Dec. 7, 2020

Selling the company and talking to 170 startup founders. By Blake Smith

Selling the company and talking to 170 startup founders. By Blake Smith

Blake Smith, Co-Founder and CEO at Cladwell that exited in 2019 and currently the founder of Jumpdocs.com (formerly named Boilerplate.legal) talks about his previous experiences in fundraising and selling his company. We also spoke about the major problems that startup founders are having and how to avoid those problems.


Check out Jumpdocs.com (in episode referred to as Boilerplate.legal) - https://www.jumpdocs.com/

Blake's LinkedIn: https://www.linkedin.com/in/blakeallsmith/

We've got SWAG (merch) now so check it out: https://www.etsy.com/listing/898219952/fundraising-radio-t-shirt?ref=listings_manager_table

Transcript

And today's a guest speaker,
we have blake's previously the CO founder at Gladwell that exit in 2019,
and currently the CO founder and CEO at boilerplate dot legal,
and they will talk about previous mistakes improvements and happy ending.
So, Blake, let's kick it out by here. Giving us some background on yourself and on boilerplate legal.

Sure, yeah, 1st, I say, thanks a lot for inviting me on this I love doing this kind of stuff and I love talking to founders, especially about fundraising, because I've made a lot of mistakes, but also have successes with it too.

So, yeah, a little bit about me, I think 1st, and foremost, if you're if you were to come to my house and meet me the 1st thing, you'd notice and the 1st thing you may notice right now in the background is that I have 5 children.

So, my father 5, kids and my wife, and I live here in Cincinnati, Ohio, and the banks, the Ohio river and that's a big part of my identity. It also is kind of what kicked me off into entrepreneurship. So, literally, it was about almost 10 years ago.

Because my son's 9, when we found out that my wife was pregnant with him, kind of everything changed my life. And I kinda was, we're essentially kind of 2 individuals.

Living our own kind of separate lives pursuing our careers and then.

When he was born, I kind of I know that for some people, when they have kids make some less more risk averse but for me, it, it made me way more aggressive.

And I was like, I want to create a life on my terms that I can bring my children into and bring my wife into rather than living these disparate separated disintegrated lives. And so I kind of quit my job based on that, and set out to become an entrepreneur with some friends.

And so, yeah, we can talk a little bit, but it written up raising.

A couple 1M bucks for a company called Gladwell and kind of grew that as in the fashion space when you're partnering with Nordstrom, macy's express levi's, bunch of different brands. Um, and then sold that business last summer.

And then the past year, I've just been meeting with startup founders. I met with 180 startup founders, and a couple of them I've coached through for the fundraising process specifically I coach started founders through racing seed. I really enjoy doing that.

You get all the satisfaction closing around with none of the responsibility of what happens right after that but bleeding to boilerplate. The reason we launched this new software programs that I kept on seeing across these 180 founders. I talked to that. They're making the same exact.

Mistakes that I made when I was an early stage founder, specifically around legal and financial structure of the startup, and they feel like administrative and kind of boring questions about how you're going to structure things.

But they have massive impacts on how much money you and your investors will make in the long run and the nature of the relationship of your partners. Co, founders.

And so I found all these founders doing the same stuff that I was doing, and it was driving me crazy.

I mean,

and so we set out and we said what,

if we created a software with minimal information we kind of created the streamlined,

easy founder centric path to incorporating your business handing out shares to the founders and Co,

founders to investors raising money all the way down to transfer agreements and employment agreements and everything.

So it's kind of like legal in a box and we're about a 10th of the cost. It, anything a lawyer, whatever charge you, but they're all lawyer review documents and you still can engage your lawyer.

But only for the custom work, so that's not legal kind of, in a nutshell and we can talk about that further. If you'd like, nice higher percentage we'll talk about more later on. So, 1st question is going to be about that job quwain. So, when your team was born, you decided to quit your job.

We're pretty sure you call you mentioned that at that time, you had no plan. You just quit your job and decide to do a startup.

So, do you think that was the right approach or should you have taken a little bit more slowly know figuring out what to do next 1st, figure out what your idea is start working on it and then with the job what do you think?

