He Built A $1 Billion Business By Enabling Group Voice And Video Calls For Any App

Alejandro Cremades Founder at acremades@gmail.com

2021-09-21

John Kim grew up on computers. He has been a pro-gamer and built a gaming company fresh out of university.

John was able to sell that firm for $10M, and start a social gaming site. He pivoted from a social app to his current model that has raised $200M.

Kim was happy to chat on the DealMakers Show, recalling the ride that he has had together, working with his fellow co-founders to build a company.

There are tales of falling short and rising again every time, by finding the grit to never give up.

Listen to the full podcast episode and review the transcript here

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    Early Life

    John grew up in Korea, with a brief spell living in the United States. He entered the world of computers, loved computers, and finally studied Computer Science at the university level.

    John was introduced to computers early on, at the age of three. By age five, he was already programming.

    His affinity with computers was mostly defined by the games he played on them. He played from age three and went on to play all his way to university.

    Kim was in online games and battles. Burning through hundreds of dollars on the hobby before playing professionally.

    Shooter games were his favorite. He caught the eye of Samsung, who put on a tournament in Korea that he ended up winning in 2000.

    John won several tournaments and never lost a game. Gaming pretty much dominated the first two years of his college education, where he won world competitions.

    After some soul searching, he decided to pass on military service by working as an engineer for Izzy Soft, a substitute for the country’s mandatory military program.

    John learned many skills during that stint, such as building products with much traction, getting feedback from clients, discovering customers, and making scalable products.

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    Testing the Waters

    After completing his degree and developing the necessary skills from his stint at Izzy soft, John opened his first business, Paprika lab.

    The company’s success relied on Web 2.0, creating an English service with a global target market.

    The company had a bunch of users in Brazil, but due to the 2008 financial crisis, they were unable to find investors in Korea.

    Leveraging his background in software engineering and experience in the gaming industry, John pivoted the company towards social gaming.

    In just four and half years, the company had over 5 million users globally. After lots of reflection, John had changed his philosophy to wanting to create more value for the customer.

    So, he looked for an exit. He was able to consult a large Japanese firm that was moving to Korea and reached an agreement. His company was bought by a Japanese firm, GREE, for $10M.

    John learned so much about running a business from his first venture and had a windfall of selling the company,. So he decided it was time to start Smile Family.

    The product’s objective was to create a community of moms to interact with other moms with similar interests and kids.

    The founders quickly noticed that moms were trying to communicate with each other using the comment section.

    At the backdrop of messaging services like Telegram, everyone was sure that the product everyone needed was a messaging feature.

    Unfortunately, there was no open-source or commercial messaging feature that worked with it or could directly be integrated with the app.

    The team’s developers sat down and decided to build the messaging features from scratch.

    Another Pivot

    Smile Bird had given birth to Sendbird, but soon the prospects for Sendbird seemed bigger, and the need to pivot was necessary.

    The opportunity came to mind after the team tried to get funding through YCombinator. The startup accelerator specializing in funding startups, and which has been instrumental to big names like Airbnb, Dropbox, Reddit, and Twitch.

    The expansion was seen as necessary as the company needed to go global and spread its wings from Korea to the rest of the world.

    Silicon Valley seemed like the perfect place to get financing, and Y Combinator had established itself as a great platform for a good startup to get funding.

    Initial application to Y Combinator to fund the parent company was rejected.

    When John came up with the slick idea of sourcing financing for Sendbird rather than the parent company they were quickly accepted. They still operate as Smile Family.

    Funding through Y Combinator was the breath of fresh air that the company was seeking, while they seemed to be on life-support through bootstrapping.

    Bootstrapping was necessary as the company had run out of seed financing. The process was made more difficult as investors were against a Delaware filing in the bid to give the company a US registration.

    Which lengthened the process and strained company resources.

    A fair amount of challenges faced the company. So much so that Y Combinator had suggested that they lay off key staff.

    This could be a catastrophic move to make as each member was responsible for critical departments such as Android, iOS, or servers.

    Investing Personal Funds into the Company

    John decided to keep the company afloat through personal funding as they were raising funds through Y Combinator.

    The firm has successfully raised capital and expanded over the years. They’ve now been through seed financing, a seed extension, and Series A through C rounds.

