Artem Mashkov, COO at SwagUp and Founder and President at Intelligent Ventures explains why founders shouldn't hunt for VC or angel funding and instead should try thinking more traditional and work on your credit line. We also discuss current situation and how founders can survive this pandemic.
Artem's Twitter: https://twitter.com/artem_mashkov?lang=en
Artem's LinkedIn: https://www.linkedin.com/in/artemmashkov/
Our YouTube record: https://youtu.be/1wC7Ty01CWE
This is fundraising radio and today's guest speaker we have, and founder and president at intelligent Ventures and this episode mainly talk about why should not badger raise money.
So we'll talk about downsides of raising money. And how one can sustain the company without the money that they might get from bc's or angels. So our term elastic code by you giving us some focus on yourself and on swag up.
I went to very well first of all, the family immigrated from the United States. Ninety five. We have refugees, we are on welfare and so Sean programs we're probably close to for five years.
So that's kinda how I got to America. They're grateful. Very thankful that I was able to come here was literally my mom, my grandmother, my great grandmother and my brother, literally, women and children.
So that's a big part of who I am today just coming here in that capacity. I got into one of the top high schools in the nation status in high school. From there.
I kind of strayed a little bit,
because at some personal family situations that happened,
kinda lost my drive basically to get into college out of high school, because I didn't submit the right paperwork kind of just like that on it.
And then started working, got into my first business was a retail store, but thank Lemme gave me her life savings. So I can buy into the business terrible business decision by her. Because, you know, somebody doesn't get into college.
And basically, it's I can't take a shot. But, thankfully, her wrong decision turned out pretty well in the long run, you know, planning is planning and, you know, really know how things work out. This worked out. Great. I was able to fully repaid or within seven months.
And I always had that chip on my shoulder that, you know, to be thankful that my mom was able to take a chance on me where, you know, mathematically made no sense started investing into companies.
Because I was a retail retail provides really good cash flow. Even though it doesn't always provide the growth you want, so I was looking outside, made a couple of investments. Some turned out pretty well some turnout not. So well, and there wasn't didn't turn out.
the was from the most and that's basically what happened with swag about was looking to expand,
but basically my technical investment,
I was trying to get to something that was less brick and mortar and more digital space and agency style and I was introduced to the founder started a company at that point,
but it just introduces somebody.
It's a smart person. Michael Moore told chief by childhood finalize Thomas contours. We went to high school together. I think it's super important to keep all your networks, like very, very strong as you grow up, because you never know where people are going to end up.
So, Thomas introduced me to Michael. We will tap dinner young kid. He was nineteen at the time show me intelligent and extremely humble, which, for me was a rarity.
Like, I find myself humble and I'm just not so that's how I met Michael and we were trying to. I'm like, I wanna get into business with him.
And we're trying to figure some things out and it was just numbers not nothing organic. Right? You want to work for a VC firm? I can't do my thing. I still control that original retail business. We're up to locations. Now it's all over in York City.
So, it's still producing good amount of cash. So I, I kept focusing on that looking for other investments and then he started this company called startup Slack and, you know, he was asking me for advice and I always consult for free.
I feel like, if somebody's starting out, it's my duty as somebody that's been there to help the entrepreneurial entrepreneurial community.
So I started consulting him, you know, talking to him about management partnerships basically, things that you don't even think about or consider while. You're starting a company. What you think marketing growth and product, right? So, it's consulting.
I went to boarding side and then basically swag came out of startups where some extent and at a point, it was in two thousand and eighteen start slab.
Sorry twenty, seventeen make thousand. Eighteen is started hitting some serious revenue figures and, you know, growth problems emerge. Right? How do I need to figure out proper payroll properly?
You know, get a bigger space, negotiate leases. How do I get financing from bags? So all these things that, you know, Starbucks don't really think about when they're starting up. I'm like, okay, perfect out here.
I'll help you out with this, and, you know, I started helping him a little more and then I'm like, I want to invest and he's like, well, we're casual positive. I don't really need your money, but I do want you. So, he's like, if you want equity, you're gonna have to work.