Well, in some ways, I was a little bit forced into it, because my employer gave us a noncompete that it was kind of post, having been employed. They said, hey, we need to sign non compete. So kind of forced my hand.

Like, hey, I'm not going to do this or not, and it was a pretty aggressive 1 so I jumped the ship because of that, but I didn't actually completely jump ship from all the way into the startup. I actually doing some consulting work with a friend of mine's company and so that kind of.

I'll pay the bills as we were formulating our ideas and so I, I still had some cash coming in and I think that'd be my recommendation to most founders who are thinking about starting a business or haven't raised money yet is just because you quit your job. Doesn't mean, you're not making money.

There is money to be had everywhere. Especially if you have any skills and sales.

Marketing or development with 10 hours a week you can I mean, if you do, you can pitch yourself well, you can make more money than you would in a full time job as a consultant. And so that's what I did.

And I still do from time to time, I like to consult with companies and help them with growth sales because I'm good at it. It's useful and it frees up my time. So that, as you're working, start up, it doesn't.

You're not trying to force it to make money for you too quickly.
So, yeah, anyway, bases, like, still make money, but maybe don't do a full time job.

Mm, right and that's that's actually why I like California non compete is illegal here. So people who are not NC move here right now. Um.

So my next question is, when do you decide to start fundraising for acquire well well, for that 1st company when was that moment when you were, like, okay, now I'm gonna go out and raise some money from angels from PCs from friends and family.

Yeah, we, we started raising money from friends and family immediately like before we had a product or anything. We literally put together a PowerPoint deck and my Co founder, Tim drunk, and we put together a PowerPoint deck.

I built an algorithm literally an Excel that kind of demonstrate what we're doing. So, it's kind of a very lightweight person to person product and so went out and raised about 300000 dollars from friends and family. That was really based on their trust in us. His people.

And so, that was kind of our 1st foray into raising investment within raised about a 1M bucks from angel groups, and then later raised a couple 1M from true venture.

So, let's actually we talk about that transition from friends and family round to raising money from professional investors. When did that happen? When did you decide that you are ready for professional investors? Startups?

Yeah, um, that initial funding from angels from friends and family got us to about 30.

Me 35000 dollars a month in revenue and so that was enough for us to get into 500 startups. The accelerator in San Francisco. So, it moved my family. My very young family.

We all moved out and lived in Mountain View while we went through that accelerator and that really set us up to then conduct a true institutional investor meetings.

And so did about 150 meetings in 6 weeks coming out of 500 Startups, which is a lot of meetings. And a lot of rejection, but that kind of kicked us off. And then we were able to close investment through that process.

Nice any major actually. Nevermind, let's talk about major mistakes. You've done to your in your previous fond reading so you mentioned that you've done plenty of mistakes and I love talking about mistakes specifically in fund reasons.

So looking back at your experience. What do you think was the major 1 major mistakes in fundraising? Not a well 1st, off.

My 1st mistake was that 1st, round of funding,
I didn't,
I wasn't,

I didn't know the right structure to raise money on and I went to a local lawyer who wasn't startup specific and so we end up spending,

like,
10 grand and legal person document effectively effectively screwed over our initial investors,

which is really a bummer because I included my dad and included a lot of our friends and family like Thanksgiving is still awkward to this day.

Because even though we're all the cell accompany, none of those friends and family investor saw a dime because of the structure in which we raised from the very get go. And I was so mad that happened. And that's honestly, that's kind of a fuel for when I started my new company.

So that people can avoid that mistake in particular. And that's not uncommon. A lot of founders do

that, because they just have to context other mistakes that I made. And then I see, a lot of founders making is, I say.

Not not not raising enough and maybe not really realizing that there are.

There are stages to fundraising, like, essentially, until you've raised a 2M dollar seed round, I would say you don't have a company, but you have as a project, and you need to think of it like a project.

And I and I'm being a little bit exaggerating a little bit, but think of it as a project. And your project is.

Titled raise 2M dollars for my idea. So, the question is, what do I need to do to raise 2M dollars for idea and you kind of have to have call it a handful of things, right. Need to have a product that people can touch and feel that is superior. Right?

