WEBVTT 00:00:00.000 --> 00:00:16.000 [Tim Minchin - Ready For This] 00:00:16.000 --> 00:00:18.000 Kia ora koutou. 00:00:18.000 --> 00:00:22.000 Hello and welcome to Episode 7 of nzangels.com 00:00:22.000 --> 00:00:26.000 A guide to raising angel investment in Aotearoa, New Zealand. 00:00:26.000 --> 00:00:30.000 I'm Dave Moskovitz, one of New Zealand's most experienced angel investors. 00:00:30.000 --> 00:00:32.000 Are you ready for this? 00:00:32.000 --> 00:00:40.000 In Episode 2, we quoted Paul Graham who said that running a startup is like being punched in the face repeatedly. 00:00:40.000 --> 00:00:48.000 Others have compared it to running a marathon, but the nice thing about a marathon is that it's over in 42.195 km, 00:00:48.000 --> 00:00:52.000 and the average finish time is around 4 hours and 30 minutes. 00:00:52.000 --> 00:01:00.000 According to Crunchbase, the average software as a service, or SaaS company, takes about 9 years from founding to exit. 00:01:00.000 --> 00:01:06.000 So you should plan on at least a decade of working your guts out, and if you finish earlier, good on you. 00:01:06.000 --> 00:01:12.000 Although an early exit may mean that you've foregone more growth and a bigger payday. 00:01:12.000 --> 00:01:16.000 And you may get caught up in an earnout for several years after that. 00:01:17.000 --> 00:01:24.000 At the start, unless you're already sitting on a big pile of cash from your previous startup exit, an inheritance, 00:01:24.000 --> 00:01:30.000 the bank of mum and dad, your spouse's big salary, or your side hustle trading crypto, 00:01:30.000 --> 00:01:33.000 you're likely to be living on 2-minute noodles. 00:01:33.000 --> 00:01:35.000 Are you ready for this? 00:01:35.000 --> 00:01:43.000 Part one of your homework is to figure out how you're going to fund the early stages of your startup before you hit significant revenue. 00:01:44.000 --> 00:01:50.000 In the current climate, you're unlikely to be able to score investment before you can prove that you have something you can sell 00:01:50.000 --> 00:01:52.000 and you know how to grow sales. 00:01:54.000 --> 00:02:03.000 A recent LinkedIn survey shows that on average founders work 10-12 hours per day, with 14 hours per day not uncommon in the early stages. 00:02:04.000 --> 00:02:11.000 Do you like sport, music, movies, or even just hanging out with family? 00:02:12.000 --> 00:02:14.000 Well, you can say goodbye to those. 00:02:14.000 --> 00:02:16.000 You won't have much time for friends either. 00:02:16.000 --> 00:02:18.000 Your business will consume you. 00:02:18.000 --> 00:02:22.000 Your phone will be simultaneously your best friend and your worst enemy. 00:02:23.000 --> 00:02:27.000 You are unlikely to have much of a life outside of work. 00:02:28.000 --> 00:02:29.000 Are you ready for this? 00:02:30.000 --> 00:02:38.000 Part two of your homework from this episode is to figure out what you would need to change in your life if you were working 14 hours per day. 00:02:39.000 --> 00:02:46.000 You will experience unimaginable stress that will put you at risk of mental illness, burnout, or even breakdown. 00:02:47.000 --> 00:02:54.000 What will you do when, in the same week, you lose an entire market due to the random decision of a foreign government? 00:02:55.000 --> 00:02:58.000 An investor fails to come through with a promised investment payment? 00:02:59.000 --> 00:03:04.000 An existing large customer unexpectedly goes into receivership with a big outstanding invoice? 00:03:04.000 --> 00:03:06.000 And you can't make payroll. 00:03:07.000 --> 00:03:09.000 I've experienced all of these. 00:03:10.000 --> 00:03:22.000 Sure, there's always a way through these kinds of crises, but you need to have the mental strength to keep a cool head and make sensible decisions in the face of conditions that would cause panic in any sane person. 00:03:23.000 --> 00:03:30.000 You wouldn't run a marathon without having trained, and you'd be well advised to give yourself the mental training and tools to deal with stress. 00:03:31.000 --> 00:03:41.000 As an example, I find yoga and meditation helpful before, not after the fact, but that's only one tiny tool to keep you from losing your nut. 00:03:42.000 --> 00:03:47.000 Part three of your homework is to develop a plan to increase your mental resilience. 