Dan Martell - March 28, 2022


How To Attract The Perfect Investor To Your SaaS Business


Episode Stats

Length

23 minutes

Words per Minute

172.27197

Word Count

4,021

Sentence Count

93


Summary

Summaries generated with gmurro/bart-large-finetuned-filtered-spotify-podcast-summ .

Transcript

Transcript generated with Whisper (turbo).
00:00:00.160 Startups are like the whole time it's you're fighting against a headwind, right?
00:00:05.600 Like you're not supposed to win.
00:00:20.480 What is up, Anne? How are you doing today?
00:00:23.280 I'm doing great. Thank you. And thanks for having me. I'm delighted to have this opportunity.
00:00:28.160 Yes. Well, I'm excited. Why don't we start off with you sharing what your startup is and then
00:00:36.500 the story. But if we just think about what's the product called, who do you serve and how does it
00:00:42.940 work? How would you answer that? Yes. So we're building MyGenation, which is a metaverse for
00:00:51.140 work to help remote and hybrid teams to drive and to help their managers manage with empathy,
00:01:00.420 basically.
00:01:01.420 So Metaverse for Work, is this kind of like a virtual workspace?
00:01:06.740 Correct, indeed. A digital office. We start off 2D, we'll build it out to 3D with specific rooms where
00:01:15.780 they can co-create collaborate chill out play together so basically everything we've been
00:01:22.500 building for years in the agency but all wrapped into a digital office space well tell me how you
00:01:30.100 came up with the idea uh well actually it's a long time bro brewing so we we had the agency
00:01:38.980 we had a lot of work done through the gamification agency and yeah the pandemic fastened up our
00:01:46.500 process to um build a sas and basically from being a remote manager myself i saw a problem
00:01:57.060 where you don't know who's doing what when where and how are they performing do they need support
00:02:04.420 do they not need support so to give a bit more help to all those managers that are struggling
00:02:10.500 in a hybrid environment that we're all living in now uh and to sort of say hey here we have
00:02:16.820 a solution for you we've worked it ourselves this way uh for years and now we've put it into
00:02:24.020 a package as a sauce i love it so this is super cool so uh definitely trend like working on trends
00:02:31.380 in the market your experience domain experience consulting um and where are you connecting from
00:02:36.580 just so that everybody gets a sense of your accent and where you're building the business
00:02:41.060 actually stockholm sweden and the company is both in london and in stockholm so
00:02:46.020 we have two offices international sas um how can i help well actually um we've been building
00:02:55.540 alongside the agency so one of the things that is always a challenge is managing the double hats
00:03:02.420 and we're raising investment because we want to really get into the metaverse and be seen as a
00:03:09.780 player alongside some of the others so raising investments while running so many hats as a
00:03:17.220 founder i find really challenging so is to yeah which hat am i wearing how can i attract investors
00:03:24.420 who know me from the agency space i don't have a track record in sas and i still want to convince
00:03:31.620 them to go on the journey with me so there's probably three questions in one is there's an
00:03:38.180 element of managing my responsibilities as a founder attracting investors and selling the sas
00:03:47.700 we do want to shut down the agency operation altogether. So that's very clear for me. It's
00:03:56.180 just, yeah, for the short term, whilst we're building, we need the income all the same.
00:04:02.260 So there's two parts to this. There's the transitioning of the services into the SaaS,
00:04:09.620 and then there's the narrative of the services to the SaaS for investors, right?
00:04:15.540 right? So let's break these apart into separate problems we're trying to solve.
00:04:21.300 On the agency to the SaaS, obviously somebody writes you a check for $2 million tomorrow,
00:04:26.720 problem solved, right? But let's say that doesn't happen. The process typically that I recommend to
00:04:33.320 people is figure out what that amount is. What is the amount of revenue that is going to be
00:04:41.540 required for you guys and your core team to support itself because like there's always the
00:04:45.920 option to wind down and wind up right and sometimes team members from the services side and it's a
00:04:53.420 framework i teach called services to sas sometimes the team members may not be the right team members
00:04:58.480 and the mistake people make is to try to bring people with them that are not the right fit for
00:05:04.720 the sas they could be great for consulting great for services not great for startup world as you
00:05:09.440 imagine those are sometimes two different personalities so what i would say is yeah
