Aug. 27, 2020

No investor wants to be "just money" - how to work with investors, by Tim Lozott.

No investor wants to be "just money" - how to work with investors, by Tim Lozott.

Tim Lozott, CEO and Managing Director at Green Life Capital explains what the phrase "No investor wants to be just money" means and how to apply it to your fundraising process. We've also touched onto the Linked ventures (and their upcoming summit) and how Linked Ventures cooperate with the Green Life Capital.

Linked Ventures summit: https://www.eventbrite.com/e/linked-ventures-investor-summit-2020-10-tickets-112308856814?aff=erelexpmlt

Green Life Capital: http://glifecap.com/

 


Transcript

And today as a guest speaker and managing director at Green life capital, and this app is a, we'll really discuss, what does it phrase? 

No investor wants to be just money mean and how to sell this idea of investor being involved in your project. So team, Alaska calls by you giving us some background on yourself and on green live capital. 

Yeah, great constantly. Thank you for having me in appreciate this a little bit about my background. So I was a, a marine U. S. marine active duty read at a high school. 

So, that kinda defines a, that's where I kinda got my discipline and strategies along the way. 

And so I had a background in finance and a real estate investment trust background and I've also been an operator I call myself a covering startup operator. 

I've had a successful exits in that arena as far as the green light capital we set out our intent was to be a driver of emerging growth and economic development over the next ten 

years for emerging growth companies. 

So we started Greenlight capital really? To solve three problems, one lack of access to adequate capital, a lack of mature focus from investors to invest in certain industries. In other words. 

Investors sometimes don't understand the industry or the companies that they're investing in. 

We I came from also a very highly regulated industry and I noticed that a lot and also we wanted to solve for emerging growth companies that operate. 

In those industries in their respective industries, they find that their operational and financial demands often far exceed, they're internal capabilities. So that's what we put a green light capital together for. 

Got it, so, from what I understood, you basically invest mostly in gross stage companies, right? 

Yeah, mostly emerging growth so we, we invest in emerging growth companies, which we defined as early stage companies that have broken down the barriers to entry and there are revenue generating. 

So, we primarily invest in companies that are based in the US. We do consider about thirty percent of our investments outside of the U. S. 

our typical investment size really depends on the size of our funds with multiple funds. 

Typically, it'll be about five percent to the fund size of any given company. In some cases. We'll actually have a one single special purpose vehicle for one investment. 

So we'll also work to syndicate our deals with other investors and funds. So, like I said, we, we do really focus on emerging growth companies that are revenue generating. 

We also kind of have a social mission that we're aligned with. And so we, you know, I know it's kind of a mouthful of what we invest in. 

We look for highly skilled operators that are disruptive and companies in technology and innovation. So we're focusing on high margin, you know, high velocity revenue, generating companies. 

Like it says it broken down the barriers to entry. We're looking for them to have established the infrastructure. 
We'd like to be able to help along the way with that, help them scale nationally and have a clear 
pathway to liquidity either from sell side or and so will invest in companies that focus on. Conservation efficiency and improving those, 

and we'll invest in companies that are improving the human condition companies that are having a social impact with superior choices and I know, 

like you said, 

that's a mouthful. 

So, 

but in broad terms, 

or in layman's terms, 

it pretty much translates the technology, 

anything technology as a, 

as, 

as you tag a fintech green tag, 

clean tech Agra tech cannabis, 

included healthy choice, 

consumer package goods. 

So that's that's just I know. It's a bit broad. Yeah. But beyond seed round, and so we but we do help companies that are seed round through our other joint ventures. 

We have under one roof with linked Ventures that we can take anything from seed round all the way to Akio. That's really interesting that you're investing. Such a broad categories, both in terms of stage, and in terms of fields. 

So, my next question is, where do you primarily find that was deal so, for let's start with your early stage investment focus. So, as you mentioned on linked Ventures, right? 

It's like this big change that you have built out to invest from seed stage of to the very. 

Pre right, right. How do you find the companies that you want to invest in at the seed stage? Because, you know, most of my legionaries are seed stage less preceded stages. 