I'm like, you know what? I love working with you I love this company at the same time. Our other partner Allen came on board.
It was an incredible marketing person with a healthcare background,
and I'm like,
I want to work with people that I enjoy and where our strengths of complimentary to each other right I'm having finance and corporate Ops.
Michael, the founder of he's very good at sales.
He's very good at product development and just like, overall business acumen and Helen also extremely, extremely scrappy, similar story to mind where she didn't grow up rich and she dropped out of college.
So just get it done type person. And she came from healthcare marketing, which prepared is like, you know, incredibly difficult. This is like a cakewalk.
And it's been evident, we haven't had a single Jen problem since the beginning of the company even scaled up.
So, yes, I'm like the most important thing is I wanna be in a company of people where I respect and I enjoy working and then yeah, so that's kind of how I came to swag up in June twenty, eighteen, pretty much a year after the company information.
And, yeah, that's welcome stuff. Right right, right. Yeah, it's a pretty cool story. So, my first question is what's your advice to people who are working in retail?
So first first time entrepreneurs, you know, for just thinking of starting their retail store. What's your major advice that maybe there is like the mistake that you've personally done multiple times in the past, and would love to fix, or that you see others doing, like, continuously?
Is there anything like that? Yeah, I kept myself in the business law, right? It's very good to keep your head down and drive,
but for eight years that the company already had that one location,
at a time,
or maybe it's location I was working in onsite in location,
physical sales and it just wasn't the best use of my time right and I knew that if I would leave that location location would fall off and I wasn't ready to.
Make that happen and it did, right when I left, but at the same time, I was able to go and build out the infrastructure that allows us to grow.
So kind of like holding onto control and trying to control every single, little detail, and being afraid of short term pain for long term gain. So you need to realize that yes, if this one thing gets worse, why you leaving?
It's okay, as long as the greater pie rows, so just let it go and letting people take over for you and being okay. With them.
Not doing as good of a job as always what you're going to end up doing is gonna be more impactful overall. Great. So now, let's talk about fundraising for those retail stores. I've personally seen that ten days.
I made some research on that stuff. I've seen multiple and multiple, really cool options for fundraising for those retail stores. Why are you personally? Not big fundraising for for these kind of starts.
retail is extremely difficult especially right now I would say there are some actually that came out of code specifically in our type of retail,
because we are necessary,
but any cellphone carrier at this point.
Not communication is ultra key having access to like, here's here's what I'll tell you selves or more. Importantly, we're living because we see homeless people and they still have cell phones. Right?
You never have a person what would not have a cellphone so we are absolutely necessary. So covet is actually accelerated our bottom line now, comes to fundraising.
It's just not a really investable business, right? So you're not gonna get a huge multiple of your revenue. And so that means, you're not gonna have extreme growth like retail person what's shrinking right? We've been able to sustain some sort of growth.
A lot of it has been coming has been coming from bottom line growth, rather than the top line bios, optimizing process and operations.
That's just not interesting for capital, you know, money, unless they're doing a roll up and then that you're not really kinda like yeah. From a role as a startup.
So, the way we actually were able to find our business is. It's,
it's a little head balanced transcripts so first of all,
I work my a** off seven days a week for two years,
and was able to pay my mother back and say what my money while living at my parents house, not owning a car dressing in,
five dollar T shirts and all that stuff.
That's how you fundraise wasn't a big deal. I grew up on welfare so, for me money honestly is just like points. Right? I wasn't spending it on anything.
So so you do that, and then you build your credit up and make sure you upgrade credit and keep requesting your credit cards to increase increase, increase increase and always paying them what to do here was a balanced transfer. When you balance transfer, you have a thirty thousand dollar credit limit, right?
With Capital one or chase, for example, or any of these companies and you're able to that take their money out, put it into your account. And for eighteen months, not have to pay back.
it's good cash flow,
we're able to do he's done that money to get thirty K, combine it with somebody else's thirty gig,
and then build out a store for that money.
