Raising Capital for SaaS Startups

Are you struggling to raise capital to sustain your Software as a Service (SaaS) startup? If you want to raise money, ask for advice. If you want advice, ask for money. Today’s episode features a panel discussion with founders from two early-stage SaaS companies in Toronto. 

Panelists are Roy Pereira, founder of Zoom.ai and mentor at Techstars, and Wes Moon, co-founder and COO of Wisely. The panel discussion is hosted by Jono Landon, founder and CEO of Hubbli. 

Topics Include:

  • Elevator Pitch: Future plans and ideas from SaaS startup founders 
  • Wisely: Started with a prediction engine to help charities raise more money
  • Zoom.ai: Targets mid-market companies with AI-powered meeting scheduling assistant 
  • What makes a safe (enough) bet for investors? Take money from friends or angel investors, but not family members—for now
  • Team vs. Traction: Attributes depend on phase and problem to be solved by right people
  • What KPIs and metrics drive SaaS companies? Stage sets story to make metrics
  • Practice makes Perfect: When trying to raise capital, seek advice on what matters
  • Lead Gen Ratio: It’s a numbers game; don’t give up on finding investors to raise capital
  • Pre-Seed, Seed, and Series Fundraising: Who to ask and how much money to request
  • How much time does it take to raise money? Go all in with complete focus and understanding because you don’t choose your venture partner, they choose you
  • U.S. vs. Canadian Investors: Know your audience’s perspectives on deal flow and funds
  • Accelerator and Roadshow Programs: Worth giving up equity to grow and gain validation
  • How to start fundraising? Warm vs. cold call, network referral/intro vs. unscheduled visit          

Links and Resources:


Jono Landon on LinkedIn

Wes Moon on LinkedIn


Roy Pereira on LinkedIn






“We help charities raise more money, and we do that by predicting from their past donor database.” Wes Moon

“Never take money from family. It’s awkward at Thanksgiving, when you lose it. Take money from your friends or from angel investors.” Wes Moon

“Sometimes, a lot of times, most times at the beginning, you don’t have those (numbers).” Roy Pereira

“Raising money is not scientific. It’s a mental game.” Roy Pereira

“Relationship is key because they are trusting you with their money.” Roy Pereira

Episode Transcript

Jono: Hello and welcome to the Kick SaaS Podcast. I’m your host, Jono Landon. In this podcast, we share excerpts from live in-person SaaS growth events that I run in my hometown of Toronto, Canada. A little about me. I’m the founder and CEO of Hubbli, a B2B SaaS company that helps private schools find new families to enroll and engage them throughout the entire enrollment journey. Basically, it’s a CRM for private schools.

In this episode, it’s a recording from a recent panel discussion that I hosted and moderated at the Hubbli head office here in Toronto on the topic of raising capital for a SaaS company. The panel included founders from two of Toronto’s up and coming early-stage SaaS companies. One is Wes Moon, co-founder and COO of Wisely. The other is Roy Pereira, serial entrepreneur, mentor at Techstars, and founder of zoom.ai.

This panel discussion offers many great takeaways from anyone who has founded or is leading a SaaS business and needs to raise early-stage capital. We’re going to jump right into this episode. I hope you enjoy the format and content we go through here, and I look forward to sharing future episodes with you from these live SaaS growth workshops.

Thank you, everybody, for coming. It’s an honor to have you all here. It’s a pleasure to be able to host you guys. We’re in the offices just upstairs. Most people don’t know that there are offices in this building, but there are and I get to use this facility. I said, “You know what? We should start doing some events here and start building a community.”

It’s funny because one day I went on to meetup.com. I was looking for events to find salespeople to go do some recruiting. It asked me if I wanted to start the Toronto SaaS meetup. I said, “Okay,” I just clicked a button. All of a sudden I have 30 members. I was like, “Okay. Cool. I’m doing this.” I was like, “You know what? I got a boardroom. I could do this.”

That’s how it started about six months ago, and then Margie joined me. This is all her, by the way. She does everything, so thank you, Margie. Everybody, give her a round.

I’ll just give you a little bit about myself. I’m the founder of Hubbli, we’re a B2B SaaS product. Basically, it’s a CRM for small private schools. I’ve been working in the B2B space, Internet business solutions for about 20 years, and I’ve been in all areas of management. Hubbli is the first company I’ve ever founded. I’ve done so many things for other companies. I’ve raised money for other companies.

Hubbli is basically bootstrapped until now, and I’m just personally really focused on raising money for Hubbli. We’re at a place now where it makes a lot of sense, and I’m currently in the middle of getting term sheets and figuring out strategies. I’m really excited to talk about this subject, but I’m much more excited to learn from the panelists here today.

What I want to do (actually) is to hear from you folks, especially people that raised their hand when they said they’ve got a startup, I’d love to hear about them. What we want to do is pass the mic around and let everybody do their elevator pitch for what they’re doing or what they’re thinking of doing. Who’s willing? Who’s ready to go? Introduce yourself first and then do your thing.

Rich: Hi, everybody. My name is Rich. I’m the co-founder of a company called Jupiter, was formerly sales hire number two at PageTree, which I appeared early on this year, and then also was a sales recruiter there. Prior to that, I had a few startup experiences as well. The company that I’m founding is all focused on training female SaaS sales reps. There’s a huge gap in the market. Wes was just telling me that there were 12,000 open roles in Toronto for sales alone.

Based on my own experience—not just any one company—but it’s always been predominantly a male-driven team. There’s research that actually says that women are actually better at sales than men on average. That’s my company. If you want to chat about how to discover your sales team let me know. I’ll be right here.

Jono: That’s awesome. Thank you. Who’s next? Who’s going to pitch? Come on. Guys, if you want to be entrepreneurs, you’ve got to be ready to pitch.

JC: My name is JC. My company is called Juicy AI. My goal is to let small retailers and e-commerce owners use algorithms and data platforms that are used on Amazon and Shopify.

Jono: Thank you. Who’s next? Come on. There were way more hands. Here we go.

Shant: Hi, my name is Shant. We have a company called Trusted Space which helps you to connect you to your community, and share, and exchange skills. Thank you, Jono, for hosting this session. Looking forward to learning from all of you.

Jono: Awesome. Come on. Who’s next? Who’s next? Who’s going to come? Who’s a founder here? Put up your hand. Who’s a founder? Here we go.

Russ: Hey everybody. My name is Russ Ward. I run a company called Massively. We are a chatbot platform, and we are rolling out a couple of different SaaS tools which is why I’m here.

Jono: All right. Thank you. Anybody else? Last call. Here we go. My man.

