July 7, 2020

USA vs Canada - where to raise money and how does the startup cross-border investing work, by Saeed Zeinali.

USA vs Canada - where to raise money and how does the startup cross-border investing work, by Saeed Zeinali.

In this episode of Fundraising Radio, Saeed Zeinali co-founder of Tranqool acquired by HumanaCare and a private investor at Keiretsu Forum explains how Canada is different from the US, how he invests in the US-based startups and how cross-border investing works.

Saeed's current company - EdgeCollab: https://www.edgecollab.com/

In this episode of Fundraising Radio, Saeed Zeinali co-founder of Tranqool acquired by HumanaCare and a private investor at Keiretsu Forum explains how Canada is different from the US, how he invests in the US-based startups and how cross-border investing works.

Saeed's current company - EdgeCollab: https://www.edgecollab.com/


Transcript

Alright, this is fundraising where you entities a guest website Co, founder of trust you make some sound so just record the first part and try and cool. That trend. Cool. 

Which got acquired by new manager trunk. Yes cool. Yeah. Okay. All right. Let's go. This is fundraising. 

Redo entities a guest speaker Co, founder of truncal acquired by from Medicare and a member of care to read. 

So, for Canada, and this episode, we'll talk about angel investing and mainly we'll talk about differences between Canada and the United States. How does the cross border investing word? 

Because a lot of us based investors invest in Canada and love Canada based investors invest in us. 

We'll talk about differences in affiliation, which is preferred for fundraising, et cetera so let's be called by you giving us some background on yourself and on tranquil. Thank you so much constantly. 

And happy to be on your on your show. My name is Sade. I'm an engineer by background, I have masters degree in computation of fluid dynamics. 

Which basically is the science of stimulating flows that going through, around objects, athletic dynamics and but it actually never worked as an engineer right? 

After I finished my school, I started working as a project financier or a project manager in the oil and gas industry, which I really liked. 

Actually, and then about two years in I made a little bit of carrier shift and started the virtual mental health company after quitting my job. 

And the reason why we did that was, because as young professionals, myself and my friends, at the time, we kind of realize it's so hard for young professionals and for for general people to access mental health services. 

And it's one of those things that you would think is would be readily available until actually you try to access it. And we kinda like left our jobs our corporate jobs to go on a mission to fix this problem. 

We were very lucky actually, 

as you your audience, 

you may know two thousand and fourteen, 

fifteen million not much of health tech companies, 

or digital health companies founded by kinda outsiders, 

but we got a lot of. 

A lot of help and support from just people within the industry and and and I got really good feedback anyway so that's how I ended up in trend. Cool. 

We did that for about four, four years, four and a half years, and grew into a nationwide company in Canada and we exit the business through an acquisition to he Medicare. Thank you. Nice. We'll definitely talk about the acquisition by the way a little bit later on. 
But first, I want to just dive a little bit deeper into what truncal was doing. 
So basically, like, tranquil was a marketplace to connect individuals with mental health professionals in a effective and efficient way. 

So, we figured we wanted to use. 

We knew that we want to use technology as a vehicle to ease the access demands for house and we did some research and through the help of our advisors, 

we realized that a specific of a mental house called quick negative behavior therapy, 

or is as effective or sometimes more effective delivered over video through a digital means so we kind of design the platform around that. 

And we had obviously psychologists and social workers and over video, 

but also in person, 

and our kind of muscle, 

and our strengths was to kind of balance this marketplace and to make sure that we match them. 

We connect people with the right choice for them. And and that was kinda like what tranquil was about, but obviously we had some B to B deals as well. 

Like, for example, we had an agreement, a contract with the D and Z, digital media zone out of Toronto, which is a very large incubator for. 

I think over seven hundred companies, 

and that we were providing type services, 

that employee assistance type services to them into their corporate, 

the companies and finally actually, 

their acquisition was done by and the company or employee wellness company. 

And our focus was mostly through B, to C or B to B to B to C. nice. Nice. And did you raising money for that company or not? 

