Aug. 3, 2020

What is founder-market fit and what to do if you don't have one? And how to find a lead investor? By Daniel Fetner.

What is founder-market fit and what to do if you don't have one? And how to find a lead investor? By Daniel Fetner.

Daniel Fetner, principal at Corigin Ventures in this episode explains what does it mean to have a founder-market fit, who can claim that they are the perfect founder for a company and what to do if you realise that you don't have a founder-market fit. We also talk about how founders can find the lead investor and what the term "lead investor" mean?

It means that the lead investor will lead your whole round - he/she will cut a first check for you, help you set terms for all other investors, introduce you to other investors and much more.7

Daniel Fetner's LinkedIn: https://www.linkedin.com/in/daniel-fetner-39097535/

Corigin Ventures: http://www.corigin.com/

For those who want to see ideas turning into fundable companies - Student Startup Battle: https://www.eventbrite.com/e/student-startup-battle-tickets-105973058270?aff=ebdssbonlinesearch


Transcript

Basis fundraising redo, and two days a guest speaker will have Daniel principal at cordial Ventures, and in base episode. We'll talk about two things, Foundry market fit and finding the lead investors. 

So, for those who don't know what Mark found your market fit, is the episode for you, and also for those who never really figured out how to find the lead investor. And what's the difference between? A normal investor, and the lead investor this episode is for you as well. 

So, Daniel olskey called by you giving us some background on yourself and encore joint ventures. Yeah, absolutely.
And,
thanks, 

so much for having me, 

you know, 

my my background is a combination of real estate startups, 

venture capital, 

and, 

and entrepreneurship grew up in New York once the University of Michigan for undergrads studied business, 

go blue. 

And then I got my MBA at the Wharton school where I graduated working in venture technology and entrepreneurship. So cords and Ventures is an early stage venture capital firm. 

We invest at the intersection of the physical and digital worlds. All of our initial checks tend to come in at speed as well as preceded. 

And then we reserve follow on capital for Series A, and Series B and we really planted our flag in the ground around. 

I would say three core buckets being prop tech consumer, and we love marketplace business models,
you know,
at this point seven years into the firm I would say, 

we kind of evolved into a generalist seed stage fund based in New York and given how active we are. 

We like to lead deals. Coli deals, be very hands on with our founders. Roughly half of our portfolio is based in New York and then the other half or in markets across the US and Canada. 

Nice nice. Can I'm curious actually never mind. Never mind. We're not gonna go into the cross border investing topic as it's it didn't last for the whole episode so we'll not, we'll not do that. 

So I was gonna ask you, what do you do there as a principle? So as a principal at Georgian Ventures, what's your core role there? Yeah, sure. 
Core roll is a combination of sourcing new investments as well as, you know, actively working with our founders in the portfolio. 

So my role I focus exclusively on prop tech as well as construction tech,
you know,
for those of you don't have,
you haven't heard the term prospect that really stands for a real estate technology and, you know, 

in addition to investing in companies and working with our founders,
I also play a role in our own fundraising efforts,
which certainly gives me empathy for for founders when they're out raising capital. 

Great. So, speaking of fundraising, this spot is about fundraising. Right? So, let's talk about that. What do you think are the matrix trends of they spend damage? So, during the pandemic obviously, some companies just to cough, like, zoom and stuff like that. 

And some went down. What are the major trends that you're seeing right now in terms of what fields are the most trending? What fields do you think will be booming for the next few years? 

Yeah, sure, you know, I, I think the pandemic we've seen a few things happen. 

One thing that we've definitely seen in our fund as well as some of our peers, where everyone's kinda rejiggering their portfolio construction a bit specifically in order to support companies data. 

We're gonna have a rough time, you know, going through the pandemic. Right? So, you know, they're a handful of companies in our portfolio that we remain very long term bullish on we still love the team. We love the value prop. 