Sandeep: Hi guys. My name is Sandeep. I’m a co-founder of a fintech company called Remitr. We are a B2B platform. We’re not literally SaaS, but we’re a SaaS in a sense. We sell to businesses, and our product helps business owners send payments to their suppliers and employees worldwide within just one day. We connect with banks in Canada and banks worldwide to make sure that happens predictably and at a low cost.

Jono: He’s getting good at it. That was great. Thanks, guys. Thanks for taking part. Wes and Roy, come on up here. I’ll let you guys introduce yourselves. Please tell us, obviously, your names. (We know your names, though). Tell us about your company and that will kick us off nicely.

Wes: I’ll go off first. My name’s Wes. My picture is up there, and I still look like that (shockingly); it’s an Internet photo. My company is Wisely, I’m one of the founders. We started our company with a prediction engine. We help charities raise more money. We do that by predicting from their past donor database—next gift amount, next gift date for every previous donor—then, giving the fundraisers, so if we look at […], a sales tool that would allow them to go out and use those predictions, engage with donors, and secure more donation revenue.

We’re doing something good in the world. We are a for-profit company, in case. I had that question twice already tonight. We’re at OneEleven. We went through an accelerator program at DMZ. I noticed Remitr, I think they’re in there right now. There are some other DMZ alumni here. Successfully raised a seed round and an angel round, so happy to answer your questions.

Roy: I’m Roy Pereira. I’m the founder and CEO of zoom.ai. We are a Toronto-based startup, started about four years ago at OneEleven as well. We’ve raised a little bit more than $5 million in seed. We target mid-market SMB companies with a meeting scheduling assistant that is AI-powered.

Jono: My first question for you guys is when investors were deciding to hand over all this money to you—either as the founder or a co-founder—what were the attributes of the team that made them decide that this was a safe-enough bet?

Roy: I think you have to look at each phase. The very first money in the door—friends and family; never take money from family. It’s awkward—Thanksgiving—when you lose it. So, take money from your friends or from angel investors, but the very first time is really all about you and your team. “Hey, that’s a great idea,” but you know what, you’re going to pivot five times. It’s not really about that. It’s not really about the business model. You’re going to change that. It’s about how big of a problem you’re going to solve, and do you have the right people that can actually solve that? That’s the very first time.

Afterward, it’s different. It’s traction, especially in Canada. It’s going to ask you for traction. Do you have a large client? Do you have a large number of clients? Do you have an opportunity to get more clients? Maybe it’s not about clients, maybe it’s about users signing up, whatever. Whatever KPI that you have, do you have traction? Are you growing? They’re going to want to see that at the beginning. The team is definitely important, and it’s going to be important until you get your Series A. It’s all about hiring.

Jono: That’ll change in a later stage in later rounds?

Roy: Yeah. Think about a continuum of team versus traction. That’s really all it is. Those two accesses. When you start off it’s 100% team. You are selling the opportunity for future success because you are who you are, and you can do it. You have to prove to them that it’s you. Your founder and the other people that you have around you may not be with you in five years, but it’s about you guys.

As you go to a Series A and are preparing to do Series A, you’re doing $100,000–$200,000 MRR a month, it’s about traction. It’s about how fast you’re growing. You don’t need the $200,000 maybe if you’re growing 50% a month—crazy numbers kind of thing—but it’s about traction. It’s less about people because those people can be replaced at some point.

Jono: That’s good to know. Wes, what do you think?

Wes: I’d say the exact same thing. Perhaps I’ll tell a story about it. We, as a company, needed some money to quit our jobs. The first place that we went to is the biggest player in the space. We went to some of their former executives that we happened to know because we also worked at that tech company, and asked them for what we call our angel round. We raised $150,000, so we flew down to Charleston. To a person, they all said, “This sounds very interesting. I trust you with my money.” That was our angel round. We did coincidentally took a little bit of money from family, uncle-type thing who understands the space.

Roy: But you don’t like.

Wes: I think they still like us. That’s the silver lining there.

Roy: For now.

Wes: For now. Exactly. We did quite honestly say to the family members—this is actually a true story—we were having a drink and we said, “This is your Vegas money, right?” They agreed that this was just Vegas money, and they understood actually the risk of investing in a tech startup that had absolutely nothing except for two guys. That was at the angel round. We leveraged that money to build a product and get some traction for our seed round. I would say, even at our seed round, we were probably early to it. It was predominantly team and competency.

With every investor that we met with, they wanted to make sure that we understood the fundamentals of running a SaaS business. If they asked a dozen questions like, “What’s your CAC? What’s your strategy around marketing?” et cetera. With a solid business plan and having some metrics and some tractions, that was really the key there. I would still say at seed, for us, it was largely having a very competent team.

Jono: That’s great. I think raising money for different kinds of business investors are going to be looking for different metrics. I’m not sure where everyone’s experience is, but it’s important to really understand what the KPIs that SaaS investors are looking for, and I think we should talk about that.

It’s a good idea to just go through what are the standard SaaS metrics that are really important to have in (let’s say) a five-minute pitch or your deck that’s going to get SaaS investors interested. You have to know, as you said, do you understand what drives SaaS growth? Let’s talk about that a little bit; let’s break that down. Roy, could you give some content into that?

Roy: I love this. It’s almost like a catch-22. You’re starting a company, you may have some customers, but a dataset of three does not guarantee you accuracy at all. You go to a VC or an investor and they’re like, “What’s your LTV:CAC ratio?” and you’re like, “Three divided by zero. Is that a number?” “No, it’s not. It’s an invalid number.”

Sometimes, a lot of times, most times, at the beginning you don’t have those. CAC is the cost of acquisition for our users. If you’re buying ads and it takes you $1000 to get one, there’s your ratio. LTV is the lifetime value of that customer. If it’s costing you $1000 to get one customer, and that customer churns after a month, and it’s a $25 per month product, man you are losing a lot of money. That’s a bad ratio, but you don’t know that at the beginning. You’re just spitballing it. You’re just experimenting.

This is when, as an entrepreneur, you have to just take out your lady balls or your man balls—depending on what you have—and say, “I don’t know. I’m going to find out. You want to join me on my journey?” It’s too early. You don’t have those numbers. You’re not an established company. You don’t have a million users coming in. Maybe you won’t ever. If you’re targeting enterprise, you’re not going to have those numbers. Your dataset is going to be so small that you cannot find those numbers. Even when you’re going and you’re generating $1 million a year you just won’t.

Jono: Is it about knowing how to build a forecast based on the right kind of assumptions that should be good industry benchmarks, and then having a good story as to how you’re going to specifically hit them?