Yes, 

so we raised the warm round from a mix of partners that a few venture capital firms and as well as a few angel investors, 

part of the other benefits of being a Canadian company. We've got a lot of support. 

From the government programs that are funds that they are available for startups that were available at the time, and I think leverage every single one of them. That's really cool. That's really cool. 

And that's by the way, it's not quite the same for us base stars, but still there is plenty of support from government in the United States as well. 

So be sure to use that before you go out and raise money and speaking of raising money when was the moment when you were, like, all right now it's time that would go out. We talked to investors, we 
raise X amount of money for this reason. 
I think we had it in mind from the very, from the get go that we need to raise around we need to raise money, because I think and this is what I want my message to people like folks that are like, starting a company as a startup. 

Obviously, there is a major difference between having a startup and also life as a business, but if you have a startup, like, you need to respond. 

Because first of all money brings money, and the second avoid adds a layer of accountability and puts a growth mindset for you. 

And also people that are putting money in your company, whether they're angel investors or or venture capital groups or angel networks to begin with. 

So,
they had some success and and they are, 

they tend to be connected people as well and with some experience in general in business that you could leverage to your advantage and new that we wanna raise from the beginning. 

But we wanted to first kinda, like, 

work on create our minimum viable product and so we have something to show to them and also test a little bit of some of the assumptions we had at the early, 

early days, 

and build a good advisory board. 

Obviously, 

because we're engineers all of us in this company, 

we needed to get some external validation from people within the industry, 

like people that are in the mental health space kinda like Robert standing us and telling that latest thing this idea is cool. 

And it's kind of work, and once we had that, we kinda started engaging investors. It was a lengthy fraud. 

Through their health and wellness center. So now that's the point of validation to that investor kind of the risks. Their, their investment that they're like okay, like, they claim that they're gonna do something. They did it. 

And now the next time, it's just like it builds trust. And and also it shows that you can actually accomplish with your promising, and it kinda shows that your plans are not at all crazy. 

So so that's also a little bit of validation. 

But retrospectively, I think it's good to be a little bit more aggressive and and also I kind of put a deadline and, like, be very aggressive about the fundraising. 
Like, just that confidence once, you know what you're doing look once you are confident in your team, just, like, go, like, put three, four months on it and just say three, four weeks on it and wrap it up. 

Got it so, how long did the whole process take? So, from the point, when you started talking to investors, to the point, where you actually close your first round, how how how much time passed in that time period? 

Honestly, for us, like, we were talking for, like, for a few months, at least, cause we started engaging them when we had our first product. 

And also, 

by the way, 

you're very lucky, 

obviously, 

because in my opinion, 

the first in Canada to do, 

like, 

virtual mental health data scale, 

we got a lot of and also we were lucky in the sense that everybody started all of a sudden talking about mental health. 

So, in sixteen and stuff, like fifteen, sixteen, like everybody has started was if it became this cool phenomenon, rock came out and talked about his depression, like, everybody was talking about. 

So we got a lot of media attention, which was, which was really good. And and my Co founder and CEO was was kinda like, for for a brief period of time celebrity. 

Yeah. So we've got a lot of a lot of media attention, which was really helpful, right. Say puts you on the radar and and it helps to start the conversation, but I would say, like, maybe took us. 

Four or five months at least, like, from the very first conversations we we had around closed. Right nice. That's still pretty fast. I think so. Good for you guys. 

And one of the questions that we get pretty frequently is how to get on the reader. 

So, if you're not doing something like, extraordinary innovative, if not like, you're the first person in the whole world to do this, how do you get some media attention? So, do you actually try writing some publications? 

Do you try to down some blogs or do you try to accounts and podcast for example did he actually reach out to those publishers? 

Yeah, so to, in my opinion, like like, in any type of, like, any type of activity, I try to put myself in the shoes of the percent of them, asking them to do something. 

And then I really try to think, what would they want. 

