July 19, 2020

Your competitors might be dead soon - advice on going through COVID by Roberto Machado.

Your competitors might be dead soon - advice on going through COVID by Roberto Machado.

Roberto Machado the CEO at BetaBlocks and a member of Tech Coast Angels explains his vision of going through COVID and emerging as a stronger company while many of your competitors die. We also talked about Roberto's view on the pitch decks as he has seen over 4,000 of them and wanted to share his major takeaway from them.

Roberto Machado's LinkedIn: https://www.linkedin.com/in/robmachadosf/

BetaBlocks: https://academy.betablocks.co/

Related episode on VCs behaviour during COVID: https://www.fundraisingradio.com/Vishal-Uttam/


Transcript

Sure, thanks for the invitation question team so much, although I've been had a very successful corporate career are working for international organizations some years ago decided you could change. 

I wasn't even in California joined some stock world the easiest way from us to angel investments. So mentioned Burke listed in the venture capital HASKELL business. 

I joined some blog angel groups in California. Two of the four largest angel groups in the in the state. A lot of setups have done quite a few investments. 

Then, I joined the Google mentorship team in San Francisco with the Google launch pad, helping set up senior fund raising strategy. So for the past five sixty has been working supporting helping set ups more more. Recently. 

I moved to the East Coast to Miami and launched the accelerated helping startups on their fundraising strategy. 

We have about a hundred fifty to two hundred setups for a year, helping them with that knowledge, defining their elevator pitch their beach back shows up the rays advisory board board of directors and so on and so forth. 

And not only that, but more recently decided to launch my own startup as well in the enterprise block chain space. So, and that raise money from my business. 

I've had experience destiny, setups, a training set up through Google and accelerator and being entrepreneurial, raising money and having. 

All these investors relations stuff. So first question I would like to ask is about market fit. So that's an accelerator problem. Can you gold and more in depth into how you work. 

Sure, so when I moved to Florida, California, three years ago, I knew I wanted to work with startups and I realized the startup ecosystem looks very behind in in Florida. 

A lot of the mentors in the area that came from the real estate world, the private banking kind of the local traditional industries, and I knew I wanted to do something we start up. So I launched a small accelerator working on that kind of one on one. 

We start ups, helping them, defined their fundraising strategy, and the way we work that's so we work with governments. We work with with accelerators. We work with the funds. 

We worked directly with setups as well on the program. 

That goes anywhere from a month to pretty much for them to design a pitch deck, 

define the content defining their message, 

or the competitive analysis everything that goes into building your pitch a verbal page and in terms of presentation as well. 

So this is kind of a one program a couple years ago. I signed a partnership with the preceding government. 

So now we train all of this start up from Brazil that go internationally on the nice with the trade and promotion and Trade Investment promotion agency. 

Proceeds one of the top five top, ten countries in unicorns so a lot of the startup ecosystem is booming, especially from Paul. 
So, and so I travel with the setups and I support them through the different road shows to internationally South by Southwest bond oil and gas events different. 

And then, of course, so Fisher government nations, within to Toronto, Boston show high different locations, normally taking between fifteen and twenty set up. So we prepare them for that mission. 

So we can actually raise money with investors, but not only raising money. But also finding partners,
distribution partners, 

clients and so on so how to prepare that page and now with this score environments and everything going remotely there's a big push wave of of companies wanted to be trained on how to pitch online between a lot of problems. 

Now, helping companies page one or three minutes four minutes five minutes I am also an investor judging eight to ten events in the US for Silicon Valley. 

If they've got a few invested in New York last year, I chose the sixty four setups and one event in New York. 

So, bring that experience of being an investor and investor judge into kind of setups. They're gonna go and pitch to them. So. 

Is being an interesting journey, balancing data with my own setup where I have to go and raise money as well. So answer your question the simulation model we work on with either one company, or a small group of companies. 

We don't have any physical cohort where they have to stay in the office for three months. The traditional solution program that you're finding by Combinator or setup. We are more one on one or a small group of training folks on. 

How do you raise money with investors? We're not broker data, so we're not, we don't go out and and raise money per se, which there's a lot of restrictions in terms of how much you raise for the people, you know, that stuff. 