Roy: A lot of investors are not professional enough. What they read is, “I need to know your CAC,” so they’ll ask you, “What’s your CAC?” They won’t really understand how you’re going to generate that. Again, it leads you, a lot of times, to not being able to calculate it and to offer them an answer that they’re happy with.

Either you walk away because you know that they’re not great investors, and you’re going to have problems with them in the future (you will), or you turn around and go, “You know what? My KPI that I really care about is X. Here’s my user journey. I can show you the funnel. That’s what I really care about because right now, I’m not generating any significant revenue, but here we’re proving out the model. We’re taking out the friction from the user journey, and then eventually we’ll get to significant numbers that I could show you what the CAC is.” That’s going to be seed two.

Jono: As long as you’re using AI and machine learning to make the world a better place, what does it matter? Just give us some money.

Roy: That’s […]. Don’t trust any company saying that.

Wes: I have actually heard, I think we were in at the BDC—

Jono: Are you a .ai company?

Wes: Oh, yeah. We have it. My CTO won’t let us put data there.

Roy: Are you defending that choice now?

Wes: I will say, at the BDC, they told us that they were pitched that day by an ice cream company using AI. There is some stigma attached to it.

Jono: To make a world a better place.

Roy: To make more delicious ice cream.

Wes: Well, I’m all in favor of it, or flavor I suppose. I’m sorry.

Jono: What do you think about these metrics? I just killed a whole panel right there. All right guys. Bye-bye.

Wes: Some of the metrics that you ask for, especially for the stage of your company, are generally unreasonable for you to know with any degree of accuracy. We always use that opportunity to tell a story. TAM is something that no matter the stage of your TAM (total addressable market), if you’re raising funds you have to understand your TAM because that will either allow you to raise or not raise money, quite frankly. Depending on the investor and how big they think, if the TAM isn’t billions and billions, they’ll tell you to go away.

We serve the not-for-profit market to address the TAM question proactively, which we learned over the first couple of meetings; it was really important for us to do. We actually revealed the industry slowly. We talked about the scope of the industry being larger than energy services in North America. We then talked about the number of employees and the amount of money spent in that sector.

As we revealed finally it was not-for-profit, we had actually proactively addressed that TAM question with some backing and belief. That was essential for us. We learned that we had to do that by taking some early meetings and trying to describe the not-for-profit sector as being particularly large in an industry that has not yet gone through a digital transformation. Making sure that that opportunity or that TAM for us was we made a story about it to make the metric important.

Jono: Basically, what you’re saying, Wes, is that you did not have the metrics, the traction. You obfuscated the answer and you talked about TAM. You made sure that they understood that there is a big enough market, there’s an opportunity, there’s no one there, and you’re the only one kind of thing, right?

Wes: That’s exactly right.

Jono: That is a really good strategy that’s used by everyone. Raising money is not scientific. It’s all about…

Roy: It’s psychology.

Jono: It’s a mental game. It’s a psychology. You are being a good politician in a lot of ways. You’re a good salesperson, and you’re trying to get to their greed, which is a lot of investors, but also small investors. What they really care about is that you have a great story, that they can tell your story to their buddies at the dinner table because that’s all they care about. You give them back money and they’re like, “Oh. I didn’t even expect this.” They’re like, “But I had some great dinners. I talked about your cool.” You got to understand what they’re interested in and tell that story.

Wes: I believe in practice makes perfect. New to sales, in a way, or tech sales. I have now only been in tech sales perhaps for four years. Before that, I was a charitable fundraiser. In charitable fundraising, you tell stories all the time. You solve problems, so in a way, you’re in sales. We took a series of meetings, just seeking advice from people who we didn’t think would invest in us (and they didn’t), but as a way to learn how people would perceive us, what they cared about so that when we did start to raise, we actually knew what we’re doing.

The first time you go talk to a venture capitalist, it can be a little nerve-wracking. I had no idea actually what they cared about, which is why we set up those informational meetings to figure out, “Hey, how do we do this successfully? Can you talk to a guy like Roy who’s done this before and learn from his mistakes?” Absolutely. Most founders will be quite generous with their time.

Roy: I’ve done a lot of those.

Wes: Yeah, me too.

Jono: That’s a good point. You never ever want to pitch your number one potential investor first.

Wes: That’s wasting a bullet.

Roy: Yeah. You have a couple of bullets. You just go and you pitch people that you don’t really care just to practice.

Jono: On that note of advice, somebody recently told me (I thought this was pretty wise), he said, “If you want to raise money ask for advice. If you want advice ask for money.” I took that. I was just at SaaS North, and I took that strategy. For the most part, it worked well, but then the one person that I actually thought I had the best chance of walking away with a term sheet, I went in with the position of asking for advice. He basically told me everything that I should have said that I would have said had I just did give him my pitch. I realized that was a mistake. It was pretty hard to really know when the right time is to take the right approach.

Roy: The point is there’s a lot of luck. I don’t really believe in luck, but there’s a lot of things going on that you don’t have control over. You walk into a room and there’s someone sitting over there. You don’t know if they had a […] morning or if they’ve been looking at your industry, if they just got rejected by one of your competitors. You don’t know so many things. You go in and you’re trying like a good AI in your brain and you’re like, “I pitch 10 VCs. What’s the commonality? How am I going to make my pitch better?” That’s good, but you don’t also know what’s going on in them.

A lot of times, I found that when I walk in I get success. Maybe my pitch was better than it was the first time, but it’s also, what did the other side have gone through? They were looking at this space. They were looking at all the other players in this space. That you don’t know. It’s an unknown variable. So basically, keep trying.

Jono: Yeah, just keep trying. A lot of times people think, “Oh, this guy had this overnight success,” but really it’s about continually putting yourself in preparing, and preparing, and preparing, and preparing, just putting the time in, and then being in the right place. Without that constant preparation, testing and everything, you’ll never have that moment of opportunity and be ready for it.

Roy: I have spreadsheets and I have CRMs that I use to track fundraising; each of my raises. The spreadsheets are really clear on how maybe bad I am because they typically have about 100 rows. I’ve talked to 100 different firms to get that 1 lead. That’s the ratio. I thought that that would not be the case. I’ve gone through a couple of exits, I’ve worked in the Valley, I’ve done all sorts of […], and I’m still doing 100 rows per first investment. That’s what you have to do.

It is a numbers game in a lot of ways you don’t know. You don’t pitch one VC and you’re like, “You guys are perfect. You love this industry. You know me,” whatever and it’s not. They’re busy doing something else. You don’t know what’s going on on the other side. It’s a numbers game and just keep going. That’s why we’re all entrepreneurs because other people out there aren’t going to put up with the crap that we have to put up with and the long hours.

