CONNECT WITH LANDON:
Tanner:
This week on the show, I have Landon Ainge, the managing director of Assure Syndicates, talk about venture capital. Landon and I talk about how early stage founders can not only get access to venture capital, but how to choose the right investor. If you’re thinking about raising capital, this episode is for you. Welcome to the show, Landon. I’m super excited to have you. Go ahead and introduce yourself to the audience.
Landon:
Yeah. I’m Landon Ainge. I’m the managing director of Assure Syndicates. Yeah. I work with angels and VCs and founders, and a unique way to try and create win-win-win situations.
Tanner:
Awesome. And I’m sure that’s super exciting. How’d you get started in venture capital? What’s your story?
A roller coaster of ‘We’re going to take over the world’ one minute to, ‘Are we going to be alive’, the next.
Landon:
Yeah, honestly, I was pretty reticent of venture capital as an outsider. I was used to doing private equity or buying cash flowing businesses. So when I looked at venture and investing in businesses that don’t make profit initially. That seems scary to me. Eventually, I decided that I had a passion that I wanted to understand, and really it was just a desire to understand. And my desire to understand, led me to seek to apply to a venture capital firm. And so I joined Kickstart Seed Fund here in Utah, the most active seed fund in the region. And that was really interesting and really a great education for me. And then I had the opportunity to switch to the other side of the perspective as a founder, a co-founder of a company called Gabb Wireless, and went through the fundraising process, went through that excruciating pain of being a founder, which is real.
And that was amazing experience for me. And coming out on the other side, for me it was, “How do I work to better connect these two?” Because I think there are a little bit of a disconnect. And that’s how I got involved and it wasn’t anything that I planned or anticipated, but I absolutely loved it. And for me, not knowing what I wanted to do when I grew up. That was kind of like when I hear stories about people that just figure it out as they go, it gives me more hope that I found my place and this is what I’m going to do. But it gave me hope as I was going through that process. It’s okay not to know. And now I found my home and I don’t think I’ve ever going anywhere else.
Tanner:
Well, that’s awesome. And I think more oftentimes than not, the people that seem to have everything figured out and they have this idea of what their career is going to be, doesn’t actually happen, right? They’ll get a degree in one thing and then suddenly they’re in a completely different industry and they find that they like it more, right?
Landon:
Yeah. I mean, I majored in statistics and didn’t take a single business class in college, in my undergraduate. Your degree will often take you in different directions and you point your ship in a direction and eventually the wind blows in one way and you’re like, “Oh, this is much easier. Or this is something that’s really interesting. Let’s go check it out.”
Tanner:
Yeah. I love that. Landon, what are some of the obstacles that you faced as a founder?
Landon:
Yeah, that’s a good question. As a founder, I think there’s probably three main obstacles. One was trying to figure out that there were enough customers ready for the product. And doing so in a way before we created the product, and how do we validate that and justify, and what was everything needed to fill the customer need. Two, was convincing people to give us money so that we could do that. And for us it didn’t happen. It didn’t happen initially. We had to go get people to actually pre-order, for us, we launched a cell phone network, so they had to pre-order our phones. And then once we had those pre-orders then a few early believers invested in us. And then the third is just the personal toll that it takes to be a founder of, it’s really a roller coaster of ‘We’re going to take over the world one minute’ to, ‘Are we going to be alive the next’, and then what it does to your own personal psyche and those close to you that watch you go through that. And that aspect, all three of those are the biggest challenges as a founder.
Doing your research on who is the right investors is often more important than even how good your pitch was.
Tanner:
Did you ever have a challenge getting in front of investors? And I liked that you mentioned the personal struggle with being a founder because I think it’s really often overlooked just how detrimental it can be to your own personal health if you let it, right?
Landon:
Yeah. So you asked the question, did we have trouble getting in front of investors? Yeah. I mean, whenever you are presenting something that it’s not obvious what the solution is or that people won’t understand the industry, for us at Gabb Wireless, it was telecom. That was very difficult, right? Not very many people are very heavily into telecom. It was really big in the nineties, but not as of late. That was a definitely a hurdle. I think that’s one of the reasons why I created my role at Assure Syndicates is, how do you figure out who is the right group of investors to talk to? Because you could be making the best efforts you possibly could, but maybe it’s not the right person. And so even though your business is great, it’s just not the right person to be talking to. Even though you gave the best pitch of your life. And that’s a hard reality. And so doing your research on who is the right investors is often more important than even how good your pitch was.
Tanner:
Yeah. That’s a really good point that you mentioned that because I think oftentimes VCs will seek their own interests, right? Or what they think that they’ll be a good investor in or things that they understand, right?