We loved the business model, but, you know, thoughts of their own, you know, they're gonna have a rough couple of quarters and so, you know, lowering the allocations slightly to new investments. 

And you're marking some support capital to companies that are in the portfolio that we want them to survive, 

covet and survive it strong then I would say most investors have have raised the bar generally, especially when you can't meet founders in person or,
you know,
it's very difficult to meet founders in person right now. 

I I would say, you know, myself, my team other funds, I'm close with everyone's generally raised the bar in terms of, you know, how many calls they'll take a week what it takes to get through an investment committee right? Now. 

And I'd say net net probably less deals are getting done, but there's still plenty of capital out there. I think people forget that last year, was the fourth consecutive year, or vc's raise the most money for their own funds. 
So still plenty of liquidity in the system. I just think it takes a little bit harder to get through an IC right now. Right right. That's true. 

And let's just jump straight into the topic of our today's episode, which is a foundry mark. If it can you first give us the official definition of Foundry market fit? Was that? Yeah, sure. Yeah. 

I think there's a handful of definitions out there.
The definition that we like to use,
though,
is why does this sounder have an unfair advantage to tackle the market that he,
or she is going after whether it's a differentiated network whether it's category expertise, whether it's your relationships or contacts in the industry that he or she is trying to Disrupt, you know, 

what about their background gives them that unfair advantage to go after that opportunity. So that that's the definition that we kind of use. 

Right, yeah, that sounds like a pretty accurate definition. I would say exactly the same words, but I'm curious more in terms of specific, specific indicators I guess that you're looking at. 

So, who can qualify as a founder who fits this specific projects. 

So, how big should be that network or how many how many years should you having that industry to claim that you are that perfect founder that knows a ton of stuff about the industry. 

Yeah,
the listen,
those are good questions,
and it's definitely not an exact sign,
you know,
just to relate the founder market fit,
you know,
definition to the industry that I look most closely at, you know,
especially within real estate and construction, those are two older school industries. 

Right and you're dealing with a very unique demographic and what we've seen in those types of industries, is that general disruption is often the better path. 
Now, what is gentle disruption means it means, you know, don't try and shock the system. Right? You know, in these types of industries where folks are used to doing things in a very old school manner, way for many years. 

Typically, they don't love to see the twenty one or twenty two year old engineer. You know, coming out of Stanford, raising his or her. And and saying, hey, I'm coming to disruptor industry right? 

And so having the category expertise in an industry like that, 

being in the industry for five or ten plus years going out and solving a problem that you experienced first hand in a prior life, 

right?
In a prior company in a prior role is typically the expertise we like to look for. 

And that's just one aspect of the team. Right? So, in addition to having category expertise or industry knowledge, we also like to see somebody on the founding team, has the technology know out to actually build and execute on the vision. 

And so, 

when we did a study earlier this year, 

specifically within prop tech and construction tech, 

we looked at the fifty most valuable companies in the space and it was about two thirds ones that are to founder market fit a, 

to not founder market fit of the third of the founding teams who didn't have founder market fit, the vast majority of them were serial entrepreneurs or very seasoned engineers. 

Right? So they've been in the industry been there done that. So those are the types of teams we'd like to look for and kinda, you know, the rationale on why we like the back. Right right. It does make sense. 

And I'm curious about how you can present that founder market fit. So, as a founder, let's say, I want to give a page to an investor nonverbal. So how do I put that on the big deck? 

Because there's a very limited amount of space that is dedicated to each member of the team. So, how can I put so, for example, I don't have ten years of experience in that specific industry, but I have a huge network and. 

What else can have? Let's say I just have a huge I work how can I put the fact to have a huge network on the pitch deck? 

Yeah, listen, I mean, typically, every pitch deck, I see as a page on team, you know, given how early where investing there's usually not that many people on the team when we're investing. 

And so, you know, if each founder, you have five or six bullet points, typically, that's one of the bullet points. We look for right we're either looking for the logo and the company used to work at. 