00:05:15.040 totally so figure out what it is that the team needs to look like and then figure out what the
00:05:20.800 revenue needs to look like and try to keep your most profitable customers get rid of the noisy
00:05:25.680 ones and and try to get them on maintenance mode so you can focus on this and then obviously if
00:05:31.280 the funding comes in it's a non-point that's just like a high level the way i think of like
00:05:36.000 transitioning from services to SaaS. I've done this myself. I had a consulting company called
00:05:41.760 Sphere. We did a couple million dollars a year in services and then slowly transitioned into more
00:05:49.040 product-led sales process. And the way I did it when it comes to just even thinking through
00:05:56.560 like where do I focus my time, I use theme days. And I do this today. I actually run,
00:06:01.440 I'm the CEO of two companies today. One of them is called SaaS Academy. The other one's called
00:06:05.360 high-speed ventures right so sas academy is for coaching largest coaching group in the world for
00:06:10.640 b2b sas founders and then high speed is essentially my family office where i deploy my own money to
00:06:16.800 buy software companies and take all the things that i've learned scaling them as myself and as
00:06:22.880 a coach yeah so it's but i i they're separate teams like literally i have a complete separate
00:06:28.560 you know co-founder partner matt on the high speed side totally different team operational
00:06:34.160 executives on this side and i run both but the way i do it is i use theme days so monday tuesdays
00:06:39.840 and fri monday tuesdays and wednesdays are one company and wednesdays and fridays are a separate
00:06:44.720 company and that way when like opportunities come into my world i know where to put them my assistant
00:06:50.240 knows how to schedule them i know where to put my block time for projects yeah so like and then what
00:06:55.360 you can do is just start with like two days on the startup three days on the services and then
00:06:59.920 slowly migrate your way over and this is good for anybody trying to start a side hustle it's like
00:07:05.360 can you give up fridays to your side hustle and then can you give up maybe fridays and tuesdays
00:07:11.200 and then eventually maybe fridays and thursdays and and tuesdays and then eventually it's like
00:07:16.400 i'm only doing one day a week on the old stuff i'm doing most of my time on the new stuff
00:07:20.880 so that's that's that's uh just a for me the way my brain works where i'm like a very much
00:07:25.920 a block time kind of guy. I want to block it out. I want to just have clarity in where I spend time.
00:07:32.000 That's what works for me. Some people can manage multiple things. My brain doesn't work that way.
00:07:36.240 And then I would say on the investor side, here's the best way for me to answer this,
00:07:40.960 because I've had to think through this a dozen times. I've helped probably 300 friends, clients
00:07:48.560 migrate a funding round while they were the CEO of a service company and move over.
00:07:55.920 and what I'll share with you is there's a perfect narrative, okay? So I'm going to give you the
00:08:03.540 perfect narrative, and then to the degree that you can fit your story to that narrative arc
00:08:10.520 is the degree that you can like easily raise, or, and I always say to people, it's not like,
00:08:16.220 can you, you can, everybody can raise money, right? But do you raise quickly from high-quality
00:08:21.240 investors, or do you raise slowly from low-quality investors? Low-quality investors are like,
00:08:25.920 real estate investors, high net worth people
00:08:28.260 that have no idea of tech,
00:08:29.320 like they're just pains in the buyout.
00:08:31.860 The narrative arc is this,
00:08:34.220 because of our background in services
00:08:36.580 and the previous years of domain experience
00:08:40.440 and all this stuff, we seen this opportunity,
00:08:44.380 metaverse in your case, right?
00:08:45.820 So we see there was this like things that we noticed.
00:08:48.900 And when we started talking to the market,
00:08:51.840 knowing what we know about what we've done,
00:08:53.380 because we've been doing this for a decade,
00:08:55.480 they started asking us to build them this thing.
00:08:59.100 And then we went and we like talked to a lot of people.
00:09:03.360 And as we were talking to them, they all agreed,
00:09:06.080 this is something we want.
00:09:07.980 And that led us to product, right?
00:09:12.220 Or early commitment or signed contracts
00:09:15.120 or like insert the thing it led you to.
00:09:17.400 But it's like, because we were in this world,
00:09:20.720 we saw this thing that told us we should try to figure out
00:09:24.880 if there's a they're there, if the dog, you know, what is it, right?
00:09:27.640 And we've built this thing.
00:09:29.540 And now with this thing, we're showing it to people