What would interest them so for example, if you're if you want to reach out to a publication to talk about your business, the two ways to do it either you outright pay them. There are some paid articles. 
Obviously. Right? 
And there are firms. That you can engage where they're very, quite expensive, but you can actually pay them and they would do a paid article on your, on your company. 

But, yeah, really speaking, like, people are really interested to learn about your startup just if there's no story on this extremely successful, which is in the story in itself. 

So, if you're in early days, Aaron, this, if hearing your elevator startup, nobody knows about you, you have to come up with this story why should they care? 

And this story can be like, a personal story, something that if you put yourself in the shoes of an editor, or a writer, or a journalist, or at the shoes of somebody that's kind of stumbling up in an article. You find interesting yourself. 

It's something that people would care about, like, an inspiring a story. Like, let's say of an immigrant, like. 

Successfully have a crazy successful, the story, or someone who used her or his personal challenge, and kind of build the business around it. 

And and also they try being on issues that generally the general public pay attention to. It also helps. 

For example, like mental health is an issue that every one of us either ourselves, or, you know, someone who has had experience with, but you can go pitch a pitch and that, hey, talk about my startup. You have to come up with a story. 

Hey, this is me, I'm an immigrant or founder. I,
so,
this problem myself, 

first talk about it publicly I believe in this and I, 

this is, 

this is what we've done and then kind of get them interested in this story, 

rather than the business. 

So, when if you actually, if the people at Google try and cool and read the articles, they're not none of them are like, we don't have a company profile. It's always like a story and then also talks about. 

About the business and and the fact that the business is a marketplace, blah,
blah,
blah, 

like a few details of what the business,
but in terms of putting under radar of investors in my opinion, 
just try to be out there as much as possible. 
And you never know, like, for example, one of our angel investors, a very significant one we met when we were doing a talk at the high school. Yeah. 

And then I asked you though like, yeah, this is really cool. Like,
I wanna,
I wanna talk to, 

so as,
as soon as you put you,
put yourself out there,
I think opportunities present themselves to you and,
and I think reach out cool to reach out as the startup founders think should be your one of your fortes. 

How to find people and how to reach out to them like, if you also recommend talking to vc's, even though your idea is early stage, don't reach out to them of course, reach out to the department. Maybe they don't respond. 

It's okay, but generally associates are more accessible and that's what they're getting paid to do. Right? 

They just, they get paid to learn about new things and new companies and present deals and, and they generally have a little bit more time to talk to them. And the chances are they say, of course, you are too early for me. 

But, hey, have you considered talking to this guy for example. 

And then you get connected to them and it's kind of like a snowboard comes down and it's it becomes powerful. It's it has definitely a network effect. 

And and then, like, you want to talk about your company with as many people as possible, obviously relevant. 

And but when you're actually raising try to have a one on one conversations, and and I kind of like set boundaries between the people that you're talking to, right. 

That's actually a great advice reaching out to analysts and associates. That's that's a great tool. 

I mean, I should've had two episodes just focusing on that interviewing Emily said to vc's and yeah, that seems to work so great advice. It seems to work. So, try it out people. 

But let's talk about the acquisition part. So,
the actual plan, 
this acquisition from the very first day on your pitch deck and say, hey, 

is our potential acquire and that it happened or do you just do just randomly happens is you just get a proposal from actually, 

to be very honest with you the early days we had we did not have an exit slight and we actually, to be honest,
I didn't really think about it.
Our goal was to to create a massive visit name. Right? So. 

For us, and then numbers in our financial projections. Okay. We're gonna have ten thousand users per month at the beginning and we didn't really think how we're going to acquire those costs. 

But in my opinion, like, especially the first down founders, they have to be a little bit crazy to get into it anyway to begin with. 

Because, if you know, too much, how much of a challenge is to start a business and grow it and make you successful chances are you never start that lack of knowledge? 