We're looking for a number of years of experience in the industry. If someone has a really robust network, they can just write really robust network in the sector. Right? I I think. 
You know, I've seen a lot of teams, right? The term founder market fit in their slide deck as well. So 
there's I think there's a lot of different ways you can do it and ultimately, right you're using the pitch deck to get that phone call. Right? 

And so, you know, you can obviously go a lot deeper when speaking on the phone and can explain some of the contacts. You have in the industry, why you have them, you know, things of that nature right? 

And speaking of the first call, literally, the previous episode of fund raising redo is about the first call with an investor colds, how to not butcher your first call the investor. So, if you are curious, how to do that definitely. Check it out. But I'm curious here. 

How should founder what should founders do if they see that? They're not like the perfect perfect founder market fit. So, if they have, like, you know, maybe a couple years in the field that you experienced that issue but they are not they see that. 

There are founders be but better than them and they but they still want to solve the problem. What should they do? 

I think there's a couple of things that you can do one. I mean, just taking a a little bit of a step back, right? A fresh perspective from an industry. 

Outsider is always helpful to have and and kinda allows you to view things with a clean palate. So, you know, that person identifies an opportunity and another industry. 

So my recommendation would be to recruit someone who is experienced the problem first hand, right? Recruit someone forward the leadership team, or, you know, V. P of product or business development or whatever. It may be. 

But you definitely wanna have, you know, someone who came from the industry that you're going after. So, you know, recruiting is one. I think some industries are easier to teach than others. 

If it's a really complicated nuance industry, you're gonna need more industry professional incentive. It's a pretty simple marketplace with a product that, you know, everyone already knows how to use how to acquire it, et cetera. 

I'd trust me plenty of professionals in the field even if they don't want to work with you full time, they might become your advisors and help. You find someone maybe less experienced, but someone who is willing to work with you full time for equity. 

So definitely search out for advisors, especially in the beginning. Now, 
that we've actually gonna be my other point I think, 
you know, 

built building out an advisory board is also something that, 

I think will just add credibility, 

not only tier two your thought process on how to tackle the market. 

But it will also add credibility in your pitch deck. Yeah, I said if you are coming from the industry, but you have some pretty senior level executives from the industry on your advisory board. 

You know, to me, that sends a signal that this is a real problem that the founder going after there is a desire and interest from senior level executives in the industry to see this problem being solved. 

And so, you know, in addition to recruiting somebody full time to join the team, you know, building out an industry or sorry, building out an advisory board industry experts is also something that, you know, a founder can do. 

Right right. And I'm happy to go over your thoughts so your point there, but now that we've discussed the found your margin, I want to move on to the second part of our interview, which is finding leads investors. 

So, first, let's start with a definition of the lead investor. 

Yeah, sure. So, I, I get this question, asked a lot. So, you know, what is the lead investor? Or what do they do? How do they add credibility? 

A lead investor is effectively someone who is going to spend the time due diligence, 

seeing your company, 

like any other investor, 

but has either the bandwidth and or the capital to price around negotiate the terms. 

Usually, it will take a board seat and finally will also help the founder raised the rest of the funds in order to hit whatever the minimum fundraising amount is. 

So, you know, as an entrepreneur, you can get as many softer or hard commitments from angels and passive funds. 

But until you actually have a lead investor, that is typically when all the other dominoes fall, right? So, let's talk a little more about the lead investors in terms of our, the champions basically right? 

Are are they like champions? Yeah. 

So, you know, how people say that you have to find a champion in a company, basically, that's gonna be room for you, you know, pushing your deal forward to the partners and so forth and so on. So lead investor is like, champion. But on the more bigger scale, right? 

Yeah, that that's absolutely right. Remember that a lead investor is also putting their name, their firms name their reputation on the line when they go out to lead your deal. Right? 