There's a little bit of liability, but we get them ready for it. As I say, I don't I don't have a date. I get you ready for it. 

So, you know, how we should be how we should address what you should say, but it's up to the a couple to find a match and and continue with your live match. Right? 

This is what we're doing, market fit and my company. Same thing, raising money. 

We did friends of family we did raise companies created people a couple of years ago, and in phrase, six hundred K to the developer blotching technology and very soon we plan to do our. 

Evaluating the directors was very difficult market conditions as well, 

but anything that I thought I also implementing change of heart for credit and how to relate with investors, 

how not to be to do it and so and so forth.
So this is it is always easier to teach then to implement as, 
you know,
but it's been,
it's been interesting matching,
support,
training and support and then judging with myself. 

So it's been lovely journey. That's really cool. That's really cool. So, I imagine that, you see, I mean, you see a live founders and a lot of first time founders who don't really have much experience in pitching our talking to investors. 

What do you think are the major mistakes that they may while let's see, in the first meeting with the investor where in the major mistakes that they make it might be a pitch it might be the way that they dress up. It might be the way they talk wherever that mistake is. 

So I've probably seen close to four thousand pages in my life through my age groups and through my different activities I think there's not one common mistake but I think 

one single mistake or different ones. 

But something said they must exist, they must happen for you to be successful. So, first of all is the passion, right? 

Like, your passion for what you're doing do you have the energy that we would like is that I use somebody that I'm, I'm definitely going to go behind you right? 

So the energies of number one, I see a lot of people present are like, oh, this is my complaint. This is what we do, rather than trying to, in some fashion what you're doing, if you don't have passion for what you do, your clients and employees will have it either. So that's the first thing. 

I see. A lot entrepreneurs very, very connected to the product where they tried to sell the product. Not the company. The company is not only a product. The company has Co, founder, is the company has employees. 

The company has the product comprehend clients the companies traction revenue organization motto. 

All this stuff that, you know, right sometimes exit strategy, if required, but so trying to sell the package, not only the product and people spend too much time talking about their product about how am I going to deal? 

How am I building a successful business? They can have maybe an exit and that's what he is. 

Probably looking for the energy and selling the whole package and then last, but not least how you see your business going. 

What's your strategy to how reasonable you are in knowing your numbers and your analysis hasn't done your homework analyzing competition analyzing you go to market strategy. So, unfortunately, a lot of people lazy. 

So, again, my, you might have a beautiful product. Great but if you don't have all the knowledge, you don't have done your homework. It's gonna be very hard manufacturers on what you're doing. Right. 
So the main ones, I'm sure they're all they're different. It's it's not a good English. 
It should be or your numbers don't match whatever there's different reasons for it or you, you, you don't have any Co founder and you're doing everything by yourself pretty hard. 

So, they're different things that happened, but I think if you don't have energy, you don't have best for you. You don't know what you're doing. You said, you just have a product, you have a company. That's that's pretty hard. 

Absolutely, that's right. And in the beginning of the episode, I said we're going to talk about racing for blockchain. Let's let's try to shift the conversation a little bit. 

So, 

do you think people so, 

founders in some specific fields have some very common mistakes so, 

for example, 

let's say, 

do you see that there is some common pattern that all founders in blockchain field that they all make the same as they do see that or basically all foundries are kind of the same about block chain itself, 

I think will happen in two thousand and a two thousand and not two thousand seven, two thousand and eight. 

There was a lot of six to eight. I'd say there was a lot of ice fields, right? There is four thousand, four thousand coins in America. A lot of people race I'd say, easy money, right? 

Ease in the sense that, you know, the average I saw was probably between thirty, forty million dollars and most of the times those I shows those rays are based only on the white paper on the business plan. 

So that means, you see all the steps, you short in the whole to see friends or family, being already going to a, for example, traction. 

So clearly motto would be a failure. Lot of companies waste a lot of money they had. They have not build anything. They have no traction. 

Some of them had good ideas and potential for to be a good product, but there was no traction. Not only that,
but investing fast in those,
those I CEOs that fundraise we're expecting to have return on the investment, 

but there's no association between the performance of the token,
and the performance of the business right let's take,
for example,
the case report report probably has the best or one of the best technology for for financial transfer for 
bank bank financial transfers,
but there's no connection between the performance of ripple and the performance setbacks MP. 