Jono: Wes, what do you think about that?

Wes: That 100:1 makes sense. Ours was 60, something like that. We talked to 60 different groups.

Jono: He’s better than you.

Roy: It’s not a competition.

Jono: Yes it is.

Wes: What we did find interesting is—again, in the beginning, the first group of investors we talked to—we knew we were too small for them. We did that on purpose, but over time, we actually figured out the right kind of investor to talk to. Even if you look at their website, see what companies that they’ve invested in at what stage, you can greatly reduce the amount of time and effort going into securing these VC meetings with people that will never actually invest with you at this stage.

I personally feel that it is the goal of every venture capitalist firm to understand what’s out there and then say, “Keep in touch. Send us your newsletter so when the time is right we will reach out to you,” which can be a long process of effort and time on your part. Just be more targeted with your time and make sure that the people that you’re attempting to talk to make investments like you with the right kind of check size. If you ask for the wrong check size you get kicked out of the room.

Jono: What’s the first question that you asked? Do you have an active fund? There are so many filters that you need to go through because you’re right. That 100 could be 10, right?

Wes: Exactly. We actually also found success in going to early and late-stage funds. We found if a fund is early, they really wanted the meeting, they would move quickly. If the fund was at the end, they would give you a fast no.

Roy: At the beginning though—we’re talking about VCs—VCs typically come in after you get some traction. Can I ask a question?

Wes: Please, yeah. Go ahead.

Roy: How did you find your first angels coming in? Was it just your friends and family? Were those the angels? Because that’s a very different thing. You don’t really have a checklist.

Wes: Every angel, with the exception of one, was found through networking. We just talked to people, told our story, and we talked to people who understood the industry and understood technology. Also, we talk to people who like to play golf because they’re somewhat wealthy. That was (quite frankly) our strategy. To find our first money, we had a nice story, we built an MVP, so we had something to show people. I think that was key.

Jono: Recently, somebody gave some advice just when you’re doing that networking, trying to find high net worth individuals that might be able to do $25,000 checks type of thing and it’s no sweat for them to focus on business people, entrepreneurs, developers types as opposed to professionals that just have a lot of money.

I don’t know if this resonates with your experience, but the idea behind it was folks that are in financing, doctors or whatever, they have a lot of money that they can spend, but they seem to be very analytical and very risk-averse as opposed to an entrepreneur that a lot looser with the checkbook and it’s not so much about metrics or business plans. It’s just like, “Do I like this guy? Do I believe in him?” They can see themselves in you a little bit.

Roy: Yeah. If they ask you when you’re going to go enter in a profit or something because they’re giving you $25,000 or they’re asking you for dividends or something like that. They’re not an angel investor that you want.

Wes: We stayed away from anyone that was concerned like that. Half the people are former professionals with sales. Salespeople basically gamble for a living for their paychecks. No? Are there salespeople here?

Roy: Aren’t we all salespeople?

Wes: I think in this room, yes.

Jono: There’s obviously a big difference between angels. There are three stages, angel seed Series A. Let’s talk about those differences because the approach, like we just talked about with getting angels, is going to your personal network, reaching out, trying to get some meetings, but when you move into seed, it’s getting more serious and institutional. What’s the approach there? What do you do day in and day out when you’re like, “Okay, I’m going to build that list of 100 folks to reach out to”? How do you do that? What tools are you using? What’s your day like? How does it break up?

Roy: I think relationship. I think you mentioned it, Wes. Relationship is key because they are trusting you with their money. When you get beyond the angels, the friends, and family, you’re getting into more institutional money. They are VCs, but they’re smaller funds. They have a $25 million fund; that’s small.

I think it’s really super important to understand how much money they do have, what size because it determines how much you should ask from them because there’s a math issue there. You have to build up the relationship before you’re ready to take their money. Whatever you tell them, you should understand that they’re going to tell everybody else in the city, especially in Toronto. It’s a small, small investor community here. They all have dinners every month, they all laugh about us, and mention what we tell them and so forth.

Wes: They’re expecting to hear from you?

Roy: Yeah, they are. They all know what’s going on, I think. So, if you’re going to say, “Hey, I’m going to double my revenue or I’m going to double my […] or whatever,” you better damn make it. That’s how you build rapport. Make sure that whatever you’re telling them is appropriate, you’re going to make it. And then just keep doing it. By the time that you’re ready, you hit that certain number, you can back and go, “Hey, I’ve done all the things I told you I was going to do. I’m going to execute.” Execution is really key, there’s a lot of talkers, there’s a lot of wantrepreneurs out there.

Jono: Not in this room.

Roy: Not in here, of course. That’s how you get rapport with them. If you build up that relationship, when it comes time, they’ll be there because an investor is your partner, should be your partner. If you have an investor that’s not a partner, it’s a bad investor. You need someone that will back you, that trust you, that enjoys being with you and vice versa.

Wes: With our lead investor, they said, “Come back when you have the next two months of successful sales that you said you’re going to do.” We came back, they invested. They wanted to see that first. And then it was done almost immediately.

Jono: That’s smart. Before that, you didn’t have sales?

Wes: No. We were early going for a seed and they wanted to see a little more traction. They said, “You have projections, can you hit them?” That literally happened. We went back and secured our investors. Doing what you say you’re going to do is pretty important.

Jono: So, don’t go in there making big statements and big promises that aren’t actually within your grasp, certainly within the next quarter or something.

Wes: Yeah, especially in the short term. You still have to sell a long-term vision where all the stars have to align for you to achieve the billion-dollar unicorn type thing. But you do have to have something realistic over the coming months because that’s how long the relationship is going to evolve. You don’t end up with a million, $2 million, $5 million check overnight, there’s paperwork, due diligence. Meanwhile, you’re still running your company and you’re executing. That’s at the seed stage for us, anyway.

Jono: Hubbli’s been bootstrapped until now, but I’ve flirted with fundraising at different stages, and I dug into it. When I did it in the past, I was still operationally managing every area in the business, it was incredibly hard to even think about the time it takes to do fundraising.

I’d like to hear from you guys how you’ve balanced being a business leader or an entrepreneur with people that you’re responsible to lead with also going out and doing raises. What are those phases like? I’ll let you guys answer.

We’re doing a little bit of a round right now. All of my time is taken. When you do a larger round, all of your time is completely taken, you don’t see your employees, you’re not part of the company. Hopefully, you have good employees, good team members, good senior people that can run the company because you are not running it at all. If you are, you’re not going to raise basically, because you really need every neuron in your brain to focus and to understand what the other person on the inside is thinking about. That’s your job, right?

