May 27, 2020

$107.6 million raised - the role of a CTO in the fundraising process by Adrian Druzgalski, co-founder and CTO at Radius Intelligence.

$107.6 million raised - the role of a CTO in the fundraising process by Adrian Druzgalski, co-founder and CTO at Radius Intelligence.

In this episode of Fundraising Radio Adrian Druzgalski, co-founder and CTO at Radius Intelligence that raised $107.6 million and survived the 2008 financial crisis tells about the role of a CTO in the fundraising process of the startup, explains how he thinks founders should deal with the financial crisis and when is it the time to pivot your company.

In this episode of Fundraising Radio Adrian Druzgalski, co-founder and CTO at Radius Intelligence that raised $107.6 million and survived the 2008 financial crisis tells about the role of a CTO in the fundraising process of the startup, explains how he thinks founders should deal with the financial crisis and when is it the time to pivot your company.

Airtm: https://www.airtm.com/en/

Invest in your host through an IPO: https://humanipo.app/id/konstantin.dubovitskiy


Transcript

Alright this is Fundraising Radio where your entity as a guest speaker, we have Adrian Druzgalski, co-founder and CTO at radius intelligence that raised $107.6 million and was recently acquired by Kabbage.

Currently Adrian works as a VP of engineering at Airtm that raised $9.7 million up to date.

in this episode we'll talk about surviving the crisis because Adrian went through a couple of them.

we'll also talk about fundraising and the purpose of us chief technology officers in this process.

Adrian, Alaska called by you giving us a background on yourself and on raising intelligence.

Absolutely.

And thanks for having me.

Really appreciate it.

so, yeah, just about myself I guess is of an introduction.

I, went to UC Berkeley, studied electrical engineering, computer science and mechanical engineering.

after I graduated, I ended up meeting with, two other cofounders and the three of us founded, what eventually became radius, intelligence.

We we originally started out, and this is around the 2008, 2009, period, right when, the financial crisis was happening.

we started a company called Wix and Flix was a consumer internet brand, specifically around, focused on location based services.

Around 2012, we pivoted to a radius intelligence, and in 2019, radius intelligence was acquired by cabbage. around that time I, I decided to join a, financial tech startup called, Eric TN.
I'm there, as the VP of engineering.
That's great background.

let's start with your first company, which is reduced intelligence.

let's talk about the topic that's very, painful for most entrepreneurs right now.

The crisis, the coffee at 19, that's basically queuing, most of the fundraising campaigns that I see.

how did you survive? Back in 2008, it was even worse.

The financial crisis was even worse, but how do you manage to get through this crisis? So you basically started a company during that horrible crisis.

How how do you feel and what do you think is the major difference between the crisis back then and now? Totally.
I'm I'm glad that you mentioned that last point, these two crises are very, very different.
they couldn't be more different.

talking about, my experience in 2008 and 2009, luckily now, we are, relatively well capitalized there at Tam, so fundraising isn't so much of an issue for us.

in 2008 and 2009, yeah, were in the, in the process of fundraising for radius intelligence, but luckily enough, I have to say that, were relatively, immune to the financial crisis that was happening.

it was all obviously very focused on real estate, very focused on banking.

because of the successes that had been seen from, social media like Facebook at the time, 2008, 2009, the, the iPhone was coming out, the iPhone was really hot and people were really looking at to that next thing, that next, that next growth, piece.

that was really around location based services.

if you recall companies like Foursquare, there was another company called Gowalla at the time that was really huge.

people were really coming off that huge wave of social, they were like, Oh my God, I'm going to have this iPhone.

The Android is out.
what's going to be that next big thing and location based services for were there.

given that, we raised money with, relative ease, I always, I still feel guilty about it, seeing all the people, in the news and, that we're ha we're really struggling.

luckily we were relatively immune to that.

I think, as an entrepreneur, that isn't the case in today's environment, unfortunately, I think, the crisis that we're facing, today is, is pretty impressive.

Dented.
So that's true.

I said that the financial crisis of 2008 was much worse, which I believe in as an economist, but in terms of startup world, probably 2008 hit the start world even less than that.