So that's that's probably the the question that bothers them most. Yeah. Very good question. So probably like,
most most of us are,
you know, 

investors, we, 
we have our own exploration team and so we'll go out and we'll be in meetings even meet up meetings. 

So believe it or not, we're in local communities, you know, learning about companies, finding out, about them from very early stages. It's relationships for us, and we're longer term with relationships. 

So, through our relationships, other advisors and industry veterans, we're building relationships and we'll get a lot of referrals from other investment professionals. Sometimes they're not able to invest or they think that, hey, this is really cool idea. 

We think you should take a look at it, or we do the same and we have our partnerships with other incubators. 

You know, I, myself, I'm the mentor at TechStars and a few other incubators and startups, and we have our joint venture with linked Ventures, which is taking in deal flow. 

So, we, we looked through incubators accelerators, other venture capitals, other angels we go to industry meetings. 

So those right now, obviously we are not able to go live, but had a lot of online events and meetings and conferences so really broad based, but we're just out there constantly. I'm working on that. 

We don't do really any any advertising. 

Most of it just comes by word of mouth and, you know, even on our even with our venture with blink Ventures, people can just submit their deal right there on the site. 

And we also have a out there on gust as well. So some people are submitting to gust. 

Nice nice. So let's talk about the outreach and specifically call the emails. So I know that you mentioned on our Pre interview call that you get tons and tons of those unverified emails. 

Basically, just where it's absolutely clear that the person just took a large all Kofi emails and just sent out the copy basic message. How do you think founders should really approach that in terms of, you know, how personalize it should be? 

I mean, it's clear that you can write a personalized email to every single prospect investors that you have. But how detailed should that be? How many personal the face should you, including the email? 

So, of course, it should be your name and should be the name of your capital. So, I mean, should be the name of your fund. Yeah. What else should a person include to make sure that you understand that the email is personalized specifically to you? 

But I think it's interesting that you asked that cause. I think what founders fail to realize is raising capital is actually marketing. 

So, they're selling their services, they're selling their opportunity and so think of it as anything else that you would in marketing anything that you would go through in marketing you would want to do when you're trying to outreach to your investors. 

So, you, you want to do your research initially and find out about them and you wanna build a persona you're trying to target a specific type of investor. And so that that's what you're trying to attract that. 

So, and if you don't know that, I think you should hire someone who understands how to raise capital and can target investors. The hardest thing that a CEO can do is raise capital and run their company at the same time. 
And they just need to understand that. They might not be the best at raising capital and so let the professional do it. 

Who have done that before and we focused on building and running your company, or building your software,
or you're a solution to a problem focus on that,
and let those people who kinda understand the marketing aspect, 

or even just, 

you know, 

how to communicate. 

So, but anyone can learn it. It does take time. I myself raised capital for many years and. 

I learned the hard way. School hard knocks hearing lots of noise and being questioned with everything that I put out there. 

So you want to use other tools you can be a research, look on crunch space. Look at pitch book. Look at the investor website. Looked at their LinkedIn profile, you can look what they write about. 

Look what they talk about. Look what they post about learn about that investor first. So that, you know, how to profile and build a profile and then target them. So don't just mass blasted out. You should target them. 

Absolutely. And let's speak a little more about your personal fund reading period. So you said that you learned all those lessons yourself, you know, hard way. 

Let's try to help other founders avoid those major mistakes that you've made. Maybe have done in the past. 

So, what would you say was your major major mistake in those previous fundraising experience that you would never never make again or would always push other founders to avoid. 

Yeah, so I would say not researching or targeting the right investor. So the,
like,
the early mistakes he can make is going after, 

like,
if you're not ready to talk to VC,
like,
if you're not generating one to two million dollars in a, for example, 
you should not be targeting venture capital. 
If your you know, there's, there's certain things like that, it's just targeting the wrong target. That's a major mistake. I think that happens. And then not realizing it's a relationship. People are gonna invest in people. 

They like, you know, and it's gonna be a, they invest in people at the end of the day. 

