June 26, 2020

Helping startups to raise money for no fees or equity - how Mother Teresa works in the fundraising field - by Landon Ainge.

Helping startups to raise money for no fees or equity - how Mother Teresa works in the fundraising field - by Landon Ainge.

In this episode of Fundraising Radio Landon Ainge, the Managing Director at Assure Syndicates explains how he helps startups to raise money without charing any fees or even taking any equity. He explains how the syndication process works and what he gets out of it.

In this episode of Fundraising Radio Landon Ainge, the Managing Director at Assure Syndicates explains how he helps startups to raise money without charing any fees or even taking any equity. He explains how the syndication process works and what he gets out of it.

Article by Landon on Assure Syndicates: https://www.linkedin.com/pulse/introducing-assure-syndicates-landon-ainge/?trackingId=0kCMulCPT9W5dAvm1jDsvA%3D%3D

Landon's LinkedIn: https://www.linkedin.com/in/landon-ainge-bb354166/


Transcript

This is fundraising renew entities a DSP who have London Ainge managing director at assure syndicates.

And today we'll discuss this the syndicates, how it works and how London works, because he has an uncommon approach to investing and to syndicating deals.

So be ready to hear something new ones in Alaska call, but you giving us some background on yourself and on usher syndicates. Well, myself, that's, you know, that's a pretty hard question openly.

I've I've been through a lot of different roles in my background, but I keep going back and forth between investing and operating. Did M, a, when worked for a large corporation, then moved to venture capital and then went and founded a company.

And now I'm back on the early stage investment side, and asure is, I would do them as the specialist. So special is kind of like the special purpose vehicle.

And what it is, is, it's a no, it's a legal entity that we all that multiple investors put money into. And they help make that easier for investors in, for companies.

Senior muted. I can't hear you again. D*** it. Can you hear me now? Yes. Alright. I'll cut that part out my bed. I'm still not used to the microphone, so.

Let's discuss what you do now,

so you said that you had both the operational role and the investing role what exactly do you do now so now what I do is I tried to bridge the gap between those two things,

because I've learned as a founder, you know,
you definitely have a one perspective, and as an investor,

you have another and in reality you have similar goals,
but often times you speak different languages like a like a developer and a product manager.

Oftentimes, it takes someone that has been on both sides to be able to communicate the, the message between the two.

So, I hope to facilitate that, and I do so without charging the founder or the VC, because I like, I want to see more deals done and I'm really excited about kind of what we've created it. Sure. Syndicates.

That is really exciting. That's a very uncommon practice. You know, it was use web for the first time, so let's let's go a little bit in depth into this, how it works.

So basically, in simple words, you connect investors to interesting deals and you don't really take any fees from that. Right? Yeah. So, what I do is I work hard to understand what the investor's goals are and I have the time dedicated to do.

So, you know, a lot of a lot of founders are the, the thing they have working against them, is they have to work on.

Running a business and focusing on that in full time and so fundraising is a second job for them.

So, I work hard full time to understand what does each venture capital firm want to focus on and what industries and what stage.

So that way I can be essentially an extension of their team providing customized deal flow for what their thesis is. And then I work with the founders to say, look, are you ready to raise venture capital? Any.

Let me give you my recommendations of who are the people that you should talk to and I can then, you know,
if you're willing that I provide your deal to these five PCs,
that seem like there would be a good fit and the venture capital firm gets to opt in,

whether they want an introduction. So,
you know,
I can,

I don't try to take fundraising from a founder,
I think,
a healthy process and painful process,
but I do try to help supplement it so that they can, you know,

find the right investor for their business.

And if you're an investor, find the right investment opportunity, because you have your customer base, which are your investors here on piece. I mean, yeah. That really sounds amazing.

And the fact that you don't really charge any fees from the founders were from bc's. It's it's insane. Is great to hear, but I'm not Mother Teresa here. Right?

I, I, my goal is to be to invest in that company as well.

And so, what I'm doing is, I'm trying to say I have aligned interest here where I want to have the best possible venture capital firm, or the best partner I should say, invest in the company.

And because I want to put money into that company as well. I'm a small check, I'm a, you know, a hundred thousand to two hundred and fifty thousand size, check into a seed and Series a deal.

So therefore it's very clear where I want to go and what I want to do. And so I'm just trying to improve my investment essentially and I'm waiting to invest until, you know, I'm waiting to invest at the same times, the venture capital firms.

So they don't believe that I have misaligned incentives. Someone else the venture capital firm says the terms, and I try to piggyback on the same valuation and and go into that deal.

So,

I am aligning myself with both venture firm and the founder where I can provide help when our founder needs it most,

when they don't have money,

when they don't have resources when they don't have time that's when I can provide the help that they need.