You need to have a team in place that are at least committed to the idea that represent the core competencies of the business. Right? You need some level of traction that indicates that there's something going on here. You need a market. That's big and growing. Right.

And then I like to say that you also have to have some sort of strategy with some sort of mode that you can build an over time and those things are true. All those things are true. You'll have no problem fundraising if 1 of those things are very true. And the rest are somewhat. True.

You probably could still raise, but all of your thinking should be focused on getting those things done as quick as possible. There's little resources as possible. So that you can raise 2M actually get enough runway until.

And so, what I did was I raise 300000 dollars. It's like, I've got a business now, let me run my business. Right? And so I started immediately operating with, just the gold get more revenue, but that wasn't enough. And so I ended up having to go and raise another half 1M.

But guess what? That was at that point. I add more attraction, early, early stage, but not enough traction for Series A, and so I kind of found myself in between rounds. So, the way to think about it is, you probably.

It is very possible. So, in my instance, with this new company, I got a term sheet for a 1M, a half on a PowerPoint deck on this new 1. I turned it down. We're bootstrapping this business but it is very possible on a PowerPoint for you to.

For you to raise a 1M a half to 2M bucks, but typically it means that you have to have some sort of traction in your background. It's up for me having an exit was helpful on that. Um.

So,

if that's possible,

like,

you just need to kind of ask yourself,

like,

what score yourself in those 5 things that I mentioned of a product of traction of a team of a market and promote and if you can score those and say,

like, okay,

what do I what's the least amount of things I can do to get those scores up to a point where I'm ready to raise that should be your focus and I.

And anything else that feels more operational for building a business that should really be delayed until after you have, you know, 18 months of runway, and you raise 2M bucks. So, I, I just wasn't aware that there are these kind of phases like that. And so, yeah, that's 1 mistake.

I think I made as well the last mistake that I made that early on that I made that I later corrected, which I didn't chicken enough meetings.

There's a 1 to 1 relationship between how many VC meetings you take, and whether you close around and typically, I see people off by a factor of 10. like I say that if you're trying to raise.

1.5M dollars you need to take around 150 meetings. I say it's like 10000 dollars per meeting is kind of my metric. Um, and you need to do that in a really short period of time.

So should be doing cadence of 10 to 20 meetings a week and that's the only way as founders that we can actually gain leverage and the negotiating and the fundraising process because.

It actually can create FOMO the fear of missing out. It's incredibly important that you inject that tension into the process. Because otherwise what you'll hear, which I'm sure most of the people listen to this heard before is, you know what this idea sounds awesome.

Really like you guys, but let's just wait and see and see if you get more traction. And the reason they're saying that is it has nothing to your traction. It's that that is mathematically the right answer. If you're not taking a lot of meetings is they're betting you're not going to build a close right now.

So you can just de risk the business on your dime. And so, of course, they want you to do that. The only way to combat that is to be taking so many meetings that when they say, hey, this sounds interesting.

Let me come back and you have more traction when I'm more traction. I know. I'm closing and the next month here. I'm taking 4 meetings a day. So, you gotta make a decision out.

And when you actually have the confidence to be able to say that, because you're taking so many meetings, that's when you actually close around.

Right and that approach is becoming more and more popular. I actually interviewed a guy who told his story of how he was when he is going into the fundraising process basically removes all.

His work, puts it on his Co, founder, and basically works on fundraising, full time. And has, like, 10 to 20 means every single day so go really farther. Yeah, and it's administrative administratively.

It's such a headache.

Like, it's really difficult. I'm like, I help people somewhat the administrative part, but at the end of the day, it's just a pain in the butt.

Um, right, but a lot of times I think that people just are either afraid to do that work, or maybe don't know how to reach out. And so they'll take 10 meetings over the course of a month or 2. and that's just not enough.

You know, you can't actually what will happen is each of them will individually say, wait, and you'll find yourself without any traction.

Right. That's a really good point. So, here actually, we are moving on to the next topic, which is moving

to California, which we've already touched on too, but I'd like to discuss a little bit more.
So, our preinterview call, he actually mentioned that he moved to Los Angeles for some time. Why did you do this or was it because we want for your fundraising process or.

