Adrian Mendoza, Founder and General Partner at Mendoza Ventures talks about his very first fundraising and why it took him so long. Adrain also talks about the ways to accelerate that process and what methodologies can be applied while fundraising.
Connect to Adrian on LinkedIn: https://www.linkedin.com/in/adrianmendozavc/
Put the kittens in the box - how to close the round: https://mendoza-ventures.com/put-the-kittens-in-the-box-the-essential-guide-to-raising-and-closing-a-round/
More articles from Adrian: https://medium.com/@MendozaVentures
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And today as a guest speaker, we have Adrian Mendoza, fintech, venture capital investor, and the founder and general partner admin, those Ventures. And this episode will talk about fintech s, reaction to the covet.
And specifically how long it takes to take to, to raise the first very, very, very first round of money for your start. So, Adrian, unless you called by, you giving us some background on yourself and on those adventures. Yeah, absolutely.
And the venture capital firm out of Boston, I'm a little bit different than most PCs.
You'll probably talk to,
on your show,
or even that you'll meet is,
I was an operator before and having had to venture back startups and raise money on them and everything that you do to have with the startup went on,
to realize that having built a nice network of investors and partners,
and kind of had done that rodeo show before I realized that it was time to look at it from the other side of the table and started investing.
And then that was early. Twenty sixteen. Really? Because I had spent some a lot of time and fintech a lot of spent some time in technology. So, things like a fintech and cyber security. We're perfect targets for us to invest in.
I'll talk a little bit more of that.
When I kind of talk about how I raised money the first time, but part of it is,
I did a lot of bootstrapping when I had my own business,
a lot of time,
building software and product for the banks as,
as I built my own companies and so,
I built a lot of those products,
so starting to understand how fintechs work from the inside was something that was really important to me because we had built a before that we realized that that's something that we wanted to invest in.
So, yeah, so I come from an operator side.
So, since you come on, come from the operator side, let's start with that side. You start, you've had to venture backed companies and from looking back at your experience. Now, what's your major take away from those companies?
Yeah, fundraising is hard. That's very true too. But let me tell you tell that to everyone. Fundraising is the hardest thing you will do.
I started my companies with another Co, founder, and, you know, the best advice I got was meet someone else who's, like, minded who believes in what you believe in and wants to build a company just with you.
And I thought that was great advice. And, you know, I was actually had another startup and it was probably two thousand and eight markets, losing eight hundred points a day. You know, this company went to raise money.
And wouldn't you believe that at that point? They let us all go the product manager. And I said, hey, well, we've been kicking around this idea. Why don't we go build a company out of it? We've got nothing else to do. Just been let go from a company.
Let's let's do this, and we spent about a year and a half kind of validating the market, and this was, you know, early, two thousand and eight, you know, and so we really kind of work.
Like, how do we do this without a network of having raised money never raise money before so we bootstrapped the company. And I did things, like, work at a bank building products and I would log in on my own personal laptop and run my company. There.
My my Co founder, I just remember this, like, started moving on to and we paid.
Our own development, we literally little by little, we raised our own money from bootstrapping and consulting products. And at the same time, we started figuring out how we were gonna raise capital.
And what for us, the outcome was,
it took three people one year to get to a term sheet and then another four months to get the capital in and this is starting from scratch with having never raised capital before having never had a,
We were literally starting from the beginning to figure out what what we were gonna do and also figuring out what it meant. What did raising capital mean?
So, sixteen wants to read the first round. That's very impressive. And how do you think you could accelerate that process?
So what do you think kids beat up the pros like, drastically entering into something more like six months race? Yeah, but one of the things that you have to as your raising money again, raising money is hard. It's not easy.
There are ways to shorten takes. And part of the important thing is as an entrepreneur.
You have your idea, you decide you want to raise money and the first thing I see most entrepreneurs do, especially now, as being on the BC side is every entrepreneur wants to peach everybody.
Every entrepreneur wants to be like, oh, your BC or investor, and they want to pitch them and really that's not the way to go around it.
The greater good around it is to teach it is to treat it,
like a sales cycle sales one and one first thing you do in sales is qualified lead and, by that mean is,
people come up to us and say,
I've got a healthcare app and I look at them and say,
I don't invest in healthcare,
go to my website.