And in and help them, get more of those things, help them get more time because if they raise capital, they can hire people, help, get them resources and hopefully help them that that lead investor.

Right, right, right. And you said word help like five times in one sense. So I'm pretty sure you're close to Mother Teresa, but before we go into that into that Mother Teresa thing, I was wondering, how do you make connections with all those investors?

So, I assume to to be able to connect so many startups, do so many investors. You have to have a lot of investors. Where do you find them? How do you how do you make connections with them? So openly?

Like,

I,

I just work hard to get into the door to the venture capital firms and then if I,

you know,

because my motto so unique,

I say,

I want to provide value for free and I'm not just gonna try to,

like,

send a huge number of deals your way I'm trying to send a hand picked group of deals to you to add value.

That that is really something that's interesting to them because it's it's unheard of. Right? Like you said, it's, it's unheard of in the world and so they are open to have those conversations.

So if you're a venture capital firm, and, like.

I do ask hard questions about what your thesis is,

what your check sizes,

what industries you do and do not like,

but openly I am only value add because the only thing I ask is that you enable me to get into the round that I've introduced you to the company so,

that generally is a pretty friendly ask for someone on that.

I, I do, I do represent some angel investors, because my checks come from individual angel, investors and family offices that like to get into deals alongside venture capital firms.

But, but don't have that ability and so I create that ability for them through unique. So,
you know,
we've talked about two parties,

founders and venture capital firms,

but I all basically help and represent a group of angels and family offices and I'm very open to bringing more people to that because that enables me to help more and more founders in this process

that's that's really great.

So, my next question was about how you personally choose the deals he wants to invest in. So you said that, usually you actually do the investment yourself, and then you presented to your network of investors who should be interested in that specific deal.

How do you decide if you want to invest or not? So, what's your major criteria? Yeah, that's a good question.

Like, I've talked about alignment probably five times as well about, like, you know, I don't I want to be aligned with the people I work with and most part of the people I work with.

So, I want to be getting the same terms that they're getting on the deal. I want to be aligned as an investor.

So they know that I'm not just trying to, you know, get a better return on my investments by investing early and then quickly thereafter, trying to raises seed round or a series a round.

Because I was, I had alternative motives. So,
short story short answer is,
I just think that,

you know,
it's pretty clear to me whether there's interest,

because I spend my whole time talking to the venture world and so I get a good sense of there is at least interest.

Granted, I have a heart. It's hard for me,
as you can tell,

I have a very soft spot in my heart for founding and I I want to help every founder and so I'm trying to do that as being,

as honest as possible and say,
you know,
you're just not ready to raise yet,
based upon what I'm hearing from venture capital firms, or,

you know,
probably makes sense for you to raise an angel around before you try to go out to the market.

And so that's that's that's hard for me. Sometimes not not hard to give that feedback, but hard for me to, like, basically the thing.

No, but I say, no a lot like, but I, I do feel like, I have an advantageous position to try to help founders in that way. And I, I've made plenty of customer recommendations or introductions.

I've a plenty of angel investors that are, like, angel investors that I know that are on my platform.

That I said, hey, you should go do a deal with these angels that like this space because, you know, my angel investors to invest through asure syndicates.

They essentially are saying, I want to invest alongside is seed and Series a fund, which is a later risk tolerance, but also, they, they often times, like to do early deals as well. Alright.

So, speaking out of the way that you decide, if you want you to help the startup or not, you said that you talk to them on the phone for twenty minutes? Yeah.

S*** something got into my I'll get that out by the way. So you said, that's basically when you decide if you want to help the serve or not.

We just need to talk to them for, like, twenty minutes and you see if it's a good fit.

So a lot of what I've heard from my listeners who are mainly founders is that they feel that if they get on the phone with an investor, or with a potential investor, they will definitely convert them because they feel they're so great.

And the question is, how do I get on the phone with investors? So how do you decide if you want to move on to even the phone call? Not just, you know, email back and forth. What's that trigger for you?

So, I'm unique in the fact that generally speaking I have, you know, I have I have a bunch of people that I trust just like a VC does that will send me deals.

And then I know if it's coming from them, it's generally more qualified. But I am more open to talking to founders earlier than most PCs. It doesn't have to be a perfect fit.

It has to be a, you know, are you thinking, are you close to fundraising in the next three months? And, you know.

So, generally, I like to say, I like LinkedIn so that's unique.

I will utilize that as a a good funnel for me that I asked to see the deck beforehand, and it allows me to diligence the individual, both their experience and their team members and everything else.

That's on LinkedIn, and if they have a deck, then a gentleman tells him the put work and thought into where they're at, with their raised process. And then it allows me to turn with some questions to them.