00:09:32.000 and they're just blown away and they want it.
00:09:35.080 And that's the reason why we're raising capital.
00:09:38.280 Okay.
00:09:38.820 See, that's what, as an investor, investors want to be sold, right?
00:09:45.120 Like, you know, I tell this to people often, it's like,
00:09:49.580 an investor wants to take risk, right?
00:09:52.660 They just don't want to take risks with things that can be mitigated, like product market fit,
00:09:57.540 like the team, like, you know, but they want the story. They want to feel like they found the deal.
00:10:04.440 They found this thing in the market that was like not a lot of people knew about and this person.
00:10:10.860 So it's always like, is this the right team to do this? Meaning what's their background? They're
00:10:14.320 doing the main experience in pedigree. A service company is actually like the best, right? Shopify,
00:10:19.400 Shopify, FreshBooks, Basecamp, they all came from consulting and building tools for themselves.
00:10:26.680 Like pretty much, yeah, most people don't know this.
00:10:29.240 I would say if I had to guess, 60 to 70% of SaaS companies were built and pulled out
00:10:38.520 of consulting because it's in consulting.
00:10:42.740 That's why when people say you can't pre-sell enterprise every day, I'm making this number
00:10:47.340 but it's probably like 50 billion dollars a year of custom softwares built custom software is
00:10:55.020 pre-selling right when when procter and gamble hired tata consulting to build a custom erp solution
00:11:03.900 that does this unique thing that they can't find in the market that's pre-selling because if you
00:11:09.900 were any company that had a product that was going to do what tata said they would do or got paid to
00:11:15.020 spec out and your product did that for a fraction of what this consulting company is going to charge
00:11:21.420 you could have got the contract so to me yeah it's actually a really great story to say
00:11:30.300 we know how to do this we've been doing this and we're going to go build this and we already have
00:11:34.060 an audience in a market and all that stuff so and and i think yeah i don't think there's any
00:11:39.500 negative to it like i think there's a undertone of the question that says well does our investors
00:11:45.740 wanting to fund a services company that's got this sas and 100 like i would love that because i know
00:11:53.420 that like i was looking at a deal recently and the founder got paid i think it was like 400 grand
00:11:58.700 in the last year to do the the custom the script that he built to manage infrastructure as a dev
00:12:05.340 devops SaaS company, he got paid 80 grand a client
00:12:09.700 to deploy the script and he's saying,
00:12:11.160 hey, I'm just taking this thing
00:12:12.320 and making it available in the cloud.
00:12:13.980 And then people have to pay me 80 grand,
00:12:15.400 they can pay me a thousand bucks a month to do the thing.
00:12:18.440 Like he just proved that there's a market there
00:12:20.320 by the consulting.
00:12:21.620 So that's where I think investors will 100% support that.
00:12:26.620 Support that, yeah, because I mean,
00:12:28.700 we have found a few investors,
00:12:31.520 but we're nowhere close to what we require to, yeah,
00:12:35.320 basically get the service part to close
00:12:38.220 and move everything forward.
00:12:40.560 But yes, we have done.
00:12:41.640 And don't underestimate customer financing.
00:12:44.360 Like to me, you know, as you know,
00:12:46.800 we've been working together for a while
00:12:49.180 in my Growth Accelerator program.
00:12:50.700 Thank you.
00:12:51.720 Yeah, yeah, no, it's been super fun seeing you show up
00:12:54.140 and like continue to pivot and iterate.
00:12:56.960 To me, like-
00:12:57.900 Yes, it's been a journey and a half, I have to say.
00:13:01.240 Well, and that's normal.
00:13:03.000 Like that's the entrepreneurial journey, right?
00:13:05.320 I think finding customers that have the pain that are willing to pay a premium to have early access to something, that's the most beautiful form of funding you can find, right?
00:13:19.820 Yes.
00:13:20.200 You know, and that's the way I've always done it.
00:13:24.040 Because it's why I always tell entrepreneurs, if you want to start a business, the best business to start is an events business.
00:13:30.020 And the reason why is it costs nothing to get started.
00:13:34.280 all the lessons you'll learn to build an event so i have a friend chris who's producing this
00:13:38.440 web3 event and i'm involved like i mean i try to say i'm not involved but like we went for a hike
00:13:43.640 i was like somebody should create this chris you're not busy right now because you exited your
00:13:48.360 company you should do it and i'll recruit the speakers yeah so like i'm not involved but i
00:13:53.320 am but chris runs it anyways the the event itself will expose you to every aspect of um