In my opinion, it worked in our favor and no, we did not have enough plan for this. Obviously,
like,
when you were trying to do a follow up round to go to the US market, 

you realize, 

actually, 

for the first time that the Canadian and us healthcare system was completely different, 

we knew that there are different, 

but we didn't really understand how would they impact our growth and and then we realize that, 

and also this opportunity presented itself to us. 

We decided to engage with Humana, Karen and I, and I'm very happy with the outcome. Great people. And I think the company found a really, really good. 

That's really great. And you have a good point. Here is some, the early have to be a little bit crazy. That's that's true. So, now, let's talk about your angel investment experience. 

So, what is forum and what does it generally invest in so correct. So, for by the way, like, I'm just a member and not in the management of curate. 

So, for me to be very, very transparent about that is that is an international kind of forum of investors and people can Google. Correct? So, correct. 
So, for well over, then they present the numbers, but they, they're a major, major, early stage fund 
Syndicator and the deals are different. 
Like, you have deals from, like, life sciences from all the way to retail all the way to even sometimes, like, not pure, real estate. 

But deals that have an angle off real estate as well and,
and basically members,
there's a due diligence process that the forum team,
like operational team help to conduct and and then members the, the site to engage in companies and and invest in those early stage. Ventures, my experience is, it's great. 

We are part of the Toronto chapter in Canada, and it's led by hose on and Kevin and great people very knowledgeable about the investment, and be very confident with their due diligence process. 

And but it's very much an individual decision. Right? 

And when you're looking at a company, especially at the earliest stage, you're looking at, kind of generally the space, and you're looking at the team and you're looking if you see them kind of executing on that. 

But there are two types of investors. See, I don't really the kinda like people, like, maybe even yourself back, going into finance right? 

And you see everything through the numbers lens. And and that's just the way that you should really quite frankly look at an investment. Because at the end of the day, it's a numbers game. But entrepreneurs, like, myself will become investors. 

They tend to have a different kind of point of view a lot of times to be honest. We don't make great investors. Either. 

We may get a little bit emotional about a company or too excited. And they try to also help, which is like, which is good. But also, like, a lot of times you have to give us pace to the company as well. 

So so I'm,
I'm in the camp of,
like,
I choose companies that they only like,
we understand that my background is in healthcare primarily and as a, as founder of,
and as a Co,
founder of edge cool app,
which is my current company, 
we are a full on business and software development firm and we,
we tend to engage in deals that we can also add value besides the capital. 

We can either help them with our connections where we can help them with our technology support and a little bit more hands on than queue, or just throw up into check. You know what I mean? 

Yeah, of course. I mean, most investors do that, and it does make a lot of sense to do that. So, let's talk about the differences between Canada and the United States. Do you do cross border investment? So do investing the United States as well or Canada only. 

So, actually, as an investor, where the opportunity is, it doesn't matter. Correct? 

So also, as soon as we do get presented by by us for him, in my opinion, at the end of the day, it comes down. Obviously a Canadian company also should have accessing the US market, Canada and country. 

There's no really like.
Think about that, to me, it's just not worthy of investment. Just the market is too small. 

Right and the US US company can get away with not accounting Canadian market, but also it's a good market. I mean, it's a, it's a good place to be. 

It's a, it's a Canada, we have a lot of really good talent, a very good ecosystem, and also obviously a lot more immigration friendly than the current US administration. 

Yeah. Which which is which, which is helpful, obviously, to startups and companies that want to acquire talent. So, yeah, it doesn't doesn't really matter. Yeah. 

Got it and says, like, I can talk a little bit about, like, just generally what I see, although, like, my experiences is very limited to me. There's a difference also with Katie and dc's and also us based. 

Generally us. I think they tend like people tend to be a little bit more aggressive, which I actually wait. And also, and also, like people in terms of decision making. 

I think like, if you talk to someone in a USBC and they do it at a partner level, and they can actually throw some weight around and get you in, in Canada, though, there's a process. Thank you. 

