Raising Venture Capital and Angel Firm Capital For Small Businesses (S9E5)

It’s Episode Five, and everyone’s most feared topic: fundraising. But what you’ll see next is something you’ve never seen before: a brand new challenge that reverses the roles and changes everything. With a just-as-intense Blox-Off on the horizon, who will emerge victorious?

A Brand New Challenge Arises

Day 3 at The Blox kicks off with a power breakfast for the pod winners and a deeper discussion on personal branding. We get a glimpse at more Bloxers and their stories, setting the stage for the day's lesson on later-stage fundraising. Despite many being early-stage, the importance of early planning becomes evident, emphasizing the need for preparation on all fronts. After a dense class, we’re treated to a tender moment of Bloxer connections, reminding us that the human element of all this is really at our core.

And then it’s back to the battle, with a new challenge that has never graced any Blox stage before. The name of this game is role-playing, with a major twist: It will be the contestants acting as investors and judges as the founders. The high-pressure exercise tests their investor mindset with on the spot questions leading to them to decide if they would fund the judge’s company. Initially shaky, they soon find their rhythm, leading to insightful consultations on equity, fundraising, and overcoming potential hurdles.

The much-anticipated third Blox-Off adds excitement as pod winners face another all-new challenge—answering questions about traction, suitable investors, funding tranches, and executive summaries with zero preparation. With one winner leaving a profound impact on the judges, the stage is set for another intense day at The Blox. Join us in Episode 6 for a never-before seen lesson, and more fierce competition.

Raising Venture Capital and Angel Firm Capital For Small Businesses

In this lesson on securing funding for small businesses through venture capital and angel firms, we emphasize the initial perception that venture capital is primarily relevant to tech companies with high growth potential and substantial traction, often in the form of millions in revenue. However, the relevance extends as businesses grow, incorporate technology, and alter their growth potential. We underscore the importance of timing and the need for entrepreneurs to understand skills relevant to fundraising in various stages of business development.

The concept of funding tranches is introduced, where founders strategically sell portions of their business at different stages to avoid giving up substantial equity all at once. This approach, termed "tranches," allows founders to remain focused on milestones, ultimately reaching the finish line with more ownership intact. Tranches are used to de-risk opportunities for investors as money is distributed based on proven traction. Additionally, investors can specialize in specific stages, acting as signals of validation for subsequent rounds of funding.

The dynamics of venture capital funds are explained, distinguishing between Limited Partners (LP) and General Partners (GP), and introducing the Rule of Thirds principle. The lifecycle of a fund is outlined, involving stages of fundraising, deployment, follow-on checks, and assistance with portfolio venture liquidation. Angel fund setups are explored, focusing on their relevance to earlier-stage companies with smaller checks. Two main types of setups—Pooled Money and Road Show—are discussed, each with distinct structures and dynamics that change the interaction dynamic for entrepreneurs.

The lesson also guides entrepreneurs on preparing for a significant fundraising round, covering considerations such as the amount to raise, proof of traction, executive summaries, financials, budget justifications, and cap tables. It encourages entrepreneurs to create a list of target firms based on geography and investment thesis. Best practices for initial contacts are highlighted, emphasizing the goal of progressing to the next step, and the importance of concise answers and building rapport with potential investors.

We also learn the intricacies of term sheets and subscription agreements along with their roles in setting basic contract principles and facilitating binding agreements. Both documents cover essential aspects such as valuation, shares bought, and the distribution of power, with adjustments made to the operating agreement accordingly. 

Key Takeaways From This Episode:

  1. Later stage angel investment and especially venture capital is only given to companies with high growth potential and a lot of traction.
  2. There is a finite window between when you start to qualify for this type of funding vs when you’ve gotten too far along and even the investors can’t afford to buy-in. The only way this works for both parties is if it’s timed correctly. 
  3. Funding tranches help founders remain laser focused on new milestones and basecamps that are right in front of them rather than constantly looking at the summit. It allows them to be more flexible with how they maneuver the hike.
  4. Earlier stage investors act as signals to the next stage of investors that something has been validated.
  5. Once a list of potential investors is made, go after every single one of them at the same time. This is sometimes referred to as Blitzkrieg. This will create a sense of urgency, keep you focused on the fundraising task, and will ultimately get you back to work sooner (successful or not).