And then we move things to kind of a follow up meeting for me things I look for is if you're B, two B,
SAS company,
you know,

that you have your product live that you've got initial customer traction,

or,

or at least long term contracts of significant value that would be that would be considered traction.

I like, go through the bullet points here like consumer software that you have user acquisition growth that you're showing that you have plans for business model. Generally speaking.

If you were a hardware play, I want to see the hardware actually working and functioning PCs are renowned for hating hardware and especially run out for hating reason research dollars to go into creating the hardware.

So, I want to see that you've come to market or that.
You are live with similar to kind of what I said with the businesses and then I,
I have a hard soft spot for consumer products because I,
I worked at a consumer product company over to Overstock dot com and,
you know,
I I like consumer products and it's definitely an underserved market in the capital perspective.

That being said, because it's underserved. I have to do less consumer product deals. Then I do so and so, I'm, I'm responsive to the vc's. That are telling me what they're interested in, and their form, a reflection of what they're interested in.

So, software tends to have greater endless restrictions there.
Right,
absolutely you're right here I personally hate hardware as well,
so definitely definitely not a big fan just because how it works counter there and say, yes,

I understand what hardware but hardware with the right software can be a very deadly play.

If you know, how to scale and go to market, right? Let's look at pellets on for example, that's a hardware play.

It's completely unattractive, but they've captured an interesting market and a captive market, in a way that is sticky and provide software, like returns in a less capital efficient and so right, right.

That I do see if you can cheat how you implement the hardware. Let's say, you know, if peloton news, we provide bikes to all these gyms for example. That's interesting.

But they've cheated it because they, they seeded the market with a bunch of these hardwares. You know, they can get initial traction.

A lot of these don't think about how to get traction, but if you can, you actually, and you have a software, you might have some tail ones in that industry.

So, not to go too far into my pedestal, random hardware because you come talk to me because I've got deals for you, but I'm.

I'm not, you know, I I like software much more and it's easier to do. We're definitely on the same page that we're definitely definitely on the same page.

So you mentioned earlier that sometimes you have to say no, and basically say, like, a year too early for try to go to recent angel round and that's one of the questions that I get really often.

So, once the a founders get to a certain stage. So, we usually succeed stage where they decide if they want to go to MBC or to angel investors. Where do you think is that threshold where you should stay with angels? And when you can actually go to.

That's a good question.
If I'm a founder,
if I have any potential and capability, I would say,
do anything you can to not have to, like,
raise money because you need it to, to get your business off the ground.

If you can. Let's just be clear about this. The best businesses I talked to are the ones that are able to grow their business and get it going either with their own money or with some friends and family money. And then they're able to grow their business to a stage.

Where it's ready for VC deal now what is ready for VC deals kind of what you're asking and I would say if you're software business, you know, every VC has a different perspective of what's considered traction.

Some vc's will look at you. If you get fifteen thousand of monthly, recurring revenue and some won't look you till you're at fifty to one hundred thousand of monthly, recurring revenue. And those are both considered seed funds, which is really hard. And which is why it's.

So it's a difficult world for founders to understand which investors are even the right fit, which is why kind of created this role, but that's kind of a good thought process.

If your consumer product or consumer software, you're going to be showing month over month growth of users. Those tend to be less.

Profitable because you're figuring out your business model, and so those tend to need an angel before they can go take a VC round. But, you know, if you get to the hundred thousand user, Mark, that's a really attractive consumer software deal.

So, I'm trying to give, like, key and most PCs won't give you them because the lines in sand are hard, but collective information of talking to VCs is helpful. I find.

Yeah, so those are good indicators. Consumer products. The threshold is much higher. Like, honestly, I don't think multi million dollars in revenue from consumer product. I just don't see it happening much from the VC side.

And if you're a single product, you, you should be thoughtful and have a plan for multi product house of brands perspective.

If you really are trying to raise VC money, but I do think there's a ton of opportunity for angels to invest in the consumer product space because they're profitable, scalable businesses that.

Continue to grow. That's completely right. And speaking of angels, I was wondering, what do you think of the current situation? So right now in this fund who is investing? More actively? Is it angel investors or is it vc's?

Well, it's clearly vc's because they have a mandate to invest. They they did kind of slow down a little bit, but I would say overall, I'm, I've definitely seen momentum.

Pick back up people are still in certain industries.

I've got a couple of travel deals that I'm really excited about,

but some people won't touch them,

but I I still think that they are exceptional businesses,

but these inherently have a,

you know,

incentive to invest.

They need to deploy their capital earlier. So it has more time to develop and they have a mandate, right? They have a ten year window their, their fund can last.