It says the three things I exactly invested and it's like oh, okay.
And so a lot of the entrepreneurs will meet, you know, funders and and everyone within the mix and the disco fund them and be like, I want to talk to you. I want to talk to you about my thing the times. That's where the majority of time is wasted.
Like, people meet corporate PCs and think, hey, you'll, they'll do two hundred and fifty. K. they won't they'll want they want to deploy five to ten million dollars. You know, they'll go to funds, like ours and say, hey, I've got a healthcare.
I've got this other thing, and we'll say, hey, well, you're not a right fit. We only deployed to these types of companies and so you have to look at who you're talking to and do homework on them.
And the other advice is just because they're there doesn't mean they have dry powder.
There was one BC that we pitch three times in someone in our network said, Adrian, why are you pitching them over and over again? You know, that guy doesn't have any drive.
So we were having conversations just to have conversations because no investors won't say no to you they'll say oh, this is great. I wanna hear it come back and give me an update.
So, what do you want to do, is you want to meet people, but you also want to keep them warmed up on what, you know, like, giving them updates a little tangible things that are actionable is build a list.
You know, it's some people say that it's harder now during because of we're all on Slack. Even ourselves, we're talking over radio. You know, we're talking on a podcast.
I actually think it makes it easier because you can now, you know, you don't have to drive anywhere. You don't have to go to some event. You don't have to pay for the event.
You can reach out to them and ask them a question, ask them about what they're investing in and asking him, qualify them to the types of checks. They right and it's okay to ask someone like oh, are you actively investing? Like, what do you normally invest in?
I noticed on LinkedIn, you just did this investment. So I realize you're investing in fintech and so being able to do a lot of qualifying of that investor is the most important thing to help shorten that process.
Absolutely, that's perfect advice and quick question here does the thing that kind of asked every investor who recommended those full Ops? How frequently should you get back to those investors you met once? And how often should you give them updates on your company?
Should be once a month, should be once per, we're should be once per, you know, six months. Like, maybe every other month when you send an update, it should be actionable.
There should be a bit of news. There should be because here's the thing about the investors is we are from boarded in our inboxes.
We're bombarded with emails and updates and getting a form email from someone really? You know, I won't read it. It just gonna fall in my inbox.
Sounds great coming into my,
if it comes in through the website probably won't read it either,
because it's so much volume the emails that are personalized the emails that come to us and say,
I know that you just did this,
I want to give you an update,
we just closed the customer little pieces of that,
that show that you're moving progressively,
and that you're moving forward or humungous because we know that something's happening getting an email just joined an accelerator.
Yeah, I did this we have great, but, like, I just meet on the bone that shows that it's moving in the right direction is something really, really important to to give the investor.
Perfect that's perfect advice. I completely agree with you. Like, once a couple of times I actually got forwarded to a bunch of those. I think those were quarterly updates, but it was like five pager.
I'm like, I have not been there right and sit or read it like those.
I honestly, yeah, I honestly feel like I got forwarded just for me to read, because that investor was too lazy to read and she was hoping that I will do the work for him past. Sorry anyways. Yeah.
No, thank you. It's all about keeping the updates small it's all about, especially now, when you can go to an event and meet someone that's actually really, really important.
Right? That's perfect. Perfect advice. No. I think that every single of those updates should be like, just major Cape guys.
Know, our retention rates increased by five percent, our trend rate just drop drastically, and we've closed additional one hundred customers that's it. And call to action by that by the, by the way.
So, like, the way we're looking to get an introduction to X Y Z. that's exactly it.
And part of it is when you're asking for introductions, like, remember, you're not a portfolio asking for help is like, unless someone offers it, you know, there's a great adage that then I will tell you is completely true. People say that if you ask for money, you get advice.
But if you asked for advice, you get money like that's completely true. So, what do you want to do is you want to go into when you meet someone and ask, like, how can I help you? Like, who can I introduce you to?
And if you, if you find an investor that you think is the right fit, do back channeling, find other people that they're connected to find other people in in their network. And, you know, let's say you find a great investor.
And you hit it off with them, reach out to their portfolio company and say, hey, what can I learn about.
This investor, what do you think? Like, do you like them? You know, how did the process go for you? Most other entrepreneurs are not gonna shoot you down.
