May 13, 2020

Stealth mode = stealth money. Gabriele Sorrento whose company just got acquired tells his story and explains why stealth mode is a horrible choice.

Stealth mode = stealth money. Gabriele Sorrento whose company just got acquired tells his story and explains why stealth mode is a horrible choice.

In this episode of Fundraising Radio Gabriele Sorrento, the Co-Founder and CEO of Mindesk that was recently acquired by Vection Technologies tells how they fundraised, how and where to find investors and why is stealth mode a very bad choice for a startup.

In this episode of Fundraising Radio Gabriele Sorrento, the Co-Founder and CEO of Mindesk that was recently acquired by Vection Technologies tells how they fundraised, how and where to find investors and why is stealth mode a very bad choice for a startup.

Vection technologies: https://www.vection.com.au/

Invest in Konstantin Dubovitskiy through an IPO: https://humanipo.app/id/konstantin.dubovitskiy

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Transcript

This is Fundraising Radio and today as a guest speaker we have Gabriele Sorrento co-founder and CEO at Mindesk that was recently acquired by Vection Technologies. In this episode we'll talk about raising your first money, building an MVP and starting to sell that MPP. Also we'll discuss how to choose the right timing to start fundraising and of course, the fun part - how do you get to sell your company and what happens after you sell it? So Gabriel, Alaska called by here, giving us some background on yourself and on my desk.

Thank you Konstantin. Thank you for inviting me tonight to your podcast.

It's a great pleasure for me to be here and share my background, my knowledge, for something I really feel compelled to share with fellows intrepreneurs and tech founders.

my background is in architectural engineering and that's how I got involved into three D CAD design.

eventually, what inspired the, the business idea of creating a virtual reality interface for CAD software.

back in 2014, I was, completing my master thesis in Italy.

this, very complex architectural project, gave me challenges that I could not, I could not face with a traditional to the interfaces.

that gave me the idea to use, newly available, VR technologies that were becoming more accessible in the market to boost, the tree lead design.

So that was the problem.

I found to be sold.

This is one of the key aspects of building a new business.

I started, I began to studying some Biden, create, a few lines of code, trying to get out a piece of software to solve this problem.

this, allow me to get the interest of good team members that could see in this project. somethings invaluable to put on the market.

there was a step one of my task creating a great team, that could create, a great product in, 2006 in 2016 then two years later we moved the headquarters from Italy to United States.

These give us a broader access to a worldwide, Chanel REO where we could, propose our meme of all viable product to the world, get some, early users, some early traction, but also getting exposed to programs like HTC Vive, ex.

Indeed.

Back in the day HTC was promoting this acceleration program that, was investing in virtual reality companies, especially those one address it to the enterprises.

We were definitely one of them.
We were fitting their criteria and we got into the program.

this also, triggered, some investor were in a conversation with to actually, John in the, in the project and, back, our company.

that is in a nutshell, how it went. What was our process?

when, before you got, not quite PCC, but before you got into the accelerator, the HTC accelerator, do you already have some MVP? Did you already have some trucks traction or do you just, had you just have an idea and decided to apply and worked out? How did it go?

So, yes, we, as a, as I said, after a few months, we start working on a project, we did a mini model of a viable product, a very minimalistic, set of features that allow the user to, connect the CAD software in real time to a virtual reality headset.

And initially just visualize the project.
later we'd have interaction features that allows you to manipulate or edit the cat project.

the original, the first iteration was really minimal and that allowed us to put the system on the end of the final users.

trust me, these wasn't easy because, especially in our, in our domain, in the enterprise domain, it's really hard, to play in a conservative environment with innovation to, inject new technology in established processes.

our approach was based on existing CAD software.

that, really made the thing easier for us.

we basically approached CAD user and, and we pitched this app upgrade to their existing processes.

They tried out and they could see the benefit and that played out very well.

That really helped us to overcome the initial skepticism against a new technology.