Right? Store one hundred thousand dollars or one hundred. And twenty thousand dollars, and then you work that story and make sure it makes money. You don't have this operating overhead and then you don't spend the money. So you have enough to pay back that card. And then we basically just get going like that.
Well, we just kept paying our balance transfer, sticking them out again. Balance them out yet. Now, one store has financials. We go to the bank. Hey, we have a retail has a lot of inventory. We have a lot of inventory.
I want to get a line of credit on the inventory.
Cool now now it'll have to worry about now I have extra money to fund your locations and the kind of just like,
snowballed for that where we just get borrowing against inventory and accounts receivables from our permission chats to find new locations.
Now, we didn't like, always when but we knew it took us back to retail at this point.
So, as long as we hire the right people, it was just, which was more difficult to do right Pre covert, but it's not a problem with two point five percent, right? That's not the case anymore.
Actually, that's one of the tailwinds that came out of that high unemployment is actually pretty good for us because now we're able to get.
Tyler, and I open those locations in two thousand and eight. Oh, nice. Right. So this is my I mean, go around right?
So all the good thing is we're able to negotiate really good reds on all of our locations, because we opened it during the recession and we tired during a recession we were able to hire people that are getting paid for sixty, fifty, forty thousand dollars.
Nice. You know, and the same thing with reds, and then when you lock in that ten to fifteen year lease, so there's always opportunities during downtime. It's just who's gonna be smart enough to find them and the attic fragile enough to take.
So this is my second go around into a recession, whatever the sense of being, right? Yeah, that's actually great advice. And, you know, billing great, many people don't really take it seriously, because, you know, startup world you don't really think about that stuff because it's not cool.
You know, boring from a buying bank serious thing so yeah, that's great advice. But totally billing upgrade is super important, but here I wanted to talk about the acquisition up Nate.
So, and without the help of PE firms, I personally hardly imagine. How is that possible? How do you mentioned the acquisition without the involvement of or PE firms?
It wasn't really an acquisition. It was more like.
Rebrand, I would say it was Michael's company and that's he just opened up swag up and then it just oh, so it wasn't like an acquisition. It was more just like a rebrand.
So, that's really what happened and you just want it to be a completely fresh company. So you'll see companies name one thing and that you're getting build something else. Right? It'll be.
It'll be like, I don't know, Apple, but it's really you're getting built by Orange. Right? And then people find it weird so just to complete a full rebrand. It was swag up. Startup swipe was very focused on startups. Right?
Which is not a terrible market, but you're really kind of like not opening up itself to the bigger picture.
And as we evolve more enterprise, more Fortune, five hundred clients, hundred onboard, and obviously startup stuff stayed, but it, the entire rebrand was suffering herself.
So I wouldn't say it was an acquisition more, but more of a brand to clarify that point, got it.
So, next question is actually on what he just said, which is acquiring those big enterprising fortune, five hundred companies, how do you mentioned that? Because that's the standard question I get from all the startup founders. Basically.
How do I core big companies if I'm so D*** small so how do you mesh to the so two things number one acquiring? Someone doesn't need training. Those are two different things. You can see, there's like, poignant marketing agencies.
Like, you know, we've done work for trader Joe's and Walmart, and all of these companies in reality. They did like a five thousand dollar campaign. Yeah. So.
But to that point, it's called the land and expand strategy.
So what we're able to do is we started out, we started with these, these things about sweatpants, which are incredibly difficult to produce basically up to date.
And then you have to purchase inventory from seven or eight different suppliers within a three week timeframe make sure they're all correct. Make sure that we modify it. Right?
We print on it, so it's an incredibly manual process and nobody wanted to deal with it because operationally, it's a headache and just.
In terms of how many things go wrong and then like, income wise it's okay but because nobody else wanted to deal with the headache of that. We were the only ones that were reducing the slack packs at the time.
We were able to get teams that have independent budget so everyone says, oh, I need to get contracts and I need to speeds. That are no right, right.