So you're able to use repo without use an extra fee. So even though the company does amazing, maybe they're going to do a nice APO and so on Saturday, the coin will follow that performance and the has not. 

So so, that that was a little bit of issue where it was a fear of missing out what we call formal in the industry. We decided that's beta block and not to do any icl not to raise a coin at that time as an investor. 

I felt it was not the right thing to do. I did not want to have any liability with the I didn't want to have a Vita with my investors. 

So, I decided to go the traditional way and now it has helped because when we go to client, one of the first questions, the client, as if you've done a nice job. 

And we say, no, they're more comfortable working with us because there's no risk of liability in that sense right of the. 

You know, data security token, or she did a utility token should have been a security token this is there's a prompt security law all this stuff all this debate that happened. 

So, what happened in the blockchain world and a more specifically with iceos and then became afterwards right? 

There's a, a, an asset back in that token, but when there's no asset, and they raised with the promise that the client would appreciate if the company does. Well, and there's no correlation, because you don't have voting rights, right? 

When you invest in the preferred equity, you have, you know, you have participation. Sometimes you get a board seat and so on, but not only that as an entrepreneur. If I raise forty million dollars, what is my incentive to build the business around? 

If I already have the amount of money they'll get in the next it, why am I going to burn plenty, 

thirty five million dollars to build something when I have the money writing my hands that completely goes against the principle of venture capital where we're taking risks together you, 

as entrepreneur,
you're working your off, right? 

Your a** off to build something and I'm gonna give you more money. I just increase your business to get traction, but if you get the mind on day, one, what is your incentive to reach the and you're right there. 

So so we see that changing now, it's become more difficult to raise money through iceos. So companies are going the traditional way. Not only that these are big the PCs are becoming more interested in joining blockchain. 
They understand a bit more they know the block chains. Normally cryptocurrency blockchain and 
acknowledge that companies are using there's more use cases in supply chain in data protection. In, in the authenticity of goods. 

There's a bunch of different use cases for block chain out. So it's going to mainstream PCs. I'm more interested people started to build technology strategy a little bit of traction on it. 

So the market's moving away from that artificial bubble into a more realistic and normal market. Where, okay, you have an idea. I'll give you twenty thousand dollars. 

You build a three hundred thousand dollars, whatever it is, a million, you build it and if you execute, I'll give you a couple more and then you should execute. I'll give him more and so on. Right? But based on traction, not based on the white paper. 

So, a mini kind of the mainstream meeting the other sectors, and they look more normal. Now. 

As it is, right so did I answer your question? Yes, you did, you did it was a pretty in depth response so I like that. And here once you go back a little bit to the question that I actually forgot to ask you, which is the pitch deck. 

So we jumped straight into the verbal presentation. And what are the major mistakes there? I was wondering, what do you think are the must have three points so the three must have points on the beach deck for you personally, as an investor. 

Hard to define only three factors, you know, if you only cover three things, you don't cover the rest. If you don't have a forecast or don't have a go to market strategy for don't show your team. It's gonna be very hard to compete somebody. 

So there's again, you should be, I should visually be able to see your product in action. Right? 

So, normally in the pitch deck, and it's very comb on product and the problem you solve and then the solution then walk me through your product. Why is the product better than your competition? How do you make money? What's your go to market strategy? Why you're better than your competitors? 

What's your attraction? So far? What's your forecast? We executed the plan and what are you looking for right now? So those six or seven things, they, they must be addressed, not address and one of them, then there's an issue. 

I can look at your business if there's no forecast I can look at a business. 

There's no, there's no team, you know, number one, I'd say if I had to choose only three, and it's a positive choose three, but I'll probably choose product. Right but if what are you doing? 

I'll probably choose the team security because I need to know who's taking my money. And if you can say, you know what I mean Musk, I don't know launching a new airplane that's gonna fly from New York to London in thirty minutes. 

I mean, I don't need I don't need forecast. I don't because and I know there's a problem like, find two is far. 