Right.

before we move on to the, a bit of a sad topic I went to ask you, like, what do you think helped you find research until you raise about $3 million, right.

what have you, so what do you think helped you most to raise this money?

the initial feedback from users was key because we could, were experiencing an increasing number of people adopting my desk.

they were using mindless for an increasing amount of time. that proved the system to be valuable for them.
Right.
The whole key here is to create something that people want.
I know this is a kind of a, motto or catch phrase, but that's true. Like you really need to, to create some value.

while there were a lot of companies like mindless providing for virtual reality visualization, were the only one providing native CAD integration that really put my desk a step up compared to the other, that additional value that, makes you outstand other solution and, and this value, paid out definitely.

because we could see an increasing traction over time.
And, the initial traction, a working product and the validation of the, accelerator where the three keys that

eventually unlock our founding path, it is worth to say that, being initially based in Italy and we should also means Europe allowed us to raise some public grant.

in United States, initial money is from friends and family. There's nothing like that in Europe.

fortunately there are public grants that help to kickstart that yet on the, in the very initial days, that's the hardest part.

yeah, we could, we knocked couple of prices and pay the early team.
Where would that money?
That's right.
I've heard a lot of stories from European startups that start like that.
I share with the public, my always show us was more active on this and grants were more widely available. But we'll talk about that layer.

now I want you to ask you one question that might be a bit said.

What do you think you've done wrong during this fundraising process? So have you done like a mistake that you really regret doing?

It's it's never too soon to get out of the building and seek for user feedback, customer feedback. Trust me, we could have saved tons of money, hon.

doesn't have thousands of dollars, hundreds of thousands of dollars of wasted money because we didn't listen to early feedback.

as a technical founder, I, I committed the error to.

Mmm.

Bay's hour operation too much in an intuition.

Why we could, we should have been more data driven.

that's definitely something, less that you're gonna learn that the hard way, if you don't have this really data driven approach early on.

Yeah, I told her, get with you on that. I think user feedback is the key here.

now let's talk about the more bright sides and let's talk about how, when do you actually start wiring? So you said that you build this meme, a meme of viable product with just names of features and how do you start wearing users? So do you use, do you start some campaigns? When did you decide this time?

Mmm,

the first user or minus was myself because I was feeling the pain on my back to create tree complex three D models on a two D surface.

So the first season was was me.

the next 10 years reserves were people like me, so people can, sorry, in my same industry, in the, a C industry.

architects, designers, chip designer, people doing a similar tasks, similar job I was doing.

that could, presumably shared a problem I had.

And that was true.

We found a couple of, very, open-minded designers who decided to adopt, the earliest version of my desk and provided valuable feedback.

when do you say that it's time to actually try to charge those users? Because, traction is great, but when users are using your, free pilots, it's one thing.

when people are actually paying for it's a completely different story.

did you decide that now we're providing enough failure to actually charge our users for this?

That's a, that's a great question.

that was, drove our decision to, insert analytic tool in our software.

with their analytics, our user would, first, signed to allow us to collect some data and part of the data was the usage data.

we still a persistent usage of our tool, that's when we reached out to the user and ask them to upgrade to the pro version so that the long story short is, provide value first and then bill for it.

Once the value is by the data, early, the earliest version of minus were just available for free because the currency the user paid, it was a feedback, right? So that's how the whole thing started.

Now, like how it started, it's interesting to hear.
I'm here, let's talk about fundraising part, actually the actual fundraising. So now we're pre-interview call.
You mentioned something like, something about finding a champion.

It's a champion is a person who is just, helping you fundraise, basically making you tons of introduction with potential investors, and just, helping you a lot in that process person who has connections and a person who believes in you.

So how do you find your champion? Oh, the champion fund me.
nice.
Well.

on my side, I did everything possible to expose our project to the word I was speaking, I was presenting, I was talking to everybody and one of them, one of those people, really got interested in us and became our champion.

the bottom line is get out of the building, show your project.

Don't be, don't be stupid.

Don't make it secret.

Just share as much as possible.

That's the way, that's the way.

Yeah.

I'll tell you, when I was in college, there was a, a very dear friend of mine, he's now leading, a company that is worth about $30 million.

and, and I was, start thinking about making a company who were, drinking some beers, sharing ideas, and he asked me, so Gabriel, what's your, what are you up to? What's your, what's your project? And it was like a, I don't know, max.

it's kind of a secret.

I don't want people to yeah, he looked at me with that face and so it got close to me and told me it.

Gabriel I'll tell you a secret.

Nobody gives a shit about your, so the best that you can do is share it.

At least you get some feedback.

Yeah.

what I'll probably, because nobody gives a shit about your idea.

That's that's a great title.

I think.

you can cut that part.