Yeah, I totally agree with you, on that.
I, the way that I think about it is that, yeah, you're absolutely right.
It's that right now in our current crisis, our banks are fine.
We don't have like fundamental, banking crisis.
So in that case, yeah, definitely.
yeah, I think it's arguable and also there's still a lot of room to see what happens.
True.
I hope that these crises will not be have control and we will get through this pretty quickly.

what's your advice to people who are starting their companies right now and want to find where you, so maybe some people who can bootstrap, it's fine, they are fine, don't worry about them.

What's your advice to those people who just need money right now to survive basically, and to get their companies on the feet?

Well, first of all, don't give up.

that would be my first piece of advice and I think that is, that piece of advice holds even when there isn't a pandemic raging around the world.

despite what you said, one piece of advice is I, and I think that entrepreneurs still suffer from this today, and it's something that took me, a long time to learn is that bootstrap for as long as possible.

A lot of times, it's very attractive to raise money, but, especially internet where you can build amazing products and get, incredible reach, through the internet.

being able to bootstrap in very creative ways as long as possible and not having to reach out for money is, it's, it's still my number one piece of advice to, to starting entrepreneurs.

True bootstrapping is definitely an option, but just FYI or multiple ways of raising money without really giving out equities.

if you're curious how that can work, check out the alternative sources of capital in the fundraising. radio.com are plenty of cool stuff there.
let's talk about the fundraising process for a raise intelligence.
You raised hundred, seven point $6 million.

That's a very impressive Mo of Mike.

What was your role as a chief technology officer in that process?

Yeah, definitely.

my role was mainly around demonstrating the technology.

basically anything that had to do with the technology, growing the team, introducing key members of the team to the board, and to, potential, investors, things of that nature.

That's pretty clear and interesting.

what was your role, for example, when you were making your initial pitches to the first investors who just agreed to meet with you once, what was your role there? Were you actually part of the presentation to you, jumping into conversation when the conversation shifted towards the technology part? Or was it just the CEO who was doing the whole beach?

it was mainly, I guess in all honesty it was a lot of, it really came down to the CEO.

my co founder, Darian, just absolute, incredibly incredible, CEO and he was basically painting a picture, painting the vision around what we wanted to build.

my role in that was to basically provide the supporting evidence and kind of demonstrate the proofs of concepts and all of the prototypes that really supported that vision around what were doing at the time, which was, a location based services application and kind of a location based services platform.

That's great and clear as well.

Love your short and on point answers. We'll move on through this quickly. Thanks for that.
But let's talk about your PhD.

first of all, for those people who did not check Adrian's background before the interview, like I did, Adrian has a PhD in,

In mechanical engineering.
Right.
Well, let me just clarify that.
I don't want to be misleading any way. Now.

LinkedIn doesn't do a very good job of presenting, but I was actually, I finished my undergraduate degree and I was about to start a PhD in electrical engineering and computer science.

I think the key phrase there was, is, was about to start.
I was in the PhD program for a very small amount of time during that period of like about to start my PhD.

That is actually when I got introduced to my cofounders through, kind of very, I wouldn't say bizarre circumstances, but very, weird circumstances.

we really, hit it off, really clicked, really connected over the idea, the vision, the potential.

I put off my PhD program for a year and then after a year I put off my PhD program for another year.

finally, after three years, they told me, Hey Adrian, we have to give your spot to somebody else.

I, I, eventually left the PhD program and decided that, I would rather be an entrepreneur than an academic and then an academic.

Right.

That that's a great clarification and thanks for clarifying that before I got into this topic, but I'm still curious, what do you think is the role of education in the process of fund raising? So do investors actually look at what university did he go before starting a company? Do they check your GPA or do they do anything like that?

Well, they don't do anything of that detailed.
I wouldn't say they like tech check your GPA or check what classes you took.

For example, with any major, you can take such a variety of classes that, it's a very different experience and results in a very different kind of individual.

I wouldn't say that is net that would kind of go to that level of detail, but definitely being the CTO of a company, having, an academic background from, a brand in university I think really helped.

I know there's different schools of thought on this.

for example, Peter TEALS, very famous for being, quote anticholinergic.

I don't, I don't want to put words in his mouth or anything, but he does have some incredibly valid points that I would agree with.

then, my own personal experiences, that has been very helpful.