Landon:
Yeah. I mean, they all have their own expertise and they’ve also told their customers, their LPs or limited partners that invested into their fund, “We’re going to invest in these type of opportunities. And they’re going to look like this and they’re going to be at this point of where they’re at in revenue and traction, and they’re going to be raising this amount of money and we’re going to have this amount of ownership.” These are all the things that VC lays out to their investors and says, “We’re going to fit here.”
Landon:
And it’s actually really small every once in a while, they’ll break their exceptions. But really their thesis is very clear, but it’s very unclear to people on the outside what their thesis is because investors want to see all the opportunities. Because they will always make an exception and they don’t want to miss out on those companies that do really well or have really good potential. And oftentimes their best performers are those where they break their rules to invest. And that’s the constant balance that VCs want to see everything, but they have a specific target that they’re going for. And founders feel like, “I’m looking for investors”, but not understanding which of those match.
Tanner:
Yeah. And that’s a really good point. Let’s talk a little bit more about your background.
Landon:
Yeah.
Finding the right investors is about thinking through who has invested in your space and understands it.
Tanner:
In today’s world, it’s really standard for startups that focus on raising capital in order to achieve the growth that they’re looking for, right? But the average person or entrepreneur doesn’t really have the connections they need to make that happen. What are some good ways to find the right investor and that’s actually actively accepting pitches?
Landon:
Yeah. That’s a great question. And the answer falls in two different categories. Oftentimes when you’re going to pitch your venture capital firm, you have to be a little bit further along than you think. And usually that’s having a product that’s real and live or customers that are already live or customers that have pre committed to your product. That’s important. I think a lot of people look at venture capital and say, “See, it’s such a high bar. We can’t get there.” But in reality, it’s on the founders to say, “Let’s make sure our business is right. So that when we bring it to them, it is an attractive opportunity.” But figuring out who, I talk a lot about seeing what investments the venture capital firms have done, is a really helpful tool. Seeing how recent that our last investment was, is a very helpful tool.
Landon:
But then you have the other category of individuals. Angels is what they’re often called or family offices. These are people that actually, historically they haven’t liked to be known publicly because they don’t want to say, “Hey, everybody come ask me for money.” That’s not exactly a fun job to be in that role. But now more recently people are coming out and saying, “I am an angel.” Usually if they are promoting that, I tend to see that they’re the really established angel or the really new angel. And so they’re not typically writing big checks. Approaching those individuals that say they’re investing, asking other people, I actually find the best success comes from those that are finding strategic individuals that are from the industry or customers or executives that partners of theirs. Or the marketing firm that they work with that sees what they’re doing and knows the potential.
All of those tools are really helpful in figuring out who is our right investor. Well, let’s change it. Instead of saying, ‘I’m desperately asking for money.’ Let me ask, if we took someone’s money, who would had the most value to us? That’s a really different conversations called value add, right? And that’s where I play with this special purpose vehicle, which is just a fancy way of saying. We spin up an entity and consolidate these individual investors or groups of companies or people that can add value to your company and help them all put smaller or consolidate checks for reasons of keeping it organizational structure clean, so that you’re ready when a VC comes and looks and says, “Oh, you’ve taken one investment. And it’s from this amount.”
And it’s very clear. Whereas if you take 20 different investments from lots of different people and some of them are small investments, that’s very complex. I went totally around the circle there. Then I’ll come back to say, finding the right investors is about thinking through who has invested in your space and understands it. Because that’s the first hurdle. Do they understand it? And the second is, who would want to invest? And sometimes it’s just asking. Asking around who is in space.
Tanner:
Yeah. I mean, I think a lot of it comes down to just putting yourself out there and making connections with new people and networking. And I find that just knowing a lot of people will open up those doors, right?
Landon:
And transparently sharing. The one thing it’s hard in this world, but to share your goals is something that really helps. There’s a balance between sharing your goals and desperately begging people. But sharing your goals is very helpful, right? I’ve learned the practice that when I talk to people, I say, “Yeah. Actually, I help angel investors invest right alongside venture capital firms.” And I’ve learned to ask, “Do you know anyone that falls into that category that might be interested in looking at investment opportunities?” And then, it’s a learned behavior. I’ve learned to fail regularly, which is a skillset. And I fail more frequently than anyone because I’d get rejected more than anyone. And I bring that up just because I had to learn that as a founder, that you need to be rejected and your job is to be rejected and to take it gracefully and to understand that it may just not be the right time. They may just not be the right person, but rejection is kind of progress in a weird form.
Tanner:
Yeah. And I would agree with you. I mean, you just have to be able to brush it off and move on with your life. I mean, if you get hung up on rejection like that, then you probably need a new career path, right?
Landon:
Not a founder because your job will be rejection from your customers. Rejection from job offers. You get people as a startup because you’re not going to be able to pay people super great. So you’re trying to convince them of the vision and fundraising is the worst. You’re going to get 95% people say no.
Every pitch for investment is also a pitch for customers.