Wherever there's gonna be an HR department where they have a credit card that they're able to spend twenty K on whatever the H*** they want without very, the due diligence right? Because swag budget is twenty million dollars. You're not going to dive into a twenty K.
spend right, they're not going to say, you know, tell me the names of the founder.
So, as long as you're able to provide a product that nobody else is willing to, you know, have the headache of producing, and it's extremely necessary and needed, which is what swag packs are.
Right? Just by its nature.
It's this instead company. So great. Slap back to help their buy from seven different suppliers and then, you know, San Francisco, you have a square foot office. It's like, lined up in the hallway. You're putting your swipe back together.
It's not a good lead. Engineer doesn't know how to make it. Look pretty so not only using. Zoom. They're just shooting at it. Right? They don't have the design aspect, the merchandise.
So, we are able to provide a highly product that was once again, necessary companies, and nobody else wanted to deal with. And we are able to land is enterprise clients. And then what happened is, you know, somebody from Facebook or Google.
I'm just using these names. So, all of our clients, but just in general, I'm using these names.
Would look like, oh, how did you get this? Nice? I'd like to get into my department also and then you get into another department you get into another department. The real trick is how do you penetrate the company? How do you because there was supplier?
Well, that's something we're still working on, to be honest with you, but we have so many champions where they're like, this is our primary supplier, but their s*** I wanna use this call with you because it makes my life easier.
Right the HR person, the marketing person to make their life easier and then when you have seven or eight or ten different people coming to the meetings mentioning, hey, we want squared up.
That's how you get them to know right? And that's when the contracts start and start negotiating. We have a couple of those right now, but honestly it just catching individual's low enough spent. It doesn't have to be half a million dollar contract right away.
We don't need to attract, actually, unless the client wants to we don't do any enterprise contracts. We, we don't have any service agreements. It's we're so confident. Our product is just by, like, we don't charge software fees for a dashboard.
Nothing zero. We know that we have the best product we know that people are keep buying it. So just come and buy. Right? It's just like eBay never charged anyone to use your best marketplace. That's why you went there.
So we're very focused on just building a mold around the quality of our product and then we don't have to lock people in with contracts that's always like a side.
If somebody's trying to get you to sign a contract, that means that, even though they might be competitive right now their size down the road, that they don't compete that they're going to keep the best option for you, and you might want to opt out. Right right.
So, yeah, I mean, enterprise it's land and expand is our strategy, and I suggest that, for everybody else, five C, kinda figure out what the budgets are in departments that don't need approval, right? Hire approval and then try to service those departments.
So, that way, you have people inside the company, champing your product to the higher Ops. So, one quick question sure. About find those, you know, independent departments. How do you know.
The specific person is in charge of that department that has that, you know, their own credit card can spend ten K.
so it's just,
it they do they all it's not,
it's not about,
those those people,
by the way our marketing strategy is a hundred percent inbound,
we have zero outbound sales reps.
we have sort of outbound marketing, our whole marketing strategy.
It's just notify people that we're able to do this, and we have this, and all of our leads are inbound and that's what that's what it is, we take away friction from the process right?
Give samples out, right away. No issues. We don't make you put your credit card down.
We don't we give you the mockups right away so we make it super simple to buy and then we just get a flood of leads. Right?
So it's all, like, we're like, oh, we're not doing account based marketing not yet maybe we will down the line as we tap the bucket, but we're not even there. Yeah, we are marketing is double I'm sorry lead count is double what our capacity is right now.
Nice, it's nice to some extent, but at the same time, I'm like that person that, you know, you see the restaurant with lying around the block, like, alright, they're not operating efficiently.
So, right now our big focus is growing our ops in order to handle, you know, our marketing and once again to help us, like, she could do better, but she doesn't she's not even going full out right now.
You know, in terms of marketing, we're not even trying. Right? That's right. Yeah.
I think it's just having the right product and then getting it on of as many people as possible and then, and then the leads will come in themselves. Right? Just advertising the right place like Facebook wasn't a great place to advertise.