Definitely in terms of the rigor of my education to help build out technology, but also from the ability to, add credibility to things that I'm saying or talking about or presenting.

when investing or when trying to raise money from investors. Absolutely.

speaking of fundraising, we're going back to what you said earlier, which is bootstrapping and then president amount of money that you raised for race intelligence.

When did you decide this and when did you decide that it's the right time to fund raise per Ray's intelligence? When was this point when you were like, okay, now it's time, we're going out to investors, we'll talk to them.

Great question.

that I would say is when you discover your minimum viable product and you're, you have a process that's kind of repeating itself, that's when I think it's a great time to raise money because there you're, you have definite goals for where your money is going.

things like, Oh, the whole goal of building a business is that you want to build a machine where you put a dollar in and you get an amount of dollars out.

you have that process, and it doesn't have to be perfect, I don't think anybody has or very few individuals have gone through that where it was perfect.

And definitely we did not.

definitely when you're able to sign, if you're in the enterprise, obviously if you're able to sign, several large companies, several large names and they're not and they're using like a product and it is productized and they're all using the same product and it's not custom solutions for each one, which is a common anti-pattern with enterprise businesses, then I think it's a great time to raise funding.

Right.
That's a clear description of this point where you should do this and I love that.
in terms of freezing intelligence, DG or we have any customers when you decide to raise or was it just MVP? radius is a unique situation in that we didn't start with radius.
The company, we started out with Wix, which was this location based services app that I mentioned before. Completely different beast, it's a consumer application around location based services.
We built up over a four year period.
We built up an expertise around location based services and location in general and around businesses.

we didn't actually find immediate success with, with those ideas, we building out a consumer brand and a consumer application.

we pivoted, to radius and we realized, I think we actually took a meeting, with a very large company. I won't, I won't name them, but were in the meeting and were trying to sell them on this.

we were trying to build a a news network, a widget where you could present local news and then you could put like a little, local ad, in there.

they, were like, Oh, we love the idea.

We'll do the deal.

immediately they were like, Hey, you've got data on these businesses.

Can you talk to, like our sales and marketing department were like, yeah, sure.

they're like, Oh, we'll buy that data off of you for like a huge amount of money.

We were like, wait, we're in the wrong business.

We're trying to generate demand for something and here we are, like, demand is on our doorstep.

then, after pretty careful deliberation, we decided to pivot, into that space.

were actually one of the first companies to do this thing called the consumerization of enterprise.

that was actually my co founder, Noah, who's our chief product officer.

He he really was on the forefront of that and that really was his, his brainchild.

That's really interesting.

you had two pivots for reasons that two pivots prior to becoming real intelligence, right?

Well, it depends on how you define a pivot.

During flex we came up with like, I lost count how many different product ideas we came up with that were all ultimately on successful.

it wasn't finally until we, I guess I would say one pivot because we, there we like, change the name of the company, changed the branding, changed kind of everything changed the space.

went from, location based services to a B to B SAS, which is a pretty dramatic, a pretty dramatic change.

True.

That's a pretty significant change.

a pivoting is something that's really important for founders and that many of them don't really understand once that point where you should not give up, but to change something significantly.

When was that you understand that four weeks must go and raise intelligence should appear.
Oh, that's such, I don't think I have a one size fits all answer to that because in our case we got really lucky.

We got lucky in that clearly were not getting demand for something which was Quick's are kind of low location based services products that we had built in our consumer applications that we had built.

on the other hand, were getting an enormous amount of demand for our data and it just became, after we had gotten, I want to say like three or four of these data deals, we realized, that, clearly we needed to sell data into the enterprise.

obviously there were a lot of lessons that had to happen in terms of selling raw data's not kind of a good business to be in.

It's better to productize that, somehow in sell services, which ultimately we did.

it became obvious for us and it's a really difficult trade off cause you don't, it's one hand people are telling you like, Oh, you gotta stick with it.

You gotta you believe in the vision, you got to go through it.

on the other hand, it's like, a lot of the times the vision that you start out with in any endeavor, what it ends up with is totally different.

yeah, I don't really, I don't have a, I don't have a good honest answer.

All I can share with your, are my personal experiences are around that specific, uh,

Specific issue.

that's a perfect answer to be honest.