00:14:01.640 of building a company. Yeah. Like you literally, like, I got to convince a stranger to speak at
00:14:08.560 my event. I need to manage logistics. I need to negotiate contracts. I need to sell. I need to
00:14:16.440 promote. I need, so it's just, it's just, but there's no commitment long-term. So it's this
00:14:21.560 beautiful little world of, so like, the more I say this and like, you could even consider it for
00:14:27.280 your stuff. If you created this one-day virtual event for the buyer, and I actually have a
00:14:35.220 framework called the Virtual Summit Creator, which is the same concept. So, if you knew who your
00:14:40.260 buyer was in the enterprise and you organize an event, you can use the event to attract them
00:14:46.680 to build the list of... Yeah, like if I was selling a Web3 retail finance tool,
00:14:54.200 I literally am going to have 150 people attend this event that I could then at the end or in
00:15:00.300 the middle at lunch, get on the stage and go like, here's a problem that you're probably
00:15:04.080 experiencing. I've built this tool that helps you solve that. If you guys are interested in learning
00:15:08.060 more about that tool, I'll be at the back of the room. Come talk to me. We're looking for early
00:15:12.560 adopters and the room would flood to me and I would pre-sell my product. So yeah, it's just
00:15:18.460 another strategy there's a yeah and and that is something that i could do because yeah i have a
00:15:25.100 history in speaking so i definitely think that's that's a really fantastic opportunity and hosted
00:15:31.740 on the platform we're building maybe yeah i mean this is like you know like every business decision
00:15:39.180 there's there's risk right so it's like you could do that but like how how many people are not going
00:15:45.020 to be able to join how many people got technical difficulties and which is great it's just like
00:15:48.860 do you want to put the risk of the sales process in front of the risk of the product technology
00:15:55.100 risks right um right yeah yeah i mean there's always like in everything in startup world
00:16:01.100 there's always a bit of magic right like yes nobody wants to talk about it but i will tell you
00:16:07.340 i mean some of the stories i i've done my own what i'm really proud of but like some of my
00:16:12.380 favorite is like one this guy terry matthews out of canada he uh back in the day he was trying to
00:16:19.260 sell to like this big company and when i say magic it's a little like hand waving like it's
00:16:23.900 you know it's perception right like right if you have a photo on your website with a logo
00:16:29.900 your logo on the side of a building even though you don't have an office but people's perception
00:16:34.540 is that that's your building you know sometimes in the early days i always say in the early days
00:16:40.300 you got to do stuff that doesn't scale and and honestly sometimes it's not legal like you can't
00:16:45.820 follow every letter of the law like just hr laws like and you know this like it's like i'm not
00:16:52.700 saying break the law everybody should do what they want to do but i'm just saying like we got to do
00:16:57.740 we got to create magic sometimes so so terry matthews needs to to sell this like enterprise
00:17:02.620 customer and he convinces a dentist to lend him his office change the sign on the outdoor plaque
00:17:12.140 like the little slip thing to the company name and then put the logo in the waiting room and
00:17:18.140 then made sure that they like it was his friend that was a dentist and then the people came they
00:17:22.460 did it on a saturday because he said like i'm traveling i can't meet with you but i'll i'll
00:17:28.140 go to the office on saturday if your executives could fly in they flew in waiting room sat down
00:17:33.740 came into the boardroom had the meeting and ushered them out i think that the dentist opened off uh
00:17:39.100 opened at like 10 a.m and they had to get everything like turned back over and i just
00:17:44.380 love i know i love that kind of stuff you know like hey this doesn't make sense but we're gonna
00:17:50.860 do what we need to do to give ourselves even a fighting chance of succeeding because the truth
00:17:54.540 this is startups are like the whole time it's you're fighting against a headwind right like
00:18:01.340 you're not supposed to win i mean unfortunately that's just the truth the odds are against us
00:18:07.100 you really think so yeah i mean i have to say the last two years have been um basically an exercise
00:18:14.940 in resilience and pivoting from yes this works no we don't get traction next part we don't get
00:18:21.900 attraction so it's it's part of learning when to spot the signs that something's good enough
00:18:28.060 and with this one we finally have a lot of interest probably also because it's a metaverse