00:03:48.000 --> 00:03:56.000 Trust me, and I say this from personal experience, you're much better off preventing burnout than trying to recover from it. 00:03:57.000 --> 00:04:15.000 Now, you may be an engineer or product person, but now you need to become an expert in accounting, legal, governance, capital raising, HR, and you'll need to be a networker par excellence, and most importantly, a sales hero. 00:04:16.000 --> 00:04:23.000 If all you want to do is build stuff all day, you might want to reconsider and go work in product at someone else's company. 00:04:24.000 --> 00:04:26.000 Are you ready for this? 00:04:27.000 --> 00:04:41.000 Part four of your homework is to consider whether you like accounting, legal, governance, capital raising, HR, networking, and above all, sales, enough to spend most of your waking hours doing these things, especially in the early stages. 00:04:42.000 --> 00:04:47.000 And after those early stages, whether you want to be the person who manages others doing all of these things. 00:04:47.000 --> 00:04:55.000 Because that's what a CEO does, and what you'll need to become a sales professional, a manager, and a leader. 00:04:56.000 --> 00:05:03.000 Which of these things come naturally to you? Which are you excited about? And which are you going to have to learn to love? 00:05:05.000 --> 00:05:07.000 Are you ready for this? 00:05:08.000 --> 00:05:17.000 If you love a hard challenge and believe that you are ready for this, then you must be truly motivated. But what's driving your motivation? 00:05:18.000 --> 00:05:26.000 In my 25 years of angel investing, I've only met a very few founders who said they were mainly motivated to found a startup in order to get rich. 00:05:27.000 --> 00:05:31.000 Nearly all founders I've met have been motivated by bringing about some positive change in the world. 00:05:32.000 --> 00:05:39.000 Brooke Leighton and Sonya at Sharesies wanted to enable anybody to invest, even if they don't have much money. 00:05:40.000 --> 00:05:45.000 Andrew and Daniel at Publons wanted to speed up science by fixing peer review. 00:05:46.000 --> 00:05:52.000 Ben at Cogo wants to fix environmental degradation. Ratu at OpenStar wants to nail fusion power. 00:05:53.000 --> 00:06:01.000 And Tal at Tapi wants to eliminate the pain that both landlords and tenants experience when something needs to get repaired in a rental property. 00:06:02.000 --> 00:06:10.000 All of these founders are scratching a personal itch, a problem they personally encountered, and they want to fix it for themselves and everyone else too. 00:06:11.000 --> 00:06:20.000 They firmly know what problem they're trying to solve. Execute well, create a huge amount of value doing these things, and you'll have a good payday at the end. 00:06:21.000 --> 00:06:31.000 Part 5 of your homework is to identify what your underlying motivation is that would make you want to upend your life and run a marathon that is only 9 years long if you're lucky. 00:06:32.000 --> 00:06:38.000 This may be the same as your company's So What from episode 6, but often founders have a deeper motivation. 00:06:39.000 --> 00:06:45.000 What is it that makes that motivation so important to you, and why are you the right person to be attacking this problem? 00:06:46.000 --> 00:06:48.000 Is it something about your life experience? 00:06:49.000 --> 00:06:58.000 When you hit the wall with the metaphorical 30K mark into your startup marathon, your motivation is going to be the thing that will carry you through. 00:06:59.000 --> 00:07:04.000 Investors will be very interested in all these aspects of your personality as the founder of the company. 00:07:05.000 --> 00:07:16.000 Part 1 is about capital efficiency. Part 2 is about stamina. Part 3 is about resilience. Part 4 is about curiosity, agility, and adaptability. 00:07:17.000 --> 00:07:18.000 Part 5 is about your passion. 00:07:19.000 --> 00:07:28.000 Your pitch and investor due diligence will be all the more convincing if you can answer these questions succinctly and convincingly. 00:07:29.000 --> 00:07:34.000 Best to start on that now, and then you'll be ready for this. 00:07:36.000 --> 00:07:38.000 The pithy quote from today's episode is, 00:07:39.000 --> 00:07:43.000 The average SaaS company takes about 9 years from founding to exit. 00:07:45.000 --> 00:07:49.000 Our next episode is about your customer and business models to serve them. 00:07:50.000 --> 00:07:55.000 Relentless focus on delighting your customer is one of the biggest factors in startup success. 00:07:56.000 --> 00:07:58.000 Until then, ka kite.