Wes: I’d say, for early-stage companies, you really don’t choose your venture partner, they choose you. You have to really consider that about going all in. If you’re only doing this part-time or you’re not really committed to the raise, you’re going to lose to someone who is. It’s a race.

Roy: I would say in the United States, my perception is that that is a little bit different if you’re in the Valley. There’s more competition within the VC community to actually place money and they’re willing to take larger bets because that’s available to them.

Jono: Let’s talk about that a little bit because that’s a topic we were chatting about a little bit earlier. I know from my experience, when I was flirting with raising money and not putting in the full time I really took, I remember meeting with some angel groups here in Southern Ontario and saying, “I’m looking for $600,000 because I was trying to be reasonable.” And they said, “You only need $300,000.” I was like, “What’s that based on?” I take the same deck and I go to the Valley and they’re like, “$600,000, what are you, an idiot? You need $2 million. Get out of here.” It’s so different. How do you guys approach that? They really throw you for a loop if you’re not prepared for that.

Wes: I did it wrong. I went down to the San Jose disaster. Lined up a bunch of meetings, even with angels. I continued to talk to one of the angels based in New York whose minimum checks as an angel is a million dollars. We were only looking for $1.5 million and that just wasn’t worth the effort of due diligence for the firms there. It’s a vastly different perspective, they place more bets, but also they’re hoping for the thousand X on one of those bets. Each one of the bets that they make wants to bet that every single one they probably do some sort of assessment that says, “Could they be worth potentially over a billion?” It’s just like a yes or no.

I would say in Canada, we’re a little more conservative. Even a couple of a hundred million dollar company is pretty good up here and bets are placed on that.

Roy: There are so many differences. As you pointed out when you go here and you tell a VC, “I’m going to do X,” X has to be reasonable. When you say the exact same thing to a US VC, they’re laughing at you. It’s like, “I’ve seen 10 companies just today that say they’re going to do a hundred X. What you?” That’s one of the things that differentiate Canadians from Americans in a lot of ways. We’re much more pragmatic, down to earth. Americans like, “[…] yeah! We’re going to rule the world!” That’s what they’re accustomed to. When you’re pitching them, you have to think that way, there’s no way that they’re going to invest in a Canadian company with us speaking Canadian.

Jono: Sorry about that.

Roy: They think it’s funny. When I was raising with Shiny Ads, which is the last startup, I had two decks. I had a Canadian deck and I had a US deck. The only difference was the amount that I was raising. It was a lot more to your point. They think that it costs a lot more because that costs a lot more in New York or Silicon Valley, the cost of employees and the cost of living is huge compared to here.

The other difference, too, is that when you’re pitching a Canadian VC in their head, they’re thinking about all the ways that you can fail. They’re trying to strike them down until they get to zero. To an American VC, they are thinking about all the ways that you can get to be a unicorn, like that 1000X. It’s a very different style. One is risk-averse and you’re trying to like, “No, Google’s not going to come and do the same thing. Can they?” Of course they can, but they’re not. Whereas the other one is, “I’m going to be the next […] Google.” And you got to prove it. It’s such a different style.

Wes: I’d also say that follows through in how you’ve managed. I’ve talked to US-backed firms and they’re pushed to get to a thousand or fail really quickly. In Canada, our partners help us live, I would say.

Roy: Shred zombies, that’s what I have to say.

Wes: Exactly.

Roy: That’s a really good point, actually. They will definitely terminate you, liquidate their portfolio that’s not going to be 1000X very quickly. You have to be really careful. Any time you take money from an investor, there are risks. Any time you take money from a VC, there are more risks. “What do they want from you” kind of thing. You have to think about that. Money is not free.

Wes: Does anyone have free money in this room?

Roy: I think the other thing that I was going to say as well was the size of the fund to your point, American VC funds are typically larger than Canadians. If you have a $25 million fund here like you have Ripple Ventures (which is one of your investors, has about that in your fund; typically, like a small-cap fund), the math for them to make a return on that is different than a fund that has a $125 million. When you look at the funds in the States, they normally have a lot more than Canadian funds do. If they have $125 million, are they just going to give the same check size that (say) Ripple would, but multiply that out by 100? No.

Wes: It’s a lot of work.

Roy: They’re going to give a lot more money. They’re going to give 10X the money and still have the same number of investments. When you go in there and you ask for $600,000 and they’re like, “I don’t even know how to write that. I’m writing $6 million checks, that’s my minimum check size. Because the math doesn’t work for me because I have a billion-dollar fund. I need to return 10X on a billion dollars. If I’m giving you $500,000 and you make it big, I’m getting 10X and that’s $5 million. That’s nothing compared to my $5 billion.”

Jono: And they have plenty to choose from otherwise. 

Roy: I think that’s the other issue, too. I may be controversial here, but I think that Toronto has a lot more deal flow than most of the places in the world. This is why you see VCs from the Valley, from New York, from Boston coming here. Boston especially. They don’t have enough deal flow anymore. You’re seeing VCs from both New York and the Valley being […] in Toronto, you’re seeing VCs from Minneapolis coming up here because—

Jono: They also get a great conversion, it’s good for them.

Roy: They do. We could talk about that. I think it’s really the caliber of opportunities here and the amount of great deals that they can have. Even in Silicon Valley, there are a lot of companies who go there, but there’s also a lot of noise and there’s a lot of competition.

Jono: What do you guys think about these programs like TechStars or Seller Price that want to bring you to the US and do a roadshow? They’re going to give you a little bit of money, but they’re going to take some points off your business. Of course, that means different things at different stages of growth. Have you guys ever considered those? Have you done any of those? What are your thoughts? Is it worth giving up the equity?

Wes: I can imagine a number of scenarios where it’s worth giving up the equity to make a larger piece of pie or a larger pie. We went to the DMZ (it’s an accelerator program). The accelerator program was amazing for our business. We all learned a lot. Certainly, many things came into deeper focus for us, but I would say the most important piece of it is that it validates to potential investors that you’re a real company that’s been vetted by someone else. From that perspective, giving up a piece of equity, depending on the size, is totally worth it.

Roy: Even for Zoom, when I started three months in, I got a phone call from […] and I got a phone call from Betaworks in New York. I actually took Betaworks. I didn’t feel like I needed their advice, but what I needed from them was network. I didn’t know anybody in New York, it’s a great place to know people, a lot of money there. Also, they are the first money in. Their terms are fantastic because there’s a US VC. In fact, I couldn’t get any Canadian investor to come in on those terms.