Tanner:
What are some good questions to ask an investor to find out if they will be the right fit or not. I know you talked about their portfolio. If they understand the space, are there any specific questions that you recommend?
Landon:
Yeah. I would say the first thing is you have to get in the door. So figuring out the way to get in the door, whether somebody that they know to trust or it’s you’re highlighting some of the key things you’re doing to get in that door. And then once you have that conversation, assuming that they are really interested in learning more, founders often forget to ask questions around what investments have you done? What is your typical role? If you’re talking to a venture capital firm, do you typically like to be on the board? You do like to be involved. Do you like to stay involved for the lifetime of the business? Or are you just involved until the next investor comes? What is your typical check size? It is often a regular one or asking the question that I talked about. Asking them about their goals.
Landon:
Do you have a typical, it’s called a mandate and ownership mandate. Do you shoot to own a certain percent of the company? Because that tells you a little bit about where they’re at. Now, they’re probably not going to give you those answers unless they’re interested and they’re trying to be transparent and show you those things. But I think they’re really helpful questions because you’re about to get engaged with this person, right? People joke about marriage and those types of things, but your investors are a longterm relationship. And so enjoying being around them being transparent. They’re going to expect you to be transparent too. When they ask questions, you’re going to say, “Well, we haven’t figured that out yet, but we’re working on it.” And those founders that answer in that way, demonstrate trust and transparency that an investor can get there. VCs it’s the same way. VCs are learning to be more transparent as well, because it is such an important relationship between the two.
Tanner:
Yeah. And it really is like marriage, right? You’re basically adding another founder to the team, right? In a different way. But yeah, you’re going to be working together for a very long time. So it’s really important to make sure that that trust is there.
Landon:
We talked a little bit about VCs, but to jump in individuals when you’re pitching angels, I think it’s really important to understand what they’re hoping for or what they could bring or asking the questions, “Do you know anyone in this space?” Understanding who you are like we serve this customer. Do you know anyone that looks like this? That has 15 employees and is doing about this much revenue and is running into these problems. They probably do. And so every pitch for investment is also a pitch for customers and a pitch for referrals and other people that they may know that also invest. All of those things are kind of the nature as long as you can spark interest.
Tanner:
Yeah. I think at the end of the day, it’s just about building relationships and I think you could probably find other opportunities even through rejection, right?
Landon:
Yeah. I mean, I tried to make a career out of that.
There are so many technology companies that we have because of venture capital.
Tanner:
Landon, what’s one piece of advice you could give to any early stage startup founders about raising money? Maybe they don’t even know where to start
Landon:
First is try to avoid it if you can, right?
Tanner:
Yeah. I like that.
Landon:
The honest truth, I’m trying to starting to repeat the same phrase, 75% of the companies that are seeking to raise capital, probably shouldn’t raise capital for multiple reasons. Maybe they’re just going through a hard patch and in reality, their customers will fuel their growth. That’s the best fundraising you could do. And the others is that business isn’t scalable, the way that a business in venture capital needs to be. But we glorify, at times, venture capital. To a point where everyone thinks they need to raise money because they view money as the solution, when in reality money, isn’t the solution. Building a sustainable business is the best principle. That’s the first set of advice. The second is if you are going to fundraise, talk to as many of your potential customers as possible ahead of time. Because the further along you get and the less you need the money, the more likely you are to get the money.
And that’s the secret about fundraising. And if you’re fueling growth, you will be much more likely to get money. And so that’s the catch-22. And when you’re going to fundraise and you do need the money, you need to be telling the growth story. How will you grow? How will you put this money into this secret black box that you have? And you’ve got this unique way of adding value that at the other end in 18 to 24 months, you’re going to two to three X the value of your company. And you’re going to keep doing that in the future. That’s my advice. There’s three types there.
Tanner:
Yeah. Once you do take an outside investment, it just turns into this vicious cycle, right? Scale, scale, scale, raise, raise, raise. And I agree with you. I think entrepreneurs should stay away from that as much as they can. Obviously some business models you’re going to need it, but money doesn’t solve money problems. So if you need money to solve your problems, chances are you’re doing some wrong on a fundamental level.
Landon:
Yeah. I do need to say, there are definitely businesses where it makes perfect sense and it’s the right trajectory. Sometimes it has to do with the timeline. Do you want to move up the timeline? And you’re able to move so much faster. The opportunities right now, or it’s coming in the next two years. And so you see before anyone else does. I used to be on the side of venture capital is bad. This is just a bad principle. There are so many technology companies that we have because of venture capital.
Landon:
And I don’t diminish, I work in this asset class, I believe in it. And I think there’s so much value, we do more for economic empowerment for those individuals that do that, but we need to improve on the types of individuals we’re giving that capital to and diversifying that. But I truly believe that venture capital will continue to spark so much of the innovation that we have. And at least the United States, I think that that’s our biggest asset, is our ideas. We really are an exporter of ideas and that’s one of the greatest things that I see about our country.
