put together that ideal cap table of firms and people who can help you grow it. And then it's, you know, signing the docs and wiring the money, basically. You know, that's kind of the boring part. 15:54 [laughs] The more fun part is, like, hustling and finding the, the right people, putting together this dream team of investors around your startup. 16:02 But you just alluded to something really important, that dream team, because angel investors, one, I think one of the neatest things about startups is there's a real relationship between the founders themselves and the investors who get involved, and there's, uh, almost this dynamic that can exist if the founders are open to it, which I find that they are most of the time, to having their investors come and, and sort of have a hand in continuing that building process. 16:24 What are your thoughts on that? Yeah, I think, I mean, like, I'll use ours as an example. I love our angel investors. They're not super active. They're not out there hustling for Founder Suite or FundingStack every day. 16:37 But if I need to call them up, I'm stuck on a thorny issue, I can do so. It's great. It's great to have this sort of board of advisors. 16:46 And frankly, you can kind of put your angel investors to work as much or as little as you want, and of course, as they're willing to do. I know some startups that are really active. 16:56 They really lean on their investors to open up, you know, doors, find hiring candidates, things like that. Others are more passive. 17:04 I'd say I'm a bit in the more of a passive category, where I need s- I need some help, you know, we send out our newsletter, our investor update. We have a product for that in our product. 17:13 If I send out an investor update and I usually have a little, like, how you can help section, if I need some advice on a pricing model, business model. 17:21 When we launched FundingStack, you know, I put it out there, "Hey, we're looking for intros to potential emerging manager VCs," things like that, that might be good beta customers. 17:32 You know, but I mean, angel investors are busy, too. They're humans. They're probably have five, 10, maybe more deals that they've invested in, so they're obviously not gonna be, like, a full-time contributor. 17:44 But I love having a good, a good team and yeah, it's wonderful. So on, on the other side, what should investors expect from the founders themselves throughout the process after investment? 17:55 I am constantly pounding the table, beating the drum about sending out a regular investor update, right? It's one of the easiest things you can do as a founder. 18:06 Well, let me, let me answer your question more directly and then I'll get back to my, my rant about investor updates. You know, you're an angel investor. You just put money into a startup. Maybe it's 25K, maybe it's 50K. 18:16 You wanna know what's going on. You wanna know what's happening with that business, and a huge complaint- Of angel investors is- Yes... like I've heard this phrase, where I don't hear from them 18:27 until they're, like, out of money, right? Or something like that. That's a common complaint of angel investors. I, I never hear from them. I have no visibility into what's going on until they're- Yes... 18:36 like almost out of money or, you know, are being sued or something like that, right? And so, you know, they wanna be kept in the loop. 18:43 They most do like to be helpful and, and active, whether it's just giving advice or, you know, opening doors, making connections. 18:51 But to do that, you've got to keep them in the loop, and that's why I love the Investor Updater, uh, Investor Update as a tool to do that, right? It... 18:58 I tell founders, block off half an hour on your calendar the third Friday of every month, right? Just have it as a regular kinda standing meeting for yourself. 19:09 And then go in and create a little investor update that just talking about, like, 19:13 what happened last month, the, the good, the bad, the ugly, where you need help, your metrics, so they kinda get a snapshot of how you're doing in terms of, like, your cash balance, your runway, you know, your revenue, your costs of customer acquisition, like other key metrics. 19:28 And then just spend 20 minutes writing this, send it out once a month so investors are kept in the loop. And then, you know, obviously you can take that even more extreme. 19:40 I know startups that will have a monthly dinner or quarterly dinner where they bring all their investors together, and that's all good, too, right? 19:46 But I think at, at a minimum, to answer your question a, a long, long way, at a minimum just keep them updated with a monthly update. I love that, and I love the idea of having the dinner or something like that, too. 19:57 Just to, to your point, for an investor it makes a lot of sense to come in and get to network with other people who are like-minded enough to invest in a similar startup. 20:04 So I think that's tremendous advice that you're offering to any startup founder. 20:08 Now, a- as I'm thinking ahead, I, I'm just wondering if you have any advice for investors, for people who are looking to get into startups, who wanna be an angel, who wanna join an angel gr- something like that. 20:17 What advice would you offer folks in that position right now? Yeah. It's, it's an interesting question. You know, you see angel investors, like here, I'm here in Silicon Valley. I'm in San Francisco. 20:29 And, you know, these companies go public, which creates a lot of wealthy people all of a sudden. And a lot of times- Mm-hmm... they will start in- investing in startups and things like that. 20:40 One little bit of advice I would say is once you decide to become an angel investor, maybe you just had a windfall or, you know, whatever, start a little slower than you would expect. 20:50 'Cause I've seen angels go in and they're just, like, writing 50K checks at a fast and furious pace, and then, you know, they, they need to, like, take a moment to digest all those deals, [laughs] right? 21:02 So just almost, like, kind of develop the discipline to be able to look at deals a little more gradual and, and just be patient with it, right? Like, don't rush into doing a lot of deals. And I, I think also, 21:17 you know, I see angel investors that will have or, or kind of develop a little bit of a thesis, kind of like a venture fund. Like- Mm-hmm... I'm an angel investor. I'm investing in longevity-focused startups. 21:28 I've got a buddy down, a pickleball friend, who's kind of investing in, like, mental wellness and longevity startups. 21:36 But it's great 'cause he creates a bit of a brand around that, and therefore, when I see a s- a startup on Founders Suite that's in that space, I'm like, "Oh, you know, hey, do you wanna take a look at this deal?" 21:48 Like, it's also becomes a magnet for deals of that type by kind of having a brand around that, right? Mm-hmm. 21:53 And then, of course, if you can double on that and be a really useful, helpful guy in that space, that's gonna get you even more deals. And so, you know, just take your time. 22:03 Build, build a bit of a brand, a bit of a focus, and have fun with it, too, 'cause it is pretty, pretty fun. [laughs] That's awesome. I love that. 22:11 Create your own, like, micro VC by having a thesis and developing a, I guess, a brand you said. There, there was something else you said. Develop a brand and be useful, right? If you've- And be useful. That's it... 22:22 not only are you branded as the guy, the guy who writes 50K checks into longevity startups, but you're also really helpful in recruiting in that space. Or whatever the helpful part is, you know. 22:36 Maybe it could be financial. You're also a really good guy that is good at reviewing financials and helping, you know, tune up the budgets and things like that, right? 22:46 Doesn't matter what that helpfulness is, but that's good. That's a double, double whammy, so. Well, awesome. Nathan, that's a great spot to end. 22:52 Thank you so much for being here and joining me today and, uh, imparting this tremendous wisdom for us. And wish you all the best with not just [laughs] Founders, Founders Suite, but of course FundingStack now. 23:02 Very exciting ventures. Thank you so much, and have a great, great day. Thank you for having me. Appreciate it. We hope you enjoyed this episode of the Purpose Driven Capital podcast. 23:12 If you found this valuable, be sure to like, subscribe, and share. Are you ready to align your money with your mission? 23:18 Discover the Purpose Driven Capital framework, access practical tools, and build meaningful connections to grow your movement and multiply your impact at PurposeDrivenCapital.co. 23:29 The views and opinions expressed in this show are solely those of the individuals speaking and do not reflect the views or opinions of Honeyhive Capital, any broker-dealer, investment advisory firm, or its sponsors. 23:40 The content is for informational and entertainment purposes only. 23:44 Nothing in this content nor any communications from it should be treated as constituting financial, investment, legal, tax, or other advice of any kind, or as a recommendation to buy or sell an interest with respect to any investment. 23:56 We look forward to you joining us next time.