Jono: How much did they give you? If I can ask, if that’s okay.

Roy: They gave me $200,000 US for 8% of the company and also that included going through their accelerator, which is fantastic. That allowed me to hire my first staff and get into the market, basically. I know Seller Price just launched in Toronto, very interesting backers, Box, and Cisco out of the Valley. Their terms aren’t as great.

Jono: They’re not as good, yeah?

Roy: No. I’m a mentor at Techstars here in Toronto. The Proptech Techstars as well, Founder Institute. They’re all good for different stages. Techstars has a great name. You go through Techstars and if you have something interesting, you should be able to get funding pretty well.

Wes: It’s a nice gold star.

Roy: It is. To your point, what you said was interesting because let’s face it, investors are lemmings. They basically follow the other lemming in front of them. You have to find that lead lemming that will jump into the water. Lemmings are these animals on an ice flow. They go around in circles until one of them falls off into the water and then they all look over and see if there’s a shark that’s eating them. They’re all scared about taking that first step. That’s the same thing. They’re all scared about taking the risk on you. What if they lose their money? They’re all waiting for that lead investor to take the bite and they’re like, “Oh, I’m in!” You have to find that first one.

Wes: Your first term sheet is the most important.

Roy: In fact when you’re raising, there are two faces, at least two. One is to find that lead. To your point, you can go through a hundred and as soon as they say no, you’re like, “You’re dead to me. I’m moving on.” Even if they say, “Yes, I’m not into leading.” You’re like, “I’ll get back to you later.”

Jono: Does the quality of the lead play an important role in getting the lemmings to jump on board?

Roy: If they don’t have any respect from the community, then you don’t have anybody following them. It’s super important to get a good caliber lead. I like what you said before, investors will choose you, that’s very, very true. There is one match out there or many more, they have made the decision that they want in whatever you’re building and you just got to get there and not screw up.

Jono: Do these programs like Seller Price or Betaworks, do they act as a lead?

Roy: No. They give you a gold star.

Jono: Okay, so it does lend credibility.

Roy: It just helps your credibility. They’re good programs. Some of them are good programs. They teach you what to do. As a mentor, I see the first pitch and I see the pitches progress, there’s a demo day for Techsters PropTech coming up. Those are going to be phenomenally professional. The transition that the founders go through is very, very valuable for sure.

Then you have the Gold Star, you can say I went through PropTech, Techstars in Toronto, and now I have a deal with Colliers. That’s the other thing that you can’t get with some accelerators. Seller Price (like I said) has good relationships with Box and Cisco. The PropTech, Techstars here is sponsored by Colliers. If you’re doing PropTech, there is a great customer right there for you, your first big customer.

Jono: I’ve asked a lot of questions here. I’m wondering what’s the most important question I haven’t asked that you think these folks need an answer to?

Wes: One of the questions that I ask other founders is how do you start fundraising? Generally, the first answer was, “Pick up the phone. Let me introduce you to someone,” or, “Here’s someone that might think this is interesting.” That’s essentially what we did.

Roy: That warm intro into a VC is so critical. If you think that you’re going to cold call or cold email a VC and get in, it’s not going to happen.

Wes: And don’t show up at their office unannounced.

Roy: It’s like, “Security?”

Wes: I have witnessed this before.

Jono: I literally thought they’re doing that, so don’t do that, yeah?

Wes: Don’t do it.

Roy: In this digital world, it’s so weird to have a physical presence and have someone there and it’s like, “No, no, no. I don’t even want to see your pitch. Just go away. Find someone that knows me, that I trust to introduce you.” That’s a lot of research. Before you pick up the phone.

Jono: That’s why I think the value of those programs that are making those intros and putting you on a roadshow seems to be there.

Roy: Exactly. That’s why I went through Betaworks in New York because they made those intros. But if you don’t have them, CrunchBase, LinkedIn. All the data is there.

Jono: When you go to CrunchBase, how do you pick the right person in the fund to approach? You don’t want any carpet bomb everybody, I’m assuming. How do you pick the right person?

Roy: You are going to be partnered up (it’s almost like dating). You’re going to be going out trying to get someone interested in you. It’s a person, it’s a human, it’s not a firm. The firm does not invest in you, the partner at the firm invests in you. It’s all about relationships. You have to like them, they have to like you, they have to trust you, that sort of stuff.

Wes: You typically are going to need a champion. The champion is often an analyst. But you need to understand which partner you’re targeting and sometimes partners have their own analyst. An analyst (in many ways) does a lot of work to understand your business and help the partner understand it, but it is the partner who you’re selling to.

Roy: Not all partners care about what you’re doing. You have to find the right partner at the right firm. If VC A has invested in your industry, you still have to do homework to find who inside of that VC invested in that industry.

Jono: Can you get that info from CrunchBase?

Roy: Yeah, totally. You can also just look at their websites a lot of times. You can check out their portfolio and normally you’ll have the partner, you can look at who’s on the board. In later stages when they ask for a board seat. All of that information is there.

Jono: Is there any way to fast track that process. That’s just a lot of research.

Wes: It’s just effort, really. Concentrated effort.

Roy: There’s an AI for that.

Wes: Is there?

Roy: No, there isn’t. If it was easy, anyone would do it? No.

Jono: Okay. What we’ll do is open up to questions now. As much as I like the sound of my own voice, I love to hear you guys. I’ll hand the mic to Margie and she will bring it over to you.

Margie: All right. We’re starting with you.

Male: What are the differences between how you’re pitching an angel round versus a seed round? Like a pre-seed round versus angel round. What does that deck look like? How are they different? What are you covering? If there are five slides on each, what would you include?

Roy: One of the issues that we’re in today is that the names of the rounds are all screwed up. Five years ago, a seed would be like $250,000. You’d go up and you’d raise a Series A. It’s going to be $5 million and be like, “Wow. That’s a lot of money.” Today, we raised $5 million in the seed. Is that still a seed? These names, it’s like Pre-seed, then Seed, then you have a Seed II, and maybe have a Seed Extension, because you haven’t got to A yet. Once you get to A and you do B, that’s pretty simple, but the numbers have all gone up.

My point here is that pre-seed and angels, those amounts are similar. Your deck is going to be similar. It’s about people, people, people. We can do it. It’s a big market dam and it’s really exciting stuff that we’re doing and we know what we’re going to do.

Next after that, when you do your seed or whatever you want to call that, you’re going to raise a couple of a million dollars, you have to have traction. That again, the continuum changes, the percentage that you spend on a team versus traction gradually changes.