Google is better, because people are actively shopping on Google. Right you know, Facebook is more like casual. And and Google is more like, I need to buy this right now. And that's what we did.
And then that was the start of it and then just if you produce a great product and our product by itself, look like people know it came from swagger. Every time we send out a sample back those people where are brand.
Right? And then I just word of mouth we've had a lot of our leads, come from somebody, getting our path and their house and then their wife, or their husband works for a different company. Like, how did you get this? Oh, let me ask my HR person.
So just continuously producing quality products, because you never know what channel whose hands are going to end up with. It's the best type of, honestly, marketing, you know, just being available on
the Internet and physical on the Internet.
And so that was somebody who goes swag up your name pops up. Like, a lot of marketing is just buying our own name.
Nice nice. And by the way for those who are not or just listen to the buckets, there's also a video version of it. We've just started doing the video and audio. So, if you want to check out swag up on the T shirt, you should check out the description of the episode.
There should be a link to the YouTube recording of this one. But let's move on to what you mentioned earlier is that you're doing some investments as well. Well, let's talk about your angel investments, would you like to invest in people? I mean, it's the same reason.
I joined swipe, like, for me, when you choose to join a company, you're making an investment right?
Investments are often seem seen as financial, but in reality, at this point, in my life, my time is worth more than my money to me at least.
So, it's the same concept is, do you I want to invest in a team rather than an idea, and I always give people the example of, hey, if you want a great idea, I can give you an idea, right?
Yeah, that's gonna generate two billion dollars guaranteed next year. Right? Two billion dollars in revenue guaranteed next year is my idea or two dollars to get to fly to more than that.
A billion people will sign up a billion people for two dollars for one to fly to do more than that. And I'm obviously making fun of some of these Silicon Valley companies that are on there, charging for their services, but that's the point. Right? That's the idea.
But that, how do you, how does the business model work on that? Right? So, I'm not very interested in ideas. I'm, I'm interested in execution and absolutely. Ultimately come from two days.
It comes from the team and it comes from opportunity right? If the technology is decides, they are to make this happen and if the team smart enough and resilient enough right smart, resilient and honest.
So I think that's a big factor to. There's out there. Right now. Every are they gonna do that and take advantage of what of the current opportunity execute on it?
So, I'd rather go into business with someone selling toilet paper, you know, because they're expert of toilet paper and they work for Sharman before, and they know the suppliers.
If somebody else is gonna say, hey, I'm making an app, allows a child to move two dollars like right, right?
And that's just the way I am, but that's kinda what I looked at now with the caveat is how much work am I gonna have to do to validate a team.
And opportunity something completely, to me, I have to, you know, I, I would have to do a lot of work that means that my price for that has to be lower. So, that way my time, which is the most valuable say, you know, I could capitalize on it.
So I would say, I look at people and do they have the ability to execute it in? Are they going to be resilient enough in a changing environment to pivot and keep going when things don't go their way because that happens to every kind of company? Oh, yeah.
The one thing I guarantee is that s*** is gonna go wrong most. Definitely. That's absolutely guaranteed.
So, question is you mentioned how people adapt to the new situations what do you think, or where you're looking at right now during the to are you, are you looking at something's particular in the companies?
Do you want them to see? Do you want to see them? You know, reflecting the effects of the current virus in their pitch deck or are there any new things that you're looking at right now?
Basically yeah, I mean, I, I'm looking at them our business being agnostic to cover agnostic or them having a plan for code right?
So, we're gonna and then I also want to make sure that they're not being too hopeful about it. I'm the kind of person that prepared for the worse plan for the worse over budget.
Like, hey, we, we don't care over the last twenty four months. We're good, right? And actually make money in this twenty four months and then we're cooperatives over now, we have another revenue stream that we could capitalize on and keep the same revenue shift from covet.
So that's what I'm looking at versus people who might be a, like, just hopeful. Right? And say, hey, Colbert is gonna be over in September. I'll figure something out. Sure. Fine.