I text you all, I need to upload the, for example so say product who is executed and then if there's so again, if you revenue boost revenue, right? 

If it's post revenue,
I need to know traction like, so let's say, 
I'm,
you know,
I'm I'm building a a plane that goes from New York to London in thirty minutes, and if so five hundred units to United Airlines. 

Okay. So, I need, you know, we can discuss price afterwards. You can add to strategy, but if you can show that in again, ideally, not only three factors. But if you can show that, what are you doing that your team is amazing? 

And who is backing you? Who's paying for me the client so if you see if you're telling me look, I'm launching a transportation app. 

I am, I'm the person that created and were backed by lawyer and Kleiner. Perkins. Okay. I'm very interesting. 

I want to know more about it, but those things are essential, but if you come to me and said, and said there's a huge, like, I'm gonna change the three topics right? Which it must have, must be in the deck. But maybe they're less important. 

There's a problem of transportation people are taking too long to go home. Okay. I get it. I make money. I charge five cents per kilometer. Okay. I get it and I want to sell my company to. Okay. I get it. 

But if you address three, three, big problems, right? There, what problem solving you want to ask how much you're charging and your address, maybe your access strategy but without, I don't know who you are. I don't know. What's your product? 

I don't know if you have any traction if you post, so you see how I chose three different topics in the pitch deck, but some of them are the others, right? 

Or more important than others I'd say, but absolutely. That's actually a great example of prioritizing the information though, so that that was great example, I think, and let's move on to your advice two founders racing right now. 

So you're still reviewing beach decks, I guess, and you see how the page decks and the way that founders present their companies to investors have changed because of the current of Iris. What's your advice to founders who are trying to raise money right now? 

And who just have to raise money they just can't bootstrap for six more months. 

It is a tough moment to raise money for sure. There is just less money on care and demand that's out there. It's competing with the stock exchange that if you know what you're doing, you can make a lot of money. The market. 

A lot of people lost their jobs as well. So, even if you have enough assets, if you're a grad investor and you lost your job is to word you provenance and invest his money, your wife, or your husband, when I say, don't don't spend money. This is a tough moment. 

I don't see getting better in the short term. It's gonna take sometimes for people to gain confidence again. I think it affects a little bit more angel investors that you've seen brown Daniel C because you see a lot of them as is their funds. 

So they have the money available fast. What happens with the angel? Then investment is that people are more skeptical to us. They have more opportunities to invest. There's a bigger opportunity cost as 
well. 
Like, you could go into stock and buy a house for cheaper price. Whatever it is beside. The issue is that you have the power would they be see them? I asked for more better results. 

Whatever it is fast, right? There's not a, as much competition for deals as you have under normal conditions. So what do you do in a situation like this? So, the first thing you want to do is you want to survive longer with the water. 

Aging is getting to your nose. 

You wanna get extra oxygen and you want to soak a bit longer. How do you do that? One thing that you control your costs? 

Oh, you cost so looking every single payment that you spanning your subscriptions salaries unfortunately, everything that you're spending benefit, whatever it is can I kept my boss to adjust then you read what I'm selling less. Alright. 

So, you know, there's something called zero based budgeting that was created by the three g group that they, they've used a lot for their conference. 

We do good by the way is the group that owns has a Bush Burger King crashtized, private equity invest a lot of the large corporation, special consumer goods company, three g capital you know, they've done. 

They've been very successful on some type of budgeting part. You started the following with zero in your budget, you have to justify expenditure. 

So, if you have marketing department and you spend the million dollars last year, you'll just see zero convince me they need every penny and how much you need and, you know, so, you have to you have to fight for that. But so it was a little bit that way. Like, why do I need that subscription? 

Why do I need to spend money rent? Why do I need to have? Why am I paying data on my phone if I'm using WI Fi calling from home? 

Why do I need to pay to see my car if my car is in my garage, which pay as much insurance? Right? So, anyway, so there's different ways. You can do on a personal side and professional size to extend the runway. That's the first thing you need to do. 

You come out of the ocean, you know, don't try to seem too hard. When there's a storm just save energy. When you come out of that storm. A lot of your competitors will be dead. So you are gonna be hopefully in a better situation than before. 