Wes: To say this slightly different way, at the early stage of your company, make sure that the people that you’re talking to understand the problem and how you’re going to solve it or how you propose to solve it. You won’t have enough data to say this is exactly how it’s going to go.

Roy: You may actually change it, right?

Wes: Yeah. Or a little bit, at least.

Roy: I would say that you don’t need to really focus on the problem space. Is it interesting to the investors? Is it big enough? Is it going to grow? How are you going to fix it? That’s an implementation detail.

Wes: The problem is the most important. It also helps determine the TAM, which they care about. Perhaps some of your early-stage investors won’t actually even know that term. They just need to know that it’s a really big problem that people will pay to solve.

Roy: And TAM is bullshit, anyway. You just make that up. Come on, right?

Wes: I do, in a sense.

Roy: We all do.

Margie: All right, next question.

Fatima: Hi, my name is Fatima. I’m curious about dilution. He talks about different levels, different stages and everything of fundraising. What do you think is an appropriate amount for your average Toronto SaaS company, at angel, seed, Series A. How much equity do they give away and everything for how much money, for example? I’m just curious.

Roy: The general thought is that every round should be at a maximum of 25% dilution. It’s a lot. Even an angel. But the thing is it’s just math. You’re like, “Hey, VC, I don’t want to give you 30% dilution because some guy up on the stage said that 25% is the maximum.” They’ll be like, “All right, sure, but I’ll just give you a lower valuation.” It’s just a mathematical calculation. It’s just negotiation. There’s a lot of issues in terms of valuing yourself too high.

Your first-rate shouldn’t even be valued. You should just have a SAFE which is like a convertible note. It’s like, “I don’t know how much I’m valued. I don’t even have revenue.” I’m just like, “There’s this problem, and I’m going to go and solve it. I don’t have an idea,” so how do you put a value on that? Do a SAFE, and then once you get traction then you can start doing a price round, which is you’re valuing yourself. Then, all of the investors on the SAFE convert over. That’s the proper way of doing it.

Jono: Yes, you are kicking the valuation down the road. Something that I’ve seen that I was not expecting to ever see (because it’s obviously a big concern when you’re starting), is you can always renegotiate things. I didn’t realize how often that happens with the earlier investors. I know a lot of people that have, and I’m doing this myself.

At one point, I gave up a lot more of my company, but now, I’m back to owning 94% because we’re doing really well, I made some good-enough deals, and I’m paying them back. I bought the equity back so that I’m in a way better position to go raise at a higher round. Again, you can play with valuations to move faster or move slower. Definitely, I have to agree. 

A convertible note or a SAFE, in case anybody hasn’t looked at that before, what it means is you’re taking a loan from somebody but there’s terms where that loan turns into equity, based on a number of different scenarios that could happen. Maybe you’re going to raise money within two years, let’s say you raised a minimum of a million, it’s going to convert that person’s loan that they have on the company will automatically convert.

It’s a loan, but those people think of it like it’s an investment, especially if there’s always some automatic conversion. There’s a lot of ways to skin that cat, so to speak, but it’s really really important to—

Roy: And the best thing is it’s not debt, so they don’t actually own anything. It’s fantastic for entrepreneurs, not so great for investors. The other nice thing is that their SAFEs are basically standard. There’s one blank that you fill in other than the person’s name. So, you just google Canadian Safe, there’s the American version, Canadian version, and that’s what you use. It’s super simple and if you get investors that are […] you around or, “Well, I want some more answers. I want this and that,” it’s like, “No,” and you walk away.

Wes: You use the standard form.

Roy: You will save so many headaches because you’re basically building a base. Your company is like a house and you’re building it from the ground-up. You do not want to screw up the base. This is your base. You bring in […] VC, investor, or whatever, or the terms are bad, that would just get compounded. The next round, the next investors that come in are going to look at your previous round and they’re going to look at the people that you brought in. If you bring in a mafia or whatever […], they’re going to look at that and go, “We’ll I’m not like that. I’m a nice guy. Why should I be hanging out with that guy?”

Wes: There’ll be a background check potentially on everyone that’s investing in your company.

Roy: Yeah, and you as well (of course). The terms, too, are interesting because if you give out really bad terms, the next set of investors are going to want those terms or maybe even worse. You have to be crushing it to change that trajectory, so be very, very careful at the beginning. 

Margie: Okay, very insightful. We’ll take two or three more questions.

Jono: Russ, don’t you have a question? That sounds ominous.

Alex: Hi, I’m Alex. Great panel. My high-level takeaway so far is when you’re in the angel round, it’s all about who you are as people, the problem you’re trying to solve, and driving excitement further, then once you start getting deeper into the investor round, it’s more about how you’re actually executing this and the traction. That’s the continuum I’m seeing.

I’m just wondering, before you start asking money from people, what’s the minimum checklist that you should go to someone with? You mentioned an MVP. You guys built an MVP that you could show someone on, if it’s a prototype, it’s actually working. Something that you can operationalize. I’m wondering if you guys have a checklist before you go talk to anyone, have these things tight besides your story.

Wes: For our MVP, it was just slightly better than an envisioned product, which means that you can click on stuff and it looks like it’s doing something, but it doesn’t actually. We felt like we needed that in order to secure our round and I think we did. Probably would have been smart looking back, to go and try to raise without it. 

Roy: The advice that I give to people, you may or may not follow it, but the advice is don’t build anything. Don’t build a prototype, build a PowerPoint, build an Excel spreadsheet with your calculation. You look at […]. The first product was him and an Excel. He built an Excel spreadsheet. He proved it to his customers, charged them, and then automated it. Hired and raised a ton of money obviously. 

Try not to spend a lot of time building stuff because whatever you build is just going to be thrown out and it may not be what the actual customer wants. If you could visualize it in something like a PowerPoint or InVision, that works really well. I think you will need some visual form because you can’t really describe something that maybe doesn’t exist because you’re building something brand new and a lot of investors aren’t as smart or as knowledgeable as you are with the problem.

Jono: This wasn’t me raising money for my company, but I was the Director of Product for this company. What I saw—this was back in 2011 and I’d never thought I would see anything like this—because these guys were older, experienced, had relationships, and a lot of credibility behind them, people were just going to give them money no matter what. We literally raised $3 million on a $35 million valuation from a slide deck and from some of the biggest funds in Canada. I was just like, “Wow.” I wouldn’t be able to do that. I did the actual slide deck and the presentation, but it was their relationship.

Male: They […] money before?

Jono: Not those particular ones, but they had a track record.