And so if they are waiting and waiting,
you know,
that that that's a potential decrease in the return on the potential deal,
granted,
they want to make sure that that company's growing and not just using that money to pay salaries, let's remember going back to the around conversation if,
if you can raise if you can get going without raising an age around,
you should and if you can get going without raising venture capital,

you should.

But always view raising capitals purpose should be growth one hundred percent growth, adding to the team adding to marketing adding to, to Compounding growth capabilities.

You always want to be improving your product, but most people like to fund graph.

Absolutely, you're completely. Right so, let's talk about the mistakes that you see in founders. So when you just connect the founder to ABC and say, hey, this is the project.

I think you'll be interested in. Here's the founder seriously, the short description of the project take out from here. What's the mistake that founders make often that you see a lot?

I would say there's two different mistakes.

Like I said, I I often times work with underserved graphics or underserved Geographics founders from those two groups. And so I see.

There's some that are overly confident and are, like, this is what we're doing this we're raising and I can't understand why DC whatever saying no.

And I think that that's incorrect.

I think it's very helpful to just say this is the same thing is if I'm pitching our customer,

I hope that they will say yes and but,

you know,

reality like you're really just looking for the right one and so but,

you know,

some of these overconfident founders,

like,

these guys are going to do our deal and they try to prop it up and try to create no false urgency and create.

You know,

almost a forced situation,

I would just say,

look be a human be who you are,

you want them to fund you who you are and what you represent and what your mission is the other is there's a lot of because of these founders come from underserved capital markets they are like,

please,
please give us money.

We know we can accomplish this. If you just do and don't do that like as a founder. If you're listening to this. I understand. You've been downtrodden. Every person has said no to you. Thousands of

people. And finally you get someone to say yes. To me.

So you're like, this is the one you're not going to sell them in one meeting. So just don't try to close them. It's not gonna be on the first meeting. And the second is it's okay.

Don't try to make it seem like we need this money, like your perspective should be we're looking for the right partner and if that's you that's great. But we're gonna be successful and we're gonna make this go.

It's a matter of if you want to be the ones to join us as a partner, and you should ask questions of the VC, what what what is their thought process? How do they think about businesses? You know, what have they had companies that have been fast growth? Or do they slow?

And how do they think about those? The phrase I say that founders probably get tired of hearing me say, is.

Inevitability you want your business to be inevitably successful from the perspective of VC and they're not questioning whether you're going to be successful or not.

They're questioning are they the right partner for you and that success not pleasing money but this is what we're going to do. Are you going to join us in the street? Right?

Right that's that's a good advice. That's a good advice. And I've seen that sometimes. Two founders help so desperate.

It's, it's just sad to watch but on this, I've been desperate to, like, I haven't I'm not leaving. I don't have money if I have a family or spouse or significant other someone,
I live with,
I feel pressure from them,

because dealing with your life and and you're feeling pressure on yourself because you have employees and payroll and none of these things.

So, there's plenty of reason for people to feel desperate. Let's not under sell that entrepreneurs are the crazy, crazy people in the world and that's why they're awesome. And they should be applauded.

And that's why I kind of I'm so passionate about, like, okay, what can I do to help? Like, how can I make one simple thing easier in your life? Because you're.

Going through so much, so right, right. That's a good point. Founders to have a reason to be desperate.

A lot of them on this said notes let's move on to the last question, which is a call to action. What's that? One thing that you would like the listening to as soon as the episode is over.

I'm gonna go three fold because I'm I'm Switzerland. I'm the neutral third party here. If you're a founder, build your business to a point where you're ready and and you're ready to take VC money.

Don't don't try to go talk to them too early and or talk to me too early. But when you're ready feel free to reach out to me on LinkedIn. If you're an angel.

Dr, I would love to help our resource. So I guess the answer is I'm gonna have a lot of work to do as a result of this progress hopefully.

Or, I mean, I'm I'm gonna have to figure out how to handle all of that, but I'm excited about this. I enjoy this work. This is what my hobby is is just I love learning new business models.

I love digging in and I love trying to align interest. I I truly believe the business can be done really well with transparent and trustworthy people that align right now. That was a sweet and the I love it.

So on this positive notes, I will wrap it up here. Thanks a lot in London for coming up and for sure. And your experience. I think that was a really interesting one and that's the first time. They see this sort of miles.

So, I'm pretty impressed, and I see much new new stuff in this in this field. So thanks a lot for bringing you something. You, I will definitely leave the link to your LinkedIn account in the description of this episode.

So, if someone is at the right state, you remember seeds, you're busy right then then reach out to lunch and it can really help you guys. Alright, thank you. Pleasure.