00:18:35.580 which is totally topical right now but it's actually what we've been building all along
00:18:43.980 it's just yeah packaged differently so that we're hitting the team manager rather than the hr person
00:18:50.460 which was great advice you gave me when we met in Canada. So yeah, that may be the person with
00:18:59.980 the purse is not HR. Turns out that's not HR. So totally good advice. So the lower hanging fruit
00:19:08.460 is actually the team lead. But you made a good point. As we wrap up, I want everybody to hear
00:19:14.220 this is people need to understand that it's the entrepreneur's decision on how we package something
00:19:22.220 right yeah and sometimes people take too long to do this and they they just feel because it's hard
00:19:29.740 i'm supposed to do it it's hard there's also this concept of like being pulled into a market
00:19:36.140 like you know and this is why i've always loved about living in san francisco for five years was
00:19:42.140 on a daily basis i would get to practice my perfect intro you know my buddy clay taught and
00:19:48.060 i teach all you guys uh or or just your elevator pitch like dozens of time and because you have
00:19:54.220 dozens of time to practice by the second and third week it's pretty good because you're tweaking
00:19:59.740 you're saying we do this for this it's like oh that didn't work we do this for this oh okay that
00:20:03.500 makes sense and then how does that work well it works like this didn't understand it uh it works
00:20:08.220 like this it's kind of like that and then and i feel like that's a part where i see sometimes
00:20:13.500 founders struggling with traction in their market right they're just i've been at this for two years
00:20:19.020 and it should be going yeah and i just i tell them it's like the the the core idea might be
00:20:27.820 great but the way you're positioning it and packaging it is the challenge because a product
00:20:34.300 needs product market fit it needs to resonate with the gap like i always say like who has your
00:20:40.540 biggest unmet need and if you feel like you're pushing then that should be feedback for the
00:20:46.300 entrepreneur now it but you got to be honest like how many conversations did you have did you have
00:20:50.380 two conversations that's not enough right but if you had 20 yes if you do 20 and only one out of
00:20:56.620 20 was mildly interested there's something wrong iterate iterate iterate and it sounds like that's
00:21:03.100 the journey you've gone through and now there's finally a thing that the market is now saying,
00:21:09.020 oh, we're talking about this in our meeting, so can you please come into our world and help us
00:21:15.260 with this? And I think that's something that every entrepreneur needs to understand is a decision
00:21:20.700 about the business. I hope they understand that it's a strategic business decision that they
00:21:28.780 should be considering it doesn't mean because i used to call it pivot or persevere do we keep
00:21:34.060 doing this and persevere or do we pivot and that was a meeting we had every second friday when i
00:21:40.060 was building clarity and it was just yeah simple idea i think it was it was a call you had with us
00:21:48.060 at the beginning we're in the middle of the pandemic in the growth accelerator which was
00:21:53.100 exactly that what you just said and that really helped and stuck with me that sometimes you have
00:22:00.940 to give up on some of your babies and that's okay you know and you just pivot and move away and i
00:22:07.340 think that's what we've been doing yeah for the past two years the idea of having the meeting
00:22:14.300 yeah the meeting idea is so that nobody thinks that you're uncertain it's this this beautiful
00:22:19.660 like hey every two weeks we're going to reassess and if we all agree we're going to keep going
00:22:23.660 but we're not going to do it blindly because we said we would and i think that's that's the
00:22:27.900 entrepreneurial art that sometimes people have a hard time with that i try to give these little
00:22:33.740 mechanics to help people think through but and based on everything i've shared what's what's
00:22:38.700 the one thing you're going to commit to moving forward um from our conversation actually i'm
00:22:45.420 taking the narrative and pushing it straight away into our decks towards investors so it's taking
00:22:51.740 that yeah agency narrative combining it because i often forget where we've come from i've sort of
00:22:58.060 feel well that's done and you know need to move forward so taking that putting in our deck and
00:23:03.820 yeah the next investors will be hit with it so it will be a straightaway impact i love to hear that
00:23:09.740 well it's been fun really appreciate time and i hope you have an amazing rest of the day
00:23:13.660 likewise and thank you so much for having me on this call all right talk soon cheers thank you