Roy: I think that point raises one thing that I want to make sure everybody understands. I mentioned that raising money is not scientific at all. It’s actually all about FOMO (fear of missing out), and that’s the trigger that you’re trying to push. You are trying to find a way to poke someone into feeling that they’re going to miss out on the next UBER, or Google, or whatever you’re pushing. That is (I would say) 90% of the tactics that I personally use when I raise money.

Wes: I agree. We set timelines, we go with confidence, and people are either in or out. It will save you time and more than likely they’re inclined to be a part of it.

Roy: Yeah, it’s not like who I am. I obviously don’t have relationships this way. It’s like, “Hey, I’m going to have drinks tonight. If you’re not going to tell me right now, I’m going to go and find someone else.” That’s not what you do when you have real relationships, but with a VC, you’re acting very very differently. When you’re in that zone, again, you’re throwing off the entire company and you’re just thinking about raising. That’s how you think. You’re basically a douchebag trying to find these places to poke these VCs and to get them to think that they’re about to lose the biggest deal.

Wes: It’s to their advantage to wait. 

Roy: It’s not your advantage to wait.

Wes: Exactly. 

Margie: Okay, FOMO basically when you get in there. One more question here.

Richard: Thank you, my name is Richard. I want to know a little bit about what you said, the risks of taking money. I’ve got customers already all over the world. We’re doing a round, initially. What are my risks of taking money?

Wes: You’re basically selling a portion of your company in exchange for some cash. In exchange for that cash, you’re also agreeing to do something which is to spend that money to grow your company. Depending on what the terms are of your agreement to take that cash on, you’re likely giving up a piece of control that probably means that you’ll end up with an official board and some additional oversight that you didn’t have before. For instance, that would probably be where I start based on the scenario that you just painted. It’s like having another partner that you have to keep happy.

Roy: At first might be okay, like you’re giving 25%. What’s your first round? You go out. Hopefully, you make your milestones and you double the valuation of your company. You go out and raise more money, you’re going to get another dilution. But this time, even though at 25%, you’re really lowering it, like 12.5%. The math works in your favor until you’re not growing as fast. 

I always laugh when I see startups that are doing a Series B. Poor entrepreneurs, they probably own—especially in a co-founder situation—5% right now. Is 5% of the company worth it to you to stay in it? Which goes back actually to the conversation that you have to have with your VCs, your investors because they have to be on the same wavelength as you. If you’re unaligned, then it’s a really bad scenario.

The first round is you’re sticking your toe in. The water’s awesome. You’re going to want more, then you stick your whole foot in. By the time you’re deeply bathed in the awesome warm water, you won a couple of points of your company that you used to run by yourself and have 100% control. There are definitely risks.

Margie: All right. One last question before we end this.

Dave: My name is Dave. You mentioned at the beginning about building your team. How big a team do you need? Like, do I need to have a CFO or a CTO?

Roy: You don’t need a CFO unless you are a fintech company, maybe.

Dave: All right. So, it’s just for show on paper or these got to be real people in the company?

Roy: The thing that you don’t have other than time, none of us have time. Your biggest competitor is time, doesn’t matter what you do (like live). We have limited time. The other thing that you don’t have a lot of it is money so why waste it? You really have to be incredibly diligent about who you hire, how much, all of that right at the beginning because that is when you die because you run out of money. That’s the number one reason why companies fail. The only reason that companies fail is they run out of money.

Who do you need to get to your next milestone? What’s your next milestone? Do you need to build a prototype? Do you maybe need to get some traction with your PowerPoint? You don’t need engineers, so it depends. You’re always thinking about, what’s my next step? What do I tell my last investors that I need to do? Oh, in 18 months, I’m going to be at $10,000 MRR so how do I get there? Do I need to build a better product or sales? I think you have to be very frugal about growing the team too fast. As entrepreneurs, we are always further ahead than we really are and it’s like, “You know what? I’m crushing it. I’m making $10 a month. I need to”—

Wes: That’s amazing (by the way) for a startup, making $10 a month.

Roy: Yeah, I get that. The economics works really well when you have 10 people on staff and stuff. That’s a joke. The point is don’t get ahead of yourselves. I was at a startup where we scaled up way too fast and we just weren’t there, then you have to scale back down. That’s really, really painful and you lost a lot of money.

Dave: Another quick question. So, […] valuation component, right? How do you get to that number?

Roy: You don’t, you do a SAFE.

Dave: Let’s say you’re at a stage where you have monthly revenue. Right now, I’m at that stage, I’m at a pivot point right now. Will they take that monthly and then they extrapolate it? Is that only good for a year, two years, or seven years?

Roy: Again, you obfuscate the whole thing and you try not to go there because that’s […]. It’s like, “Oh, I’m going to take your trailing 12 months revenue.” No, that’s not your valuation. That’s what a subway dealership would do. You’re not selling sandwiches. You’re pre-revenue until you’re doing a million dollars a year.

Dave: Okay, so anything […].

Roy: Whatever. Insignificant.

Dave: Say, you’re at half a million?

Roy: As soon as you say that you have revenue, they’re going to try and put a multiple on it. An industry average—

Wes: You want to be a pre-revenue.

Dave: So, what do I do? Bump all the expenses up so it’s like a negative […]?

Roy: No, it doesn’t matter.

Wes: Just don’t focus on the revenue.

Roy: Yeah, it’s insignificant.

Dave: The more […] would take, right?

Wes: Yeah. What you did was some really good testing. It’s produced a thesis for you and perhaps what you want to use the money for is to validate that at a larger scale.

Roy: Before you are generating (I don’t know; pick a number) $10 million a year, you’re experimenting. Startups are about experimenting. Let’s say you are doing a million dollars a year, you’re failing because you haven’t hit that magic number so you need to experiment. We are all in the same category. As soon as your (what was it called?) sausage-making factory is working properly. Your sales processes are working, then you can hit it out on the ballpark if you will. A lot of analogies there. But until then, you’re just experimenting, so whatever revenue you get, insignificant. Do not quote me on that. Revenue is an experiment. 

Jono: We are just testing and validating, and that revenue is just telling us…

Roy: As soon as you tell a VC that you have revenue, that is a hole that you won’t be able to get out of. Pre-revenue. It’s like Google with their products beta. They’re in beta for five years until they kill them.

Jono: Okay, that’s actually very insightful. I’ve never thought about that before. Personally, I’ve heard a lot from these guys. I really appreciate it. We’re going to wrap it up now, but please feel free to finish off the pizza and the drinks, and we’re going to turn the music on, network, and smoosh. I just want to thank everybody for coming. Thanks to you guys for giving us some great insights. Thanks to Margie for putting all of these together for us and that’s it.

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