We that's what we do, and, you know, we're gonna invest in people and things that we like and so it's gonna be about that relationship building and so not building that relationship. That's another major mistake. I see too. 

I still get this today. 

Like, 

someone will connect with me on LinkedIn, 

which I do readily accept most a connection request and right after accepting the connection request, 

they'll send in, 

like, 

mass, 

long message great food out word and a pitch deck and a business plan. 

I'm like. 

Why don't you find out what I really what really drives me and making you tick and you target me and attract me and tell me how I'm gonna help you with your trajectory. And I, then got my attention. 

And so I think that's some, some of the mistakes you can make, and I made all those mistakes to mass blasting and trying to talk to everyone think it's just a numbers game. It is a numbers game. 

But you still wanna you wanna have the most effective way, right? You are still gonna hear a lot of knows, but you still need to target the right ones otherwise you can have the potential for the right yet. 

I'll have people that I have this investment in watches. I'm not invested. You didn't hear that on my what? I'm investing. I'm not interested in watch it so. 

I'm not even interested in that. Great. Absolutely. And that's, I mean, it's, it's normal to make that mistake. I know. It's really tempting to send out like a thousand emails to a database. You've just scraped, not worth it. 

People not worth it, but let's talk about something you just mentioned, which is, you know, founders mentioned how you as an ambassador can help them with the trajectory of their company. 

So when is the right time for your founder to push this site to investor, where they can say that you, as an investor will be build to put your hands on this help us do this. 

And that and question is, when should founders say that? And how much are they pushing it? 

Well, I think, you know, I think we're alluding to whether a, an investor just wants to be money or not, you know, we've got two kinds of investors. 
You've got investors who are dead money, and a lot of times those are your early investors that maybe friends and family that really can't help you grow can help your trajectory. 

They have no, you know, they, they, they might have in your uncle or Antar cousin or somebody like that or some rich friends you have. 

They may not be able to help you in growing your company. 

And one of my favorite posts that I saw recently on LinkedIn was from Matt Higgins, 

you know, 

one of the sharks on Shark tank, 

and he posted his four pet peeves that he has an investor in in founders and one number four was that pet peeve is investors don't want to be just money 

and he says you have to bait the investor and how they can help your trajectory. It's good for them. Good for you.
So this is,
this is so true, 

because after all that investor they want to achieve, they're under certain mandates,
they have to return capital for their investors to, and they want their return for their investment. 

So they need to be able to help you grow and they want to have some involvement in that most times and so the right investor is gonna be the right relationship. That can help you. 

So, 

most investors find that they just don't have that relationship that can help them, 

you know, 

they can't, 

you know, 

some investors, 

they can't help you make introductions or they can't help you solve and employee retention problems, 

or they can't help you with organizational turnaround or how to pivot during covet nineteen or the right investor. 

But the right investor can help you do some or all of these things. So, you know, utilize their network and and don't be so, where you don't wanna run your company. 
They want to have success for your company. And so that, you know, it's a win win. Your successes, 
their success, and you can lock arms together and grow to get. 
Absolutely, that's right and yeah, perfect definition you have to distinct between the investors who just want to put money in and those investors want to put money and their personal work into this. 

So, let's talk about the current situation that kobe's nineteen, you know, what's your advice to those early stage founders who are just starting their companies? What's your advice to them? What should they do now in terms of fundraising specifically? 

Yeah, so, you know, I have the luxury of being experienced, we call it a, I've been through several of the cycles and so I I remember two thousand eight very clearly. 

I was through that cycle. 

I remember actually value in our funds on the bond valuations and things like that, 

and having to every quarter write things down so in this time. 

But out of two thousand eight, a lot of a lot of great things happened later on. 

We had two jobs, 

and we had a lot of great ways for entrepreneurs and I think we saw more startups than in any other time before we've seen, 

you know, 

we've seen venture capital completely change how they invest how, 

you know, 

we've seen private equity change. 