And it's like, your best friends with a partner, and they have to get approval and then you have to go through a process. So, in that sense, things can happen faster like that with us firms. 

And, and even in in terms of companies as well there a lot more it can't Canadians are a lot more on the careful plan, and everything us to just think, let's figure it out as we do it. 

So, this is my kinda experience. Alright. So, let's talk about the fundraising now during this condemning. 

So, what's going on from your perspective so, would you see in the fundraising world right now? I think that there are deals that are being made.
There are investments that are happening,
but I know personally haven't myself invested anything in the EU independently, 
but they have looking at one right now but I have I know a few companies that have closed their rounds through. 

Zoom to me, as long as you're not like raising in leisure or hospitality, which is very awesome. 

Right now this is an episode that's gonna kinda like cool. We're not gonna because we're not gonna be around forever. Right? So, if you have a good company, you will have a good company. 

If you don't have a good company, you will not have a good company through the pandemic. There's no better market place on Amazon still. Right? So, there's a logo. 

There's social media then, like Facebook and Instagram still doesn't pandemic. Didn't make a huge difference. If you have a good good product. 

Actually, even that don't don't myself personally don't really get excited about opportunities or companies that seem too opportunistic. 

And because to me, the core of it, like, should your business should work regardless if it is a pandemic or not? Yeah, yeah. 

A good example for you guys, you know, about top hat, Canadian company no. To be honest. Never heard of that. So, check them out. 

They're an amazing business they are in their thing and making seven hundred, eight hundred universities already they are in ad tech,
very successful business,
like very successful and they had a very good business before pandemic. 

But now, with covet, the people are looking at them to hold ritual classes, and using their features, in the next level, this pandemic kind of gave them a boost, which is a perfect scenario. 

But if people are using you only, because is pandemic, then it's not a good business. Quite frankly your, your counting on people like people's misery there's another pandemic or people always live in this condition in order for your business. 

I don't like that. Oh, yeah, no, no way. I actually was advised multiple times to start focusing heavily on the dynamic on the fundraising during but on this part yes. 

I'm like, no, no, no later on identical began a few months. It's gonna be. Alright. And what's gonna happen to that content generating right now? They've both been dynamic. So we're definitely on the same page here. 

So let's move on to the last question of today's episode, which is a call to action. So, what's the one thing that you would recommend police going to do? As soon as they episode is over. 

I think, like, what's what would be very helpful for them is to read about other companies in this space. Like, Wendy are starting your business. 

There is a reason why people doing things in the in, in a specific way. If you are,
like, 
coming up with a disruptive idea, that is very, 

very disruptive and then you kind of look into the do market research and you figure nobody else is actually, 

like, 

your competitors people that are in the space are not doing it the initial initial impressions should not be that I'm super smart and nobody has actually found it. 

Chances are people have actually lived with it and find out why they haven't done it and see, we can fix that fundamental problem. And it's only if you can fix that. 

And then that's a good catch if not, then you're gonna like us based, like, six or seven months, and you're find out. All right. So so there is like, for example, like. 

And, yeah, there's a reason why people do things in a certain way and I'm not like, advising myself and people to be too conservative, do not thing outside of the box. 

Look, I'm guilty of always being super, super, ambitious and I take even honor in that. 

But, but people, like, you have to trust in the collective, collective, the smartness of the of the society that a lot of the smart people out there. 

And and if people are not doing a various specific thing, or are they, they're not doing in the way that you think they should do it chances are there's a reason for it. 

And if there is not a reason, and you talk to people within the industry, it's like, oh, that sounds like a great idea. There's no roadblocks then that that's that's a very, very innovative business. 

But before that you're probably laid off to waste your time. Yeah. You waste a lot of time making research, but, you know, it's gonna pay off at the end. 

So great call to action and this rate call to actual wrap it up. Thanks a lot for coming up and for knowledge and I think it was really insightful episode. So, thanks a lot for that appreciate it thanks so much. 

And I, I hope you guys are safe and healthy. Sure.