And as an investor, I, I, I, I noticed that a lot of the good to use that investors God, we're doing crises just because some companies that would not raise money otherwise because they had a lot of revenue that they need to raise capital. 

So, they're open to have outside investors, or because you're just able to negotiate better terms for the investors. 

So, and you buy, you might end up buying, like, buying a house, you know, sometimes wonders foreclosure. That's when you buy a cheapest house, you know, and then when the mark comes back, the price goes up again, we just have to shop for the right house. 

Because somehow is it going to appreciate a value when the economy goes back fast? So then all others demand is there, right? 
So the same thing we set up some setups will not recover even when you invest after some startups will take longer is some setup again grow very fast once the market goes back to normal. 

So, and always taking into consideration the fact that if I raise money a little bit of money, that's not enough to go very far. 

I might actually hire that investor so I'll also plan while your cash flow, I might need and finding the right people. And if you realize that your startup won't survive the crisis. 

We might as well look for a job, create another startup, but no hold and find a job part time job, a full time or two back to back. And then you, you start again, or you reactivate your startup. 

So everybody knows what's best for them. How much is their monthly cost you have sometimes a family to feed so, and you can't fight the market a hundred percent by yourself, right? You absolutely. 

There's no clients now there's no investors now there won't be any fast in two weeks. Like, how can you survive? Right? So plan work hard costs. And if you think they can survive the storm. Fantastic. 

You've probably gonna be better off. Are you going to have a stickers and show resilience to or future investors? It's just too hard for you. 

Don't go broke, don't use your personal finance and the is and break the bank and sell your house to make it survive and you're going to be in the deeper problem. They don't. Right? So. 

That's perfect. Can I show considering naming these episodes a lot of your competitors will be dead because I'm sure that that's gonna be a fun time for, for all founders who survived this crisis. 

So we're moving on here to the last question of today's episode. It's a call to action was that one specific thing that you would like the listeners to do as soon as the episode is over. 

It's hard to have one recommendation for everybody, because some people are early stage setup. Some people have a later stage set up. Some people work in a corporation. They want loans to set up. 

So,
there's not one of device for everyone,
but,
you know,
I'm going back to what I said before,
if you don't know when you gotta get cash,
either from investors,
borrowing or from clients but as you can survive safe energy. 

So, when this passes you live, this is my recommendation if you have your startup stay lean, I guess, unless you are in the business that's booming. Right now, let's say you were in the commerce, or you were in online education. 

I don't know some type of business that actually benefit, like, you know, like, zoom for example, benefit from just crises and you just have to feed the beast, raise mine accelerator growth benefit from the moment. 
But if you not feeling the other ninety five percent, ninety five percent of the bids that got affected by the crisis, I don't know the number. I'm just guessing here. My suggestion is again, looking at your QuickBooks. So, your, your finances, your costs. 

That's one element that you control and where you can cut costs to survive a bit longer and plan not on your business cash flow, but your personal cash flow. 

How much time can I stay on this without taking any money out of my business if I have a family fixed cost and so on don't break the bank don't go into bank receipt yourself. 

To save a business without knowing how long it lasts, if you knew was just a month. Okay. I can take I can lend some money. I can borrow some money here. I can sell, you know, give my car back whatever it is. 

So my car, because I know in one or two months seems to go back to normal in the situation like this. We don't know. So, stay as mean, as you can and wait for the storm to pass. 

This is my recommendation, and a few businesses for me, small percentage of companies that are doing extremely well report on the virus and try to show as I say, feed the beast. 

The animal is growing fast people feeding it with you on funding with the company find and when the investors finally, and just keep them growing and dominate your market before the other players come back, that's credit advice and stats Pre, inspiring ending. 

So, thanks a lot for coming up and for sharing your knowledge and that. I think that was the Pre episodes Pre inspiring. I love those to be honest. So thanks a lot for that and have a great day. Thank you. 

If anybody wants to follow me or to connect with me more Roberta Machado in Miami. So very easy to find Thank you question team for the electricity. But absolutely. I'll leave a linked to your LinkedIn and the description of this episode. So, anyone check it out is there. 

Thank you. Thank.