I remember that during our pre-interviewed call, you mentioned that the RTM act would Pew as well after multiple years of rain, right?

well, Oh, the current, company that I'm in RTM, yeah.

I wouldn't say it pivoted.

more of it has been evolving.

it's different in that it's expanding in terms of the services that we offer and, the financial services, the financial services that we ultimately offer.

it's not so much of a pivot as more of a, just an expansion in terms of the, the, the financial services that are being offered.

Got it.

Alright.

Well now going to that semiprivate then too much, but I was curious.

I always like to ask a successful founders who sold their companies relatively recently, if they do annual investing and some advisory role.

do you personally have any enjoy investments in startups or do you do any advisory role officially? yes.
I've done, numerous advisory roles in the past.

I've done, no, I mean, I wouldn't say I'm like an, I wouldn't label myself angel investor, but I've definitely done a few angel investments.

so, yeah.
Yeah, that's a perfect answer and I love it.

the question is, so I personally think that successful founders or great source of capital for younger entrepreneurs who are just starting, have never done anything before because, it's both the source of capital and source of wisdom basically.

I'll, should founders reach out to you asking to become their advisor or even asking to review their pitch deck or do basically anything for them.

Yeah, definitely.

I'm old, and one of the reasons that I love my current role at air team so much is that I mentor, I do a lot of mentoring.

Basically everybody I mentoring is a huge part of what motivates me. I think it builds very strong relationships.
It's a very good motivator for, people that you work with.
I think the best way is probably just LinkedIn.

I think that's the best way to reach out to basically anybody.

in terms of angel investing? I guess I'll be honest, I mainly, I think if I look at my record of angel divestments, they're all done through my personal network.

mainly friends, other entrepreneurs that I've connected with over the years.

I'm not one to take meetings and just do random angel investing.

not because I wouldn't like to, but mainly because, to really do due diligence, it takes a lot of time.

being an entrepreneur myself right now and also a father, it's just a, I don't have that level of bandwidth to, to do the level of diligence I would have wanted to be successful.

So.
Angel investing does take time.

Sino investors invest with their guts as people say, but to be honest, I've never met a single angel investor like that.

yeah, it definitely requires a lot of time and a lot of precise to diligence.
let's move on to probably the last question of today's episode, which is a small call to action.

what would be your condition to a listener? Right now, who, as soon as this episode is over, what's the one thing that you want the listener to do?

You know, that's a really good question.

I mean, I would say that, the number one thing to do is not give up, stick a stick with your ideas and, learn and use every failure as a, as, as a lesson.

I think that for me, that helped me out the most in my career so far.

Absolutely.

what's your advice? I'll kind of continue this cultivation thing for specifically for engineers.

love my listeners are actually a technical background somehow.

I'm not exactly sure how did this happen, but, it's the facts are the facts.

what's your advice to those technical people who are basically preparing to, or whose companies are preparing to fundraise? What's your advice for them?

Yeah, definitely.

I think for me, when I first started out my career, I guess for the lack of a better phrase, I kind of had my engineering blinders on.

in like horse races where they put the blinders on the horses so the horses are focused.

I just, I frankly, the only thing I cared about was engineering.

I was very focused on engineering and just being a better engineer.

my definitely my biggest growth, I've always been very strong technically, but my biggest growth as an individual over my entire career is everything not related to engineering.

for example, it was, understanding and appreciated appreciating the product and design process or learning really how to grow an organization and learn all those, learn all about management and those skills or building out, radius for zinc example has taught me a tremendous amount about the sales and marketing processes.

I think really expanding your reach beyond engineering and, and really diving deep into those different facets that are required to make a business successful is, are super important for any technical phone cofounder in any individual that wants to grow with their company.

it's, it's absolutely crucial.

Perfect.

You were advised to technical people is much more precise.

I guess you were biased towards them, but I don't judge you and I definitely loved how you compare it to a technical people with the race horses at that.

That's a wonderful comparison, but we'll wrap it up here. Thanks a lot Adrian for coming up.

I know you have extremely busy schedule and I really appreciate that you took time to share your experience, on fundraising and on company building.

I think that was a great one.
Thank you so much and thanks for having me.