We've seen a lot of changes and for do all the time and now in covet nineteen, 

we're seeing the same thing, 

but we're in it and we saw a lot of people become jobless, 

but we know great people that had great ideas. 

And now they're actually forced to go out and execute on it. 

Because maybe they don't have another job or, you know, maybe they've been on the sidelines because of covet nineteen. 

I think it's a great time to bring your idea forward and it's going to force you into action. It's gonna be painful. But I think go go ahead. 

And go for it, but do realize that you're gonna have to it because the money is gonna be more constrained. 

You're gonna have to be more attractive and have more traction to attract and investor. So you're, you're going to have to do a little more. 

You got to be more bootstrapped and be more lead capital focused. Absolutely. And that's perfectly correct. You know, that's positive attitude with a piece. So, you know, a real estate city here. 
So yeah. Be positive, but keep in mind that we're still kind of in a little bit of a economic depression. So be careful, but on these positive notes, let's move on to last question. If this app is a, which is a call to action. 

So, what's the one thing you want the least want to do? As soon as the episode is over? I hope I can actually say two things,
because one thing I would like your listeners to do is approach,
they're seeking investment or seeking capital as research and marketing. 

And so, I think they need to take that approach to, to raising capital. They need to be targeting. 

And for the second thing I would say is for your listeners who are the early stage founders, which is most of your listeners, just because green live capital is later stage beyond seed round doesn't mean we don't have a solution for you. 

We do under one roof. 

We can get you from zero to ten by zero. I mean, ideation and ten. I mean, a billion dollar company to our joint venture partnership with link Ventures. So we're helping build under one roof. 

These solutions for companies to really grow in many different form some call it incubator somebody call it accelerated. I don't think we exactly. 

May call it that, but we have angel fund venture capital fund. We have recruitment and retention and so I would go for your listener go to link Ventures dot net check it out. We're rolling out our investor Summit, which is coming up. 

We'll have over, you know, our network of investors will be there wanting to hear deal flow. They've reached out to us, they wanna hear from more companies that are raising capital so we're putting them up there. 

We're we're showcasing and putting some companies who are raising capital in front of our investor network that I've taken over decades to build myself. It's gonna be fun. 

Assume the educational I know our investors are really looking forward to seeing some of the deal flow will have hopefully thirty to forty companies and we're still we're still taking applications. The event's September. Twenty. Th, it's gonna be virtual. 

So you don't have to book a hotel or book a flight, or you can even attend in your pajamas. Although if you're presenting and help, you're not in your pajamas. 

So, I, I hope they would apply, so I, you know, we are actively seeking and it's real easy application and so we'll, we'll take them or they can email me directly as well. 

You know, Tim at at g live cap dot com. Sounds good. Yeah, 

I'll definitely make sure to leave a link to both green light Capital Ventures and to the linked Ventures and to that summit that you've mentioned and I highly encourage everyone to apply because I assume that's a quick question here by the way. 
So, if they apply, and they do not just have to do they get some sort of feedback of why they did not 
accept that? We're not. 
Yeah, so we're, you know, that's the idea. We, we wanna be able to see if there's a way we can help them, you know, if if there's a way, we can help. We definitely wanna be there to try to help. 

If if it means, you know, there's a, there's a few things that they could have done better, you know, it's just it's it's gonna take oftentimes, it just takes humility though. 

I mean, obviously some people don't want to hear feedback, they have to be to hear some feedback and why they weren't selected and what we can do to help get them ready to be there. 

Because we do want to have, you know, the companies that have good chance of getting funding. That's what the investors one. So, and we want to be able to bring those companies to them. 

And if we can help a company, get to that level, and find what what pieces they might be missing to get there, we would love to be able to have that opportunity to do that. 

And so we will definitely provide feedback. 

Absolutely, that's great. Yeah. That's perfect. Incentive to fly people. So if you have some good idea, definitely make sure to check out the description of this episode. I'll leave a link to link venture summit that's coming up in the September. 

So do that, and my call to action is as usually go to the description at this episode. I will leave all the links that I mentioned before. So you will find something give herself there and have a good day.