There was another reason. Uh, no. So we yeah, so we initially moved to San Francisco for 500 Startups, and actually stayed afterwards to close round of funding and then later we ended up getting investment from, um, from science, incorporated out of Santa Monica.

And so they offered for us to come in office out of there while we raised our next round of funding. So that's why we moved out there.

Nice that's for those who don't know science incorporate. That's the. I think 1 is certainly 1 of the most legendary venture studios in.

The United States, 80 in the world so that's just a gradient. So quick question here on science incorporate. How do you get in touch with them? How how do you manage to get them on board?

I met Mike Jones who is a CEO of science.

Someone someone introduce me. Oh, it was 1 of my 1 of my investors, he was an L. P. and science as well. And so he introduced me to Mike Jones actually, because I was looking for advice on subscription apps because we had a B to C.

subscription app and so I've met with Mike, I think, once a month for.

Maybe like 3 or 4 months just because he seemed to know metrics and kind of like the funnel metrics and why should be shooting for better than anybody I've ever met before. And so it was only after 2 or 3 months. He was like, hey, are you interested in taking investment? I was like, oh, I didn't even realize.

Oh, I didn't even realize that you invested income. I thought that they were just an incubator. I didn't really investments, so I was like, oh, yeah, sure. I guess we can talk about that, but I wasn't pitching at all. He was just incredibly knowledgeable.

If anybody listening to this is doing a consumer subscription app, or even just a consumer subscription play in general.

I mean, talking to Mike and science, and he, he'll meet with people, he's incredibly knowledgeable about that stuff and they use that was probably more valuable than even the cash. They give us.

Nice and that's just congrats, whereas I'm working with them. Great guys. I personally never really met them, unfortunately hope to meet them 1 day, but if they're just they're down the block from you, right? You're right. Yeah.

Right there down the blog, but I still have never met them. And in fact, I actually tried to reach out to them back in the days when I was trying to invite them to in advance about venture studios and they ignored me.

So definitely try to get a warm introduction to those people, because they are busy reach out to me. I'd love to introduce you and anybody who wants to I'm happy to make a warm introductions. Like, that's part of the founder code.

That's what we do for each other by the way, because I do, I do get paid for coaching with start ups for fundraising just to be clear. I don't get paid to make introductions.

If anybody tries to charge you for introductions, run away,
because that's against the founder Co,
founders code is if somebody needs an intro,
we are happy to make warm intros for each other, and we do that for free,

because that's what that's how we operate right?

Yeah. So that's a really good I'm glad you've mentioned that because I personally, I don't think I've personally ever met people who are trying to charge for introductions, but I'm pretty sure they exist. And if you made them definitely definitely. Don't do anything.

Even if the introduction should be good. So, here we're moving on to the 2nd, part of our conversation, which is about more current situation and.

Yeah, you've mentioned that you've coached a bunch of stores in the past year about fundraising specifically. So what do you think is the major mistake that those founders are prone to making.

I mean, I've covered 1 that is the biggest 1 is they just don't take enough meetings.

Um, for sure, it's just or or not enough meetings in a close enough cadence. By far. That's the biggest mistake. I see. People making other ones is probably not creating a good investor list. That's targeted. That actually makes sense.

They'll just take meetings with any investors and that ends up wasting everyone's time a lot. So, being really targeted on that list. Other mistakes I see people making is maybe a.

Some sometimes, and he gets founders, we tend to get stuck in our own head about, like, the mission of what we're doing and what we're excited about.

But we forget that these are financial people, they're, you know, and their investors and so we need to think of it from the investor's point of view. And I think for me, having a background in finance.

Helps in that sense, because I could kind of relate, but I think that sometimes we have to empathize a little bit on like, why why is this person here? What's their background? And how do I portray this business in a way that's compelling you're interesting to them.

Yeah, no, there's probably 3 good point. So now let's talk about boilerplates so, which is very current situation. 1st question is, how do you what's the major difference?

You see between you approaching building, boiler plates, legal versus you approaching building Coleen collect well, sorry? For pronouncing wrong. Yeah.

Biggest differences between a person clap on boiler plate. I mean, number 1 is just how I've thought about who I found it with.