They're gonna wanna share the same experience. I mean, that's what I did is when I met a good investor, we, you know, we baffled each other and I'm gonna do the same thing with founders too.
I'm gonna figure out, like things that, you know, they've done before and ask them questions on it that you, as an entrepreneur need to do the same thing. Right right. That's perfect.
And actually, that was time for us to go back to the initial discussion that we spiraled off, which is the timeframe of the fundraising process.
So, based on which metrics do you think can one estimate was the timeframe for his or her fundraising process? So, I know, sure look at the number of customers that have a look at the revenue that I'm generating every single month.
Look at how big my market is, or what should I look at to try to figure out how fast can raise four million dollars away. I look at it in terms of how to best way raise.
Money is think of it is like, you're gonna climb Everest. I've never climbed. Never. So I'm just going to use is you don't just decide I'm gonna go climb Everest.
You go from a base station to a base station to, like, little by little by little to you get to the top and on the way down. That's what I think about fundraising and growing a company. You're not just gonna say, I'm gonna be a billion dollar company. I'm gonna be bigger than Google.
You're gonna say this is how I'm gonna do it.
Stage by stage by stage, and that should equate to your fundraising.
The biggest failure I see is entrepreneurs that are still really early thinking I'm gonna raise three million dollars with no product or little revenue and that's just the wrong approach to do it.
Because you're, you're thinking I'm gonna get to the top of Everest, so I'm gonna raise three, five million and usually that B*** up in their face, starting off. And I think this was even having learned fundraising my own way.
I think what we did wrong, was we, instead of starting little by little and saying we're going to raise two hundred and fifty K or six hundred K, you know, we were like, well, let's raise one point two, five million.
And then, at that point, it was like, oh, well, in order to get that amount at that time, that has to be a price route. So you need to find a lead. And it was like, the chicken and the egg versus, you know, the successful startups that I know.
Now, having to get done it are the ones that raise what they need little by little they might start with
They might start with a note, then that sort of builds up into, you know, as they're scaling as they're getting traction to a seed or seed to or to a, but just going from zero to one.
Hundred really doesn't get you there because you might not have the traction. I usually tell the entrepreneurs go as far as you can without getting funding.
You know, and this is a great thing is that, you know, compared to when I raise money, there were things like safe. There weren't things like different types of notes. It was literally it was either a convertible that, or there was a price round.
I tell founders,
put a safe together for two hundred K,
you don't need a lead you can go out and you can collect it as you want to give you enough runway to build that traction to get to the point when you become when you're ready and it doesn't mean you can't bootstrap your company,
you can't do a little consulting projects so that when you become to the point that you do want to raise a price round with an investor or a VC that you have that traction in place,
and you also can control your own destiny destiny a little bit more.
Right. That's actually a really good point. I personally don't like when founders see too many movies in there like, oh, we're raising one point five million dollars at exactly. Three million dollar validation likelihood. So that's a really good point.
You know, safe sort amazing. And everyone who's not using save, especially in the beginning I think that's just don't try to invade reinvent the bicycle. But let's talk about you. We've kind of touched onto your mistakes in the past fundraising processes.
But what do you think is the major achievement you've got there?
What, you know, now looking back at the experience, like that thing I'm really proud of it was that, you know, the best thing that I was proud of is that I built a great network of people. Like, I pitched to everybody.
I pitched angels like page investors and that's a network that then I had to my access when I started into the investing side because everybody knew who I was everyone had heard the pitch.
Everyone had, you know, kept them updated all my success. You know,
and where we were,
and it was to the point that,
one of the people that be now is an advisor to our fund with someone that I met as an entrepreneur and who remembered me as an entrepreneur and said,
I'd love to invest in your fund.
So, the relationships that I built there have now been helpful for me now, I can now go back and know who has a fund who doesn't have a fund. You know, we change our group investing in tech.
We change an investment in tech and that was the important thing about building those relationships, because they help you. And part of it is when building relationships. You don't want to be transactional. Oh, I only meet someone because I want to get something out of them.
It's what my mentors always refer to it as ask the question how can I help you?
And from when you talk to angel investors in and other founders, create a network of how can I help you to just build the relationships out there? Because people will remember you if you do it.