But like, if it's not true what happens that, and the second thing, I don't I kind of look for things that I don't like more of the things. I like, I'll be honest with you what you don't like.
I, I don't like people who are not using data who use kind of their emotion and you wanna when you're marketing, you want to say motion. Right? But when you're making business decisions, you want to appeal to data. Yeah. And I want to meet people that are self aware.
That could just tell me, hey, I don't know about this, but this is how I'm going to figure it out and and I'm gonna watch these things versus people who are gonna tell me this market. Alright. Great.
I don't know if you're like a big market and everybody's going after it like so my thing is and all of the people is, I don't want it to go to a covet. This is business only works here and coping.
Right. There's a lot of companies like, hey, wanna sort of mass company right? I'm nothing against that. But what is your company going into one corporate is over? Like am I investing into something that's gonna be around twelve to eighteen months?
Even if you make a s*** ton of money right now no. Because your horizon is gonna be greater than whenever we're investing, you're gonna you're looking for an exit in five to ten years. So if something's not gonna survive, that's five years. Then.
Was you know, what's the point of investing is that it might be a good lifestyle business, but it's not on ethical business and then I look at people who weren't able to take criticism and turn that into a.
right, right and for agility in their actions and their mindset so somebody tells them. No, you can't do this. They don't get angry. They don't break down. Right? Those are the two usual reactions. Well, I'm gonna prove you wrong.
It's more like okay, why do you think? I can do this and let me see, maybe I didn't notice something and you're right and okay.
I found out what you notice and this is how I want to counteract it, you know, with the specific practical steps.
And that's more impressive that if I can't find what's wrong with something that actually, I don't like it because there's always something wrong. And that means if I'm that means I have to do even more work. And then I can't find fine what's wrong with something.
And then the person, instead of, like, getting defensive about it, we'll come back and say you're right that's what's wrong with it. This is how we're going to counteract it and like I said, so, that's kind of what I look for.
I look for resiliency and rigidity because even the most perfect business ideas don't always end up. Well, and you're gonna need that either today or down the line at some point.
Right that's part of the Russian attitude, I guess, looking for mistakes, looking for problems, which I think is good. I'm I'm Russian myself, so I, I'm totally on the same page with you, but let's move on to the last question of today's episode, which is a call to action.
So what's that one thing that you would like that we start to do? As soon as the episode is over.
Sure, follow me on. Twitter are no underscore match though. You can follow me on LinkedIn mashed off. If people are looking for work.
Hit me up when I'm hiring and in my retail business. I'm hiring in my hospitality business. Actually. Believe it or not just being able to pivot and and being smart with things and obviously we're hiring swag up.
Right now. You know, pretty extensively were growing fast. And if somebody has, you know, has any questions about entrepreneurship or startups, I'm open. Right.
The only thing I ask for people is to do their research on me and to call prepared, and also the less setup you are in, like, the more likely I would be to help. Right? So I'm not looking out here to help millionaire. Right?
But if they're students, if you're starting out, if you're a refugee that's coming in, or if you're, you know, first generation immigrant or you're just, you're somebody that disenfranchised. And it's hard for you to break through the mold.
Come to me like that. Those are the people I really want to help out people that don't have too many options. I wanna be that option for them. And I truly believe that it's beneficial for me to help people like that.
Because I think that those people are extremely valuable, and they're not being valued by societies and I love investing into people like that. And my time is my investment in this case.
And you never know you could be the next the company that comes out of this. And it's all it takes is just the right advice to the right point call to action.
Twitter or LinkedIn or mascot, reach out to me, you know, if you're one of those people that are usually ignored by society here, to helps, you know, do your homework ahead of time before, doing that perfect. Yes, absolutely.
My call to action is go to the description of this episode. I'll leave the link to our YouTube video. I'll leave the links to or tome's, Twitter and LinkedIn and just also what they have a really nice website. So, take a look at it and we'll wrap it up here have a great day. Everyone.