Tanner:
I love that X quarter of ideas. That’s so true. You talk about, staying away from raising capital, unless you have to, what are some good alternatives?
Landon:
Yeah. I think I’ve talked a lot about them. It’s really the biggest are our customers, and the other ways are through debt, but you’re not going to get debt unless you get revenue and can justify the structure. Those are kind of the only two. You can get grants, you can get other means of financing, non-diluted financing, but they only fit under a certain category. And I think they’re very helpful. So you should look at those. You should look at SBA loans. You should look at those aspects. They’re not used as frequently in the venture asset class, but they are used. And if you’re running a normal business, a lifestyle business, you are an entrepreneur as well, but you have to think about, “How do I create something that’s scalable without taking the outside money?” The other alternative is there are ways to raise capital, not from venture capital firms. Because what venture capital firm is saying, “I want you to 20, to a hundred X. Have that kind of potential.”
That doesn’t fit for all of the businesses I talked to. In fact, a lot of them it’s, I don’t know if venture capital’s a fit for you. But there are ways to seek investment from individuals, these angels, family, offices, friends, and family, that if you can show that they can double and triple their money in a short order of time, in the end, then that’s worth it. Or if you can create a company that creates cashflow and you can give dividends to your owners because you use that money to grow. Then that’s an amazing opportunity. That’s just like a real estate investment that people make.
Some of the unscalable things are the things that differentiate me.
Tanner:
Yeah, no question, Landon. That’s great advice. What would you say your secrets to scale are?
Landon:
My secrets to scale? I’m still figuring that out. As a founder in my own, right? I consider myself a founder in the venture capital asset class. And I haven’t really talked about that, but I match-make founders and VCs for free. And then I help individuals invest alongside. For me right now, scaling means duplicating myself. And so my scaling right now has to be people, initially, and then technology. And I am scaling. I’m going to be adding two new team members here in short order so that I can more effectively help with VCs and help founders connect as well as recruit more angels. It’s not easy to do that on a consistent basis and constantly balance. I’m building in systems, but more importantly right now it’s, some of the unscalable things are the things that differentiate me. And I actually hope never to completely pull people out of certain processes.
But for the ones where I don’t need people that I’m trying to utilize technology to remove them. And I think that’s pretty much the answer to any founder of scalability is. Where can you remove people and add value through automation? And where do you need that human element to drive it? And at the top, it’s always going to be human elements. That’s what makes these businesses great. People are the greatest assets that companies have.
Tanner:
Yeah, no question Landon. People like to do business with other people businesses, right? You got to have this balance of what can I automate and what should I not automate? If it’s going to be detrimental to the image of your company or the level of service that you provide, then obviously staying away from automation is probably a good idea. But you can still use automation in other ways, like I use automations to remind me to do something that I would personally do, right? And I think there are still ways to speed up and make certain processes more efficient without taking the human out of things. Landon, I really want to thank you for taking the time to do this. Is there anything that I have not asked you that you think might benefit the audience?
You have to be crazy to be a founder and that’s awesome.
Landon:
I know that I talk in circles, but I think that because of that, there are little things that stick out to people in each question. The only thing I would just say is, you have to be crazy to be a founder and that’s awesome. And those people should be empowered, but also those people that are going through that, I understand that it’s difficult and that at times you are literally thinking your self-image is part of your business. And I guess for me, it’s just a reminder to say, “No matter what people say about your business and no matter what your personal journey you’re going through, or family members that are encouraged you or family members that discourage you or whatever it may be, that doesn’t change your own personal value.”
And I just truly reiterate that, that every person has an extreme value to add to this world. And we are all going to fail. And failure doesn’t diminish any of that. And it’s actually an encouragement that every time we fail, it’s a reiteration of that human beings, we are incredible and we adapt and learn and we come back stronger. And that’s why we are where we are today.
Tanner:
I really love that, Landon. Thank you for sharing that. I completely agree with you about failure. Failure is never a bad thing unless you’re failing the same thing over and over, right?. One of our values is actually we embrace failure. Actually I want my employees to fail because failing is learning, right? And that’s so crucial to growing, not only a business, but growing as a person too.
Landon:
Yeah, I totally agree.
Tanner:
Well, thanks again, Landon. What’s a good way for anyone listening to get in contact with you?
Landon:
Easiest way, I’ll point to the automation piece. There you go. Syndications dot assure dot co. If you’re an angel, you can reach out. If you’re a company, you can reach out. If you’re a VC, you can reach out. And it helps me understand who’s reaching out or LinkedIn, Landon Ainge, pretty easy to find.
Tanner:
Thanks, man. We’ll also link that up in the show notes.
Landon:
Awesome. Thanks so much.