Right people will remember who you are and know that, you know, your fundraising know that you had a startup know what happened afterwards. Because especially if you're in a Boston or New York or in, in silicone Valley, everyone will know who you are.
And what you're up to is raising money.
Because when the world of and the world of ecosystems and tech are so small,
that when I tell entrepreneurs is that when they raise money,
the first conversation they have by the time,
they get to their second one.
Everyone knows that they're raising money and everyone below that you successfully raise money and everyone, although that you didn't successfully raise money.
So, remember that about building good relationships. Absolutely. That's a good point. The more and more I spend time in this industry. The more I realized that, you know, it's just a tiny, tiny, tiny world.
It's, it's insane to never be rude. I would that's my best recommendation. I think, yeah, just don't be rude to people. Okay. And even if you don't like them same thing, you know, we're not a good fit. That's it.
But, anyways, let's move on and talk about, you know, the thing that you just mentioned, which is your own funds so those Ventures Alyssa, would you invest in what stage to invest and are you geographically attached to that East Coast?
Yeah, so we, as I said before, primarily focused on three things, fintech and cyber security, we're a little different than if you go on our website will tell you exactly the markers we're looking for. We're looking for companies that are early stage.
In those three verticals,
but also that have raised the friends and family before so that someone other than,
grandma has validated that you have something we usually like companies that have a product to market and that have a first customer where the value proposition may not be perfect,
but we could still pointed in the right direction.
We are not geographic agnostic so we invest everywhere from Canada to Silicon Valley to Boston, New York, London, England. One of our companies was in Austin, Texas that we sold out of our first fund.
The goal is, you know, there are great entrepreneurs around the us around the country. Not. They're not always in Silicon Valley.
The thing that we can do is to find those great ideas and then we leverage our network across Canada, the Valley, the East Coast to help sort of create that financing networks around though. We also are very active.
You know, the entrepreneurs that attract, you know, that are attracted to us, are the ones that are look at the domain expertise we have and focus around. You know, we're very hands on investor.
We're not running the company for you, but we're meeting our entrepreneurs on a weekly basis. I wanna know that help, you know, because having been an entrepreneur, it's about.
Avoiding the same mistakes that even eyes and entrepreneur made, if we can help those the early stage entrepreneurs to avoid them and be successful that's where we know that. Us as an investor have done a good job.
Right perfect description of what you do and what you invest in. So here I want to follow up on something you just said, which is, you know, find detail and find those good deals.
How do you find them and what percentage comes from the referrals and what percentage comes from the other fields like,
just founders reaching out to you through emails,
applying to to your venture capital on your website,
other sorts of tools yes,
I'll give you a a quick metric since we started in January of twenty nineteen with this fund.
We probably had about four hundred companies reach out to us. We have more companies reach out to us, the capital, the companies that we look at and, you know, and here's the thing. Most of those
companies will be people.
Like, I got someone emailed me, like, I'm on a list somewhere for healthcare and, like, we don't invest in healthcare. I got invited to a healthcare conference. I was like, dude, I don't invest in healthcare, just random things.
Agricultural tech. We don't invest in ad tech or food and so, therefore, you know, we weed out some of the here's the three verticals we invest in and then we also weed them out on. Hey, do you have revenue?
Like, do you have a customer and not just an, but someone that is gonna pay you for your product to validate.
And we'll track people that may be say, well, we have an a letter of intent, but not yet. We'll still continue to track them to, to see where their progress is.
So, usually, the, the best companies come from three sources. One referrals are important from other investors.
You know, we, we have done this deal before they may have come in early, or we might come in earlier and we'll pass, you know, things within our network.
And that's the investor one partners in our Eco space in our ecosystem people that we know that are pretty connected,
whether it be accelerators,
whether it be,
service providers that are actively meeting people and say, hey,
this might be a good fit.
And then the third one is sometimes called outreach my recommendation for any cold outreach is that when you send out an outreach tailor and do your homework out of the hundreds of messages that we get in on our
or via email,
I've only really,
ever responded to three or four of them, because the response was really tailored.
Cold billing doesn't work, you know, putting your your deck on a website doesn't work. If there's an investor, you want to meet, go through LinkedIn, find who they're connected to and get a warm intro that way.
Because even when I was fundraising, the warm intros were the ones that we've always had better conversations with.