Because at the end of the day, they're the ones who are negotiating all the terms on behalf of the rest of the syndicate. They're the ones who are likely sitting on your board. 
They're the ones who kind of yeah, they look good and bad in the press with you and so, you know, they're kinda putting their name next to your name. They're taking a risk as well. 

Not that all invest, not that all of your investors aren't taking a risk, but, you know, the lead investor in particular is spending a lot of time and capital to help your company reached the next level of it's script. 

And so, when the company fails, the investor fails as well when the company succeeds, the investor succeeds, right? So, I assume it's really hard to get a lead investor. 

I've seen tons and tons of companies, you know, looking around getting oversubscribed for like, a hundred, four hundred, seventy percent and never find that lead investor. And that's really sad to watch. So, what's your recommendations on finding that? The investors? 

So how, how can you find one. 

Yeah, I mean, in one word it's probably hustle there. There's some good BC spreadsheets and Google Docs that I've seen passed around. 

Some of them are very good and provide a a laundry list of investors that are pretty accurate in terms of stage check size. Yeah, whether they like to lead, or or if they're more of a passive investor. 

Yeah, I think the majority of vc's, at least that I know. So prefer you to find a warm intro into them, you know, others rely on a rule of three. I know. 

A lot of people that say, 

if three different people tell them about a founder company, 

or yeah, 

they have three different sources saying, 

hey, 

you should take a look at so and so they're building something really interesting then they start paying attention but at the end of the day, 

I think it's just hustle, 

you know, 

it's linked in. 

It's Twitter. It's, it's called emailing. It's networking. It's finding more metros. It's identifying who the lead investors are out there and then trying to figure out, you know, a way to get into them. 

Whether it's a warm intro or a cold email. 

Alright, so, let's celebrate on Twitter specifically. That's probably the tool they use the least, but that the tool that I hear about the most, I do know, I have no idea why I didn't like Twitter as much, but I do not. 

So, I'm curious how exactly can you network through Twitter to just follow a bunch of vc's and comment on their articles comment on their tweets or how does it work. 
Yeah, so full disclosure, I'm probably more in your camp. I'm not that active and Twitter. I'm proactive on LinkedIn,
you know,
so, 

for those of you,
who want to get in touch with me,
you're probably,
you know,
I have a way,
better a chance at connecting with me on LinkedIn and Twitter but, you know,
I I know the rest of my team is pretty active,
you know,
to just them your idea and them a little bit about yourself,
you know,
Tweet your company and,
and,
you know,
please add us or some of our partners. 

And if it's within, you know, some of the trends and teams that were interested in looking at, you know, where we're always actively outsourcing for deals. So if it checks our boxes, where we're definitely gonna respond and, you know, definitely wanna hear more. 

Right right. So let's move on to talking more about current virus. That's a Super hyped topic right now for good reason everything's changing. 

So, my question for you is, as a person who is working in preseason seed stage, what's the major trend you've seen there? 

So, from my personal observations, basically from the data, and from the other speakers that hadn't fundraising for you, is that most of the capital now goes to more mature companies. So, seed slash series. 

A plus what do you see at precedes? Do people still invest. 

Yeah, people are definitely still investing. I, I would say, manage your expectations a little bit. You know, some firms aren't gonna be comfortable writing checks without meeting founders in person. You know, I've seen a little bit of that. 
You know, other firms are perfectly comfortable writing checks without meeting folks in person, just to take a step back. Right? It's it's still one of the absolute best times to be an entrepreneur. 

Know, and no other industry do investors value a PowerPoint pitch deck, with limited traction in the million dollars. Vc still have the most dry powder they've ever had. 

You know,
I do think that some of the preceed firms,
some of the managers who had success over the past two,
three years,
you know,
at least success on paper,
you know,
all,
depending on their personal situations,
they may not,
you know,
go out and try and raise a more of a formalized funds,
which means there maybe a little less capital in the system for really early stage concepts. 