I don't know what's your audience that feels,

I will name this episode.

No one gives about a shit about your idea.

I'll leave episode like that.

So fair deal.

Fair deal.

All right.

Yeah.

I personally hate when people are like, Oh, sorry, I can't really share to you any of that stuff because we're in a self mode.

Like come on, I worked for adventurous CEO, I have a podcast in fundraising.

Are you not going to share with me seriously anyways, so will not focus on those people and move on to actually the acquisition of mindset.

My desk, sorry.

So stealth startup gunnery, stealth money.

Y up.

Y up.

All right.

Probably that's going to be the name of the episode.

I'll think about those two different.

All right, let's talk about that acquisition now.

So my desk had a happy ending.

Your word acquired that then how did this happen? How did you find this acquire of yours?

startup founders, spend, their whole life trying to figure in the day they will get acquired.

Like like people spend other people spend their lives thinking about their marriage or like, that the turning point in your life at truth is, when you get acquired, nothing change and everything changes.

there's definitely a shifting into operation practices.

The circle becomes bigger, the family becomes bigger.

now you have to deal with more people and you have to integrate branding products, operations, finances.

There is a bunch of stuff to figure out.

that's something that takes most of your energy for the time, after being acquired about, eventually the synergies, among the two companies, definitely overcome the cost of integration.

that's something very important to bear in mind where when starting merging project process,

right, right.

Yeah.

Actually in fact, one of my previous speakers said that he raised $1 million just to make the integration into another company, which I think is a great story.

here I want to ask you how do you find that, how do you find vaction, technologies? How, why did they decide to acquire you and how did this happen? did you just get a phone call saying that, Hey, we want to buy your company, or how did this work?

they had, this great company with a lot of big names, a lot of great customers.

when, when the process started, they didn't have an, a SAS product, and we had one that would perfectly fit their markets.

we, me and, vection CEO, we could see a perfect fit.
How about our companies.
And that's what triggered the merging process.
the introduction happened through one of our investors.
that's one of the reason why it's important to have a VC investors.
I mean, it's definitely, a difficult step to, engage with them, negotiate a deal with them. once they're on board, they play your game, they help you on the ongoing processes. the acquiring company was on there rather of our one our investors.

And that's how we got the connection.
that's again, the importance of, being out there in the field.

here, let's talk about, so, as I said earlier, most of my listeners are early stage founders who not quite close to the acquisition part.

what would be your advice to those early stage founders who are listening to this episode right now? Get out from the Hurley stage how to do that.
It's always the same receipt getting new customers.
How do you get new customers provide a solution for their problem.

It's all the chain is always led.
That right there is this potential and express the SART outside that need to be sold.

You are one of the first seeing it and procuring this solution and, and this generate some, some movement is, generates some actual, economic value for someone.

once you get to the bind is just a matter of fine tuning, adjusting the machine and to get the job done.

Right, right.

you're, sorry, here I'm going to go back to what you said about finding a champion.

you said that champion actually found you and you were just going out into those events, speaking about your company, about your solution.

Can you give me a couple of examples of those events or were those like professional conferences about the design and architecture? Or what were those events or are were those peach download events?

Yes.
Great question.
if I looking retrospective, I would say that our progress was a result of pure luck.

It was nearly like nearly impossible because like for example, the way I met, our CTO was by presenting our, early, demo to Comicon event like video gay and call me conference in body, very little conference.

The mayor was opening the ceremony.
very unlikely to find like a super expert, CT.
That was, that was ridiculous.
the, the luck we had actually he had, had the spot next to us.
He was presenting his own video game.
it was a phone game about saving the privates and nobody would give a dime.

Like I was like, trying to gain was like, yeah, shift, like what is this? But then I look farther and I felt, okay, this guy managed to create a game from scratch with sound effects, graphics, physics, a level editor that really looked like a CAD software.

So maybe this is a good guy.

I followed up, share my idea again, always I keep repeating myself, sharing my ideas that made something click in his mind.

And and it just happened.

The destiny the faith made is, made his game.

in another competition we met tower championed, which was basically one of the judge to vote for hours and, he believed in us and allowed us to win that competition that we followed up, introduced, one of the investing team.

And that's it.

serendipity plays a huge role in this, but you need as a founder to create the condition for luck to play your game.

That's the key.

Yeah I totally agree with you.

actually I had a couple of stories like that.