I'd say before I just if I met people who are really excited about the idea, I was like, how we can do this together. And so I was less strategic about the competency of the person that I've partnered with.

And so what happened is that we were kind of duplicative and we had 3 non technical Co founders.

And another word for that is being very expensive, because we have technical business and so this time I reached out to my old and he was the 1st person I pitched, and his wife's a designer and so I'm not a designer and I'm not technical.

So, I knew that I needed them and the truth is that they need me, because they're not salespeople and so we have. No. And then my wife is doing a lot of the on the writing. There's no duplication across the entire team.

And so, because of that, we move quickly, and we kind of value each other and there's enough room that we're not stepping on each other's toes. So that's a big 1 other thing that I'm doing differently. I'm not taking venture funding and the reason for that really?

Is because, I mean, we're in place.

Financially, and why is that? We, we can afford to kind of self fund this we also see, the opportunity is kind of we can generate revenue right away.

And we kind of had the partnerships lined up before we even started the business. And so I say that's a big 1.

And then last, maybe I think this is different when you're when you're kind of coming at it the 2nd time I think this business is probably.

That involves that talks about if you haven't referred anybody to nimble he's a great podcaster philosopher investor but he talks about how 1st time founders often take on market risk,

which is like,

you're trying to create a new market and when you succeed,

you end up changing the game and you make ridiculous money,

but it's very rare that you can actually shift the market as opposed to 2nd time founders often take on execution risk,

which is,
like,
there's a market here.

The question is, like, can I create something superior? Like can I execute? Well, and so I say this is very much an execution risk business, as opposed to a market. Right? There is a market here. We are 10 times cheaper than anyone else in the market.

And so it's like, it's less risky from a market standpoint. We just have to make sure that we execute. Well, and so typically, those have less high outcomes. Probably not. It's not gonna be 100B dollar business but that's okay.

I think this is meaningful. And that is helping people avoid pain that I experienced. And I think it can be 50 or 100M dollar business. That's still a good use of time.

Absolutely, that's very true. So, actually, let's talk a little bit more about your bootstrapping of boiler plate legal.

So you mentioned that you've actually turned down 1 term sheet from term s*** from ABC a question is how did that? We see. Learn about your company. So, I assume you didn't pitch anyone. So how,

how did you even get that term sheet?

They reached out to me, they were actually they were of interest studio who reached out to me and said, hey, we have a couple of ideas we're looking for. We'd love to pitch you some of our ideas. And if you have any idea that your own, we'd love to hear yours as well. And I was like, well, you got to take the meeting might as well.

And so I took the meeting and, of course, in typical founder fashion, I hated all their ideas. And, of course, I loved no surprises founders. We only love our own ideas and I love my ideas. And so 1 of them was boarding the plane. It's like, oh, I really liked this 1.

Really? You like it like well, let's explore it together, so we spend some time together and they actually, they invested time with me really? Exploring the market and kind of saying, what could this look like and so we got excited.

We both got excited and so they offered and then I found myself, like, I guess my sales instincts were kicking in so I was almost kind of chasing them. And then when they offered me the term sheet, I kind of had to think, like, oh, do I really want this?

So I actually, it was over the weekend. I'm sitting by the pool with my wife and our kids, and she goes, hey.

Look whatever you want to do she goes, I trust you. I trust your judgment. She does, but I just want you to pause. I want you to aspect. Do I really want this?

Cause she's like, you just got out of being venture back to the board, and all of the different stuff.

Um, and that was that was heavy, and there's a huge responsibility with a massive team. And like, are you sure this is what you want right now and just and if so go for it, but I just want you to ask yourself that. So, it's like, okay, I'll do that.

And then the next day I just want to reach out to my old and I pitched him on the idea and he says I love it.

I want to do it, but only on 1 condition, you have to turn down the term sheet. And, like, why he's like, I think we can build it ourselves.

Like, I think we can do this, just us and really at the end of the day. I'd rather work with him that have a couple 1M bucks. Nice. Yeah, that's really cool. Love the story. So quick questions here. By the way.

I completely forgot to ask you where did you get your sales background? So I personally love when people are able to sell whatever the hell they have on their hands and.