But, like I said, you know, put it on perspective. It's still one of the best times to be an entrepreneur may take a little longer to raise may need it. May need you need a little more attraction, or need to add one or two more team members of the team to look a little bit more. 

Legitimate, but, you know, there's still dollars out there and keep your heads up high and just hostile. Absolutely. Positive right here. I love it. 

So any specific advice those early stage founders, so those who are Pre revenue? I mean, Pre, correct? Pre revenue that's exactly. 

The Pre revenue and Pre product, what's your device with them to to have any specific sources of capital that you would recommend to them? 

Maybe incubator lawyers or grants or something that you would say that now your current virus and works best. 

Yeah,
listen,
I I think if you're an entrepreneur, with an idea, 
you should get it on paper, 
you know, 

if you wanna take your conversations to the next level, 

you really need to have a a deck for investors to, 

you know, 

take a real look and potentially schedule a call with you, 

you know, 

you need a blurb. 

A blurb in my mind is is really a, you know, two sentence description of your company along with three to four caught high level, important bullet points. 

You know, my other advice, create a crunch based profile create angel is profile, create a LinkedIn profile. So those are all kind of a typical first sites that I'll go to in order to determine the history of the company amount of funding. 

How long they've been working on their concept you know, one other thing that I've seen done. Well, especially recently. Given covet is create a five minute pitch video. Right? Maybe ten minutes. 

This will save you an enormous amount of time on the back end as well. Because if you think about it, it's a lot smaller of an ask to have an investor, you know, watch your five minute pitch video on their own time. 

Then, to get them to agree to a thirty or sixty minute phone call, which involves, you know, just coordinating schedules, et cetera, and this type of video will also help them qualify you and vice versa. Right? 

Sometimes getting a quick now is a lot better than a long drawn out process. 

Which, at the follow up five, six times, and when you finally get them on the phone, you know, both parties realize, it's, it's not a fit. So, you know, there's still plenty of accelerators out there. 

I think a lot of venture firms are also incubating companies and so, you know,
if you have a,
a concept, 

and you have a,
you know,
flushed out idea,
there are a lot of early stage funds who, you know, 
our, 
considering, 

just bringing you on as if you are, 

you know, 

helping you work closely with you to through the ideation process with kind of the handshake, 

promise that at the end. 

You know, there's a check. They are waiting for you. So, you know, I, I think for each person for each type of company and and idea that you have, there's all sorts of avenues. 

You can go, you know, graduate school is another really interesting Avenue. 

You know, when I was at business school, and most, most of the business schools now, they have so much programming for entrepreneurship they have so many grants they bring in so many experts and advisors. 

You know, it's almost like one big sandbox, but just and so, you know, like I said, all, depending on what you're trying to build a, once your personal situation is, I think there's plenty avenues out there for, you. 

Absolutely, and those are great advice, especially, I think crunch base and creating those, you know, essential profiles. That's super important. Because personally, if I serve someone crunch base and they're not there, it just feels weird. Like, come on. How hard is it to create crunch based profile? 

Takes three minutes, so do do that for sure. 

And speaking of ideation, we're creating an event called student star bell so there we're gonna come up with the real precise step by step guide into how to turn an idea into fungible company. 

And by we, I mean, three professional investors or founders who's sold their companies, not me personally, so definitely. Check it out. 

I'll leave it in the description of this episode and we're moving onto the last question of today's episode, which is a call to action was the one thing that you would like to do as soon as the episode is over. 

Yeah, I think my, my my call to action was, you know, get your idea on paper create your crunch space profile creates your LinkedIn profile and create your five minute pitch video? 

I think those are all the things necessary to take your idea process and take your dialogue to the next level and and make it real. Right perfect. That's a perfect cultivation. I love it. 

And my cultivation is go to the description of this episode. Leave the link a bunch of links there. One of them will be a link to LinkedIn of Daniels. So if you want to get in touch with him, definitely do through LinkedIn. So we're gonna wrap it up.