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Meet The Judges

Brittany Hays
Brittany Hays
South Sound Staffing

As the owner and founder of South Sound Staffing, Brittany is driven by a genuine desire to make a profound difference in the staffing industry. Being a family-owned agency, Brittany and her team go above and beyond to deliver exceptional service and unmatched dedication to their clients. With a customer-centric focus, they strive to provide the best staff, ensuring that employers find the perfect match for their organizations. Brittany’s extensive experience of over 10 years in the industry has honed her expertise, making her a true authority in the field. As a thought leader, Brittany is passionate about bridging the gap between employers and employees. She actively engages in discussions surrounding hiring, careers, staffing, leadership, and recruiting. By sharing her insights and expertise, she empowers both job seekers and employers to navigate the ever-evolving job market with confidence.

Chase Curtiss
Chase Curtiss
Sway Medical

Chase Curtiss is an innovative digital health expert and clinical exercise physiologist with a strong expertise in developing mobile software solutions within the medical, sports and fitness markets. Chase has an academic and research background in biomechanics, exercise physiology and neuroscience with published research in each field. Chase has been recognized as a pioneer in the mobile health space with the first ever FDA clearance for a software only mobile medical device. He has been highlighted in the Wall Street Journal, Bloomberg TV, Forbes, Pando Daily, Mobihealthnews, the Grey Sheet and many other mainstream and medically focused publications. YouTube has also named Chase NextUP for his work in video instruction content reaching 30 million viewers. As an expert in the field of digital healthcare, Chase is also a regular speaker having presented for events put on by Blue Cross Blue Shield, AARP and Chase was the 2014 commencement speaker for Wichita State University.

Clay Slaton
Clay Slaton
LIFEguide

Clay Slaton is a leader coach with a passion for helping individuals succeed in both their personal and professional lives. Clay's journey began many years ago when he recognized the profound impact of personal development on professional engagement within his own team. Fueled by a desire to empower others, he embarked on a coaching journey, sharing insights with fellow business leaders through workshops, forums, and mentorship. The vision for LIFEguide took shape in the process, driven by Clay's commitment to facilitating personal and professional growth. In 2017, after successfully exiting a company he founded, Clay directed his focus towards LIFEguide. With intentional coaching for CEOs in both business and life, Clay drew upon his extensive experience as a career CEO, believing in the transformative power of wisdom and experience to elevate leadership and businesses. As a coach, Clay's mission is to guide CEOs to fully engage in life.

Lily Mockerman
Lily Mockerman
Founder & CEO, Total Customized Revenue Management - Austin, TX

President and CEO of Total Customized Revenue Management (TCRM), Lily is a passionate and devoted leader and practitioner in the revenue management field. Lily earned her Bachelor of Science degree in Hotel Management from Johnson & Wales University. Following graduation, Lily’s career encompassed a variety of roles and responsibilities, including positions with independent full-service, boutique and resort hotels, and work with major brands including Starwood Hotels & Resorts, Best Western Hotels & Resorts, Hilton Hotels, and Hyatt, and various management companies. With 13 years of diverse hospitality experience under her belt, Lily founded TCRM in 2012 leveraging her vision to become the premier provider of revenue management services for the hospitality community. In recognition of these efforts, she was named 2015 Revenue Management Professional of the Year by HSMAI’s Arizona Chapter. TCRM continues to grow under Lily’s leadership and has recently begun to expand into international markets.

Luke Wade
Luke Wade
Owner, KC Crew and MediaAlly - Kansas City, MO

Luke, an energetic and adventurous individual who’s always on the lookout for exciting new experiences in his city, started his business when he was frustrated by the lack of engaging activities and quality events. What began as a small initiative has blossomed into an incredible success story, with over 51,000 participants engaged in diverse activities like Sand Volleyball, Basketball, Pickleball, Cornhole, kickball, softball, and more, spanning the entire city. He also orchestrated one-of-a-kind events such as a Grilled Cheese Festival, an Underachiever’s Run, and a Zombie Crawl, attracting a staggering 16,000 attendees. These endeavors not only allowed Luke to leave his conventional job five years ago but also enabled him to foster a thriving, interconnected community. His once-small initiative now boasts four full-time employees, 40 part-time officials, and an office that has transformed into a bustling arena. Driven by his desire to make a positive impact, Luke is committed to helping others cultivate vibrant in-person and virtual communities. His dedication has earned him numerous accolades, including the 2018 25 under 25 Award from Thinking Bigger Business Media, the 2017 Innovation Partnership Program award, the 2017 Social Sports Industry Association Product Innovation Award, the 2016 Social Media Club Trailblazer of the Year Award, the 2014 Mayor Sly James’ Challenge Cabinet recognition, the 2014 Rising Star Award from NonProfit Connect, and the 2013 Urban Hero Award from the Downtown Council.