Absolutely, really good point here and I want to pull up a little bit on the cold outreach. So you mentioned that, you know, cold emails don't work. I believe so as well. But I also think that they work if you make enough effort. But the real question that I have is, you know, do you.
To make a really good email to reach out to make this cold outreach to an investor. You really want to work with. You have to do a lot of homework there. So, like, thirty plus minutes of research on that specific investor.
And my concern is that maybe the investor will just missed that email or maybe he, or she will feel that that email is too long and not personalized enough. Do you think that's the case or do read every single email? That seems to be personalized?
I skated most of the ones that get personalized. You're right.
There's a lot of noise in our inbox more noise and we can see,
but I think if you're going to do your homework and you're gonna,
like the mountain messages that I get on LinkedIn,
only read the personalized once the amount of decks that get sent,
sending the deck just over the transom of,
here's my deck.
Usually it's do the homework. Hey, Adrian. Here's what we're doing is this of interest. Maybe, we can look at that, but I think the best approach is, it has to be this multi prong approach.
It has to be I'm gonna send them an email or a LinkedIn message. I'm also gonna find a warm intro, or I'm also gonna find, you know, Pre covet if they're in the event and I want to get to meet them, you know, sometimes you could do face to face.
So it's not just the same thing. Can you do it in multiple ways? Because the best companies. The, you know that especially the best founders that do fundraising is they use all of them. They
leverage their network. They build a network, they reach out to people and say, hey, you know, can you, you know, I noticed you're connected to with.
So, and so, would you appreciate, you know, an intro and then have build a relationship there before Randy TRW sent.
Good yes. So, but, you know, that's what it's gonna take, you know, because here's the thing like, that's when that's why we refer to it as sales, it's sales one on one.
Like, you have to build a quality network of qualified leads to then go, bring them down the funnel. This is just exactly what you'd expect any entrepreneur to do, because they're selling themselves as much as they're selling their product. Very good point.
And, you know, multiple points of contact is a really useful thing. So you might reach out to them on Facebook, even though it's not the best idea, because some people might get pissed off by that happened to me a couple of times.
But let's talk about, I'm gonna ask you kind of off topic questions here, but what's the weirdest way that someone reached out to you? And Nicole way?
So, maybe the commented, one of your answer imposing, like, hey, we are doing fintech. Can you take a look at our pitch to court? What's the have you ever had such outrageous to?
Oh, we've had a couple of them that have made us laugh where we had the one that was I like money. Give me money. Will you give me money?
There was one about I think it was like.
A, a posture app and there's something and we have a little mascot that's flushed on from one of our acquisitions and someone said, I noticed that VSI puppy has fantastic posture. He would be great. He'd have better posture.
If he uses our app that laugh again. Totally out of our, we, we're not gonna invest in the company.
It wasn't a fintech, but it was, it was, it was a cute way of getting our attention, but there have been crazy ones before.
So, we just like that other one that I said that at first one, and that's the way it is for me love those stories, to be honest love when they're kind of nice cute and in a sense, not aggressive.
So, yeah, on this positive note, we're moving on to the last question of today's app, which is a call to action. So Adrian, what's the one thing you want the listener to do? As soon as the episode is over?
You know what I'm happy to on the episode if you go to our website, we have a ton of little articles. I remember I, I wrote an article about that equating fundraising to put putting kittens in a box.
If you've ever tried putting kittens in a boxing, just described, getting B*** into year round. That's a great read on it.
I would say if you want to reach out, connect on LinkedIn, have an interesting thing, or just read up about some of the things we're posting and are types of companies. If it's a good fit. Take a look.
I think I try what I try to do, have been an entrepreneurial post articles and medium poster website posts on topics. That could be helpful. So recommend if anyone wants to read up there and see where see where that goes.
Absolutely perfect cultivation. I'll leave the links to those that you just mentioned into the treatment of
this episode and my call to action is as usually go to the description of this episode. The links mentioned in this conversation will be in that description.
And also, I will leave a link that you can fill out. That's a form that I will personally review. And if I like, if I see that there is a connection with one of the mentors or investors in my network, how can actually, because it's just fine.
I'm trying to help my Lucerne so, go to the description of this episodes, fill out the form, take a look at the links that I will leave there that information in this episode and have a good day.