I mean, I've heard a couple of stories like that.

One of my previous speakers actually found his leading investor in a pub, so he was just drinking beer and then the guy saw that he was using this battery at, that's his company was developing.

He was like, Oh, what's that? He pitched the idea and then it turned out that the guy was a pretty big investor connected to pre big investor.

story like this happen all the time.
I was, I was in Helsinki back in 2015 a dis a huge event called slush.
one of the veins in, in this kind of mass was, pitching naked to investor in a sauna.

I was like, yeah, why not? Like, let's do this.
nothing bad could happen for this.
All right, well what happened there?
Well, nothing happened that they've, again, I was ready for embracing, destiny for embracing luck. I wasn't imposing any limit to myself, to my company.

and that's the way to do it.

Never impose yourself limits.

That's Epic.

That's Europe.

just one sentence, you're pitching to an investor naked in a sound that's Europe.

That make a lot of sense because when you pitch naked, all the social.

distancing, what, what a, what a bad period.

The third this discussion.

one of the, some of the barriers that, play against you fall down and you can really gain the trust of the person that is in front of you.

That's something that is socially awkward, but, people try to undervalue. in, in Helsinki, the culture is a bit different.

They don't care about this and things like this are possible there, but that's just a matter of, again, understanding what's going on and embracing any opportunity.

Right, right.
Yeah I think you're, it's great, great examples right there.

I mean, pitching naked in a sound, that's the example of, just trying to, every opportunity that you can take, just take that.

All right, so here, let's talk about the last pro lease to object.

If I were to Daisy interview and it's, I like to talk with the successful founders who recently sold their companies, and asked them if they're doing angel investing personally.

a lot of them have sold their company successful and they feel that they, they want to help other entrepreneurs and they have experience in, building stirrups.

they decide to become angel investors and a lot of them join angel groups, et cetera. So do you do anything like that?
I'm definitely considering doing that.

it's I would say it's a very, it's very likely this to happen for two reason. The first reason is because I've been through the whole process.

becoming angel investor would allow me to go through the process again from the other side of the table, being able to mentor another fellow entrepreneur as like becoming younger gain, when you're young, your, your young ones, your high young hood and twice in your fatherhood.

that's a similar process that repeat itself.

yeah, but as for now, I'm still very focused in, in my current, activity.

yeah, definitely considering being angel investor in the future.

Right.

the second part of this question is advisory.

some founders can not invest in other founders, for a variety of reasons, but they can be advisors for those startups.

do you do any advisory work right now? Hi, sit in a couple of advisory boards. Yeah.
as you can see, I'm very open.

I love to do the helping hand to whoever needs it. Um.

how does this for you, so how should found your sexually reach out to you and ask you to become their advisor? Because I know you're really busy, you have tons of things to do.

Why how should they reach out to you so that you choose them? you're right.
I cannot hide it.
Like I'm actually pretty busy.

again, it's a meadow of, of luck.
Maybe I meet someone in a bar and they, they tell me about their business and I fall in love with that idea. That could happen.
Unfortunately this is not a short process.
Yeah.

Unfortunately or fortunately because then a structure process with other batters, especially for early stage founders,

most definitely.
I love that's that part of a third world that there is just no structured part.
Nope no structure whatsoever.
You just do whatever you think you should do and that's it.
You hope this is going to work out.
So we'll wrap it up here.
last last question.
I'm trying to do this, cultural action thing at the very end of each of my episodes.

whenever someone is listening to this episode, when they're going to be finished, what is one thing that you want them to do immediately? maybe they want, they should go on LinkedIn and reach out to their old friends or go in to register for an online peach demo event.

Right now your independent make, they're only light online, but what was that one thing that you would recommend them doing right now?

Well, definitely one thing is solving an actual problem.

the Colby is creating a whole new bunch of problems related to transportation connection.

those are on salt problems.

try to talk all the consumer goods industry that is not being, very effected.

Cloud services are also doing very well.

So this is, one direction to go.

Once you get your, your, business idea right, then collect data, reach to users and, and, and yeah.

And and go for that.

Perfect.

That's perfect advice and we'll wrap it up here on this positive note.

Thanks a lot, Gabriel, for coming up and for sharing your experience for sharing your story of the success of mine desk and have a great week.

Oh that was totally my pleasure.