I personally never really learned it, I guess, but I'm trying I'm really trying and question is how, how would you recommend early founders alerting that Super extra? Very, extremely important scale of sales.

Yeah, that's a good question for me. It's in my blood and my dad is a sales executive and his dad before him was a sales executive. So I come from a long line of sales people.

And so I think so, which unfortunately we all have the patients as a salesperson, which is non existent, really great thing. But now, my dad started coaching me on sales, which is the 1st sales job that I think everyone probably listen to this has done before, which is selling yourself.

You're interviewing for job. That's a sales funnel right? You interviewed a lot of different places you need to create that funnel. Who's my list that I'm going after?

You kind of water each of the opportunities as they go, you try to keep them going simultaneously so hopefully get a couple leads that all make offers at the same time. You work those offers against each other, and you select the winner and that's that's it. That sales that's fundraising that's like all the same thing.

It's literally just I feel like the sales process is.

We all do it. We'll have to do it if we're going to be in any sort of business. It's just that a lot of times we, we create different names for it because we don't like the idea of being a sales person.

I think if sales is the same thing as teaching, which is the same thing as coaching, it's just like revealing information that's going to result in a good action for that person.

I know about this, and I think I like salespeople I like, when people can say, you know, you have that thing, I can sell it. Let's go. And that's great.

And super helpful in the star world where the toughest part is getting the revenue in, or at least 1 of the toughest parts. So let's move on and talk just a little bit more about fundraising before we wrap it up.

So, question about boilerplate again.
Once you plan to, are you even playing to fundraise? So when.

Do you expect to see that moment when you were like, okay now is the time for me to go out again and raise money from VCs and angels.

We don't intend to I, the only instance that I would would be.
I mean, we were already revenue positive at this point. We're nice. A month and a half in.

And so it's like, well, I guess you would have to I would have to be in a place where I'm confident that I can have you, in a place where I'd have a head to head competitor that I'm confident I could win but the only mathematically possible way for me to win, would be to raise venture.

That'd be the only instance that I would raise venture.

But it's right now I am pretty confident I can win without raising and so why would I, it's a be a waste of effort and wasted dilution.

That's completely, I think you have to let the idea dictate its financing structure.

Does your idea is it mathematically possible for you to win the market without raising venture capital? And if it is do that thing, venture capital is like, the worst bank on earth, like, imagine going to imagine, go into a bank. And you say, hi, I'd like to get a loan.

And the, like, sure, the terms of a loan are.
Um, you have to give me a 100 times my money back.

Or I'm going to fire you right but that it was a venture, right? Like, you have a short period of time, in order to make a 40% in order to pay back their fund. And so it's like, it's the worst bank ever.

The only reason you would ever go to that bank is if no 1 else would finance, you.
And that's what venture exists for if they finance things that no, 1 else would ever think about finance.

It.

And so if if you can finance it yourself, or you can figure a way to do it through revenue, or do it through any other means, do that.

Absolutely right. That's actually a very fair point whenever I need to help someone with fundraising. 1st thing I look is actually venture debt or any sort of debt instruments because I think there are like, so much superior to venture capital costly.

So, on this positive slice, not very positive and hoped for moving on to the last question of today's episode we chose a call to action. So Blake, what's the 1 thing you want to do? As soon as the episode is over? Yeah.

If you want to talk about fundraising or about boilerplate, reach out to me, you can go to all Smith dot Org a L. L. S. it dot org. And that has my YouTube channel where it kind of talks about. I give advice on fundraising. I interview founders about their exits.

It also has a way for you to contact me if you want to help on coaching and also links to boilerplate, which is the new startup that can help you legal stuff. So yeah. Go to all Smith dot Org and I would love to chat with anybody.

Charge you money up front like, I'm happy to just advise and help people because as founders, we got to stick together. We're a lonely group, you know, and we got the, the world against that. So I'm happy to chat with anybody.

The very fair point, and I'll make sure to leave all the links that were mentioning this episodes in the description of this episode.

So, if you're curious to learn more about what Blake Blake is up to, what boilerplate is doing, maybe it's going to be a good fit for your startup, make sure to go there, collect the links and check it out. So, do that.

That can be my call to action for today and as usually have a good date.