Patrick Culpillari
Patrick Culpillari
E-Commerice/Amazon Guru

Meet Patrick Culpillari, a seasoned e-commerce expert whose leadership style is a powerful force of inspiration. Patrick believes that effective leadership should naturally energize people, infusing the soul with enthusiasm to the point that the contagion of his vision becomes unstoppable. Guided by four fundamental principles—Customer Obsession, Brand Passion, Excellence, and Creativity—Patrick brings a unique blend of strategic thinking and passion to the e-commerce landscape. Customer obsession is at the forefront of his approach, ensuring that every decision made is centered around providing exceptional value and satisfaction to customers. Patrick's brand passion is infectious, driving him to cultivate a genuine connection between consumers and the products or services he champions. He believes in excellence as a non-negotiable standard, consistently pushing boundaries to deliver top-tier solutions and experiences. Creativity is the cornerstone of his approach, infusing innovation into every aspect of the e-commerce journey. As a leader, Patrick's goal is not only to achieve success but to inspire and motivate those around him to aspire for more than they thought possible. His leadership philosophy encourages individuals to strive for success not merely because it is expected, but because they have been genuinely inspired to do so. Patrick's magnetic enthusiasm and commitment to these principles create an environment where personal and professional growth are not just encouraged but become inevitable.

Todd Kinzle
Todd Kinzle
Serial Entrepreneur

Todd Kinzle is a seasoned entrepreneur with a distinct penchant for technology and an unwavering passion for creating meaningful impact. With a wealth of experience, Todd has become a driving force in the business world, adept at leading teams and fostering a winning culture that thrives on individual excellence. For Todd, the thrill lies in leveraging technology to create efficiency and solve real-world problems. His entrepreneurial journey has been marked by a keen focus on start-ups, strategic relationships, and a commitment to excellence in leadership. Todd excels in business development, product development, sales, marketing, and strategy, showcasing a versatile skill set that spans the entire spectrum of entrepreneurial endeavors. At the core of Todd's leadership philosophy is the belief in the power of great individuals coming together to form exceptional teams. He finds joy in inspiring and highlighting the unique strengths of each team member, creating an environment where collective greatness is not just encouraged but celebrated. With a track record of successfully navigating the dynamic landscape of start-ups, Todd Kinzle is not just an entrepreneur; he's a visionary leader who understands the intricacies of building impactful businesses. His passion for cultivating strategic relationships, combined with a focus on innovation and efficiency, positions Todd at the forefront of the entrepreneurial landscape, ready to tackle the challenges and opportunities of tomorrow.

Tyler Young
Tyler Young
Owner, VersiTech

With 16 years of experience in the payment processing industry, Tyler brings a wealth of expertise and insight to help businesses navigate the ever-changing payments landscape. In 2009, Tyler founded PPSW, which quickly grew into a successful merchant processing ISO. In 2017, Tyler acquired the POS company VersiTouch and transformed it into VersiTech, a restaurant technology company focused on delivering cutting-edge point-of-sale technology through a local partner network. At VersiTech, Tyler and the team believe that every business deserves personalized support, which is why they work closely with local partners to offer a unique customer experience. The focus is on making technology work seamlessly for businesses with as little hassle as possible. VersiTech is known for its adaptability and going the extra mile for customers, taking pride in serving as a calming presence and a source of relief for partners. As a visionary leader, Tyler is passionate about helping businesses grow through technology. His goal is to make VersiTech a major competitor in the POS industry, offering innovative solutions and smooth processes for customers. Tyler leads by example, valuing his employees as family and striving to help them thrive both personally and professionally.

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