    Collectively raising over $200M. The firm’s success is rather remarkable, considering it almost fell apart with founders almost falling out due to the pressures.

    Storytelling is everything which is something that John Kim was able to master. Being able to capture the essence of what you are doing in 15 to 20 slides is the key. For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) where the most critical slides are highlighted.

    Remember to unlock the pitch deck template that is being used by founders around the world to raise millions below.

    Listen in to the full podcast episode to find out more, including:

    • Reinventing the pitch deck after many rejections
    • Holding a team together when they face divergent interests
    • How to successfully exit a company and make a profit
    • How to successfully expand the company when cash-starved
    • Talking to investors and how to raise capital from a pitch deck
    • His top advice on how to set the right priorities for the business

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    John Kim On Building A $1 Billion Business By Enabling Group Voice And Video Calls For Any App

    Alejandro Cremades Founder at acremades@gmail.com

    2021-09-21

    John Kim grew up on computers. He has been a pro-gamer and built a gaming company fresh out of university. He was able to sell that firm for $10M, and start a social gaming site. He pivoted from a social app to his current model that has raised $200M. His venture, Sendbird has raised financing from top-tier investors like World Innovation Lab (WiL), Meritech Capital Partners, Tiger Global Management, and Emergence.

    In this episode you will learn:

    • Reinventing the pitch deck after many rejections
    • Holding a team together when they face divergent interests
    • How to successfully exit a company and make a profit
    • How to successfully expand the company when cash-starved
    • Talking to investors and how to raise capital from a pitch deck
    • His top advice on how to set the right priorities for the business

    SUBSCRIBE ON:

    For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.

    *FREE DOWNLOAD*

    The Ultimate Guide To Pitch Decks

      Moreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here).

      Remember to unlock for free the pitch deck template that is being used by founders around the world to raise millions below.

      About John Kim:

      John is the Co-Founder and CEO of Sendbird (YC W16), the no.1 chat API for mobile apps and websites. They help businesses build direct messaging and group chat quickly on their applications.

      Their customers range from e-commerce, live-video streaming, business collaboration, and consumer apps including NBA, Yahoo!, Reddit, Delivery Hero, ServiceNow, Paytm, and DHL.

      They have raised $120M+ USD to date, backed by ICONIQ Capital, Tiger Global Management, Shasta Ventures, August Capital, FundersClub, and Y Combinator.

      His first startup Paprika Lab (social gaming) was acquired by GREE, and he was Korea’s all-time no.1 pro gamer in Unreal Tournament.

      See How I Can Help You With Your Fundraising Efforts

      • Fundraising Process : get guidance from A to Z.
      • Materials : our team creates epic pitch decks and financial models
      • Investor Access : connect with the right investors for your business and close them

      Book a Call

      Connect with John Kim:

      Read the Full Transcription of the Interview:

      Alejandro: Alrighty. Hello everyone, and welcome to the DealMakers show. Today we have a very, very interesting guest. I think that we’re going to be learning a lot about building and scaling. Right now, he’s in a rocket ship, one of his multiple companies, but his latest baby is definitely going in the right direction. We’re going to be learning about the ups, the downs, fights with co-founders, catastrophic financing rounds, you name it. So without further ado, let’s welcome our guest today. John Kim, welcome to the show.

      John Kim: Yeah, thank you for having me. I’m excited to be here.

      Alejandro: Originally born and raised in Korea, so tell us about the upbringings.

      John Kim: Yeah, I was born and raised in Korea. I had the fortune of living in the States for three years when I was a kid, so I think that’s where I put my niche a little bit, but since then, I went back to Korea, studied at Seoul in computer science. Right around that time, I also delivered professional gaming in the background. I had a kind of a difficult background as an engineer, literally a geek, loving to spend time on games and trying to figure out what to do with your life. I guess that pretty much sums up my upbringing.

      Alejandro: You’re forgetting to tell everyone that is listening that you got into computers at five. Wow!

      John Kim: I guess most people who grew up around the ‘80s or mid-‘80s probably got their first dose of computers through Apple, a little bit of IBM, EDO, B6, microprocessors, and all that. One of my uncles was really into computers. I think I actually got my first dose of computers when I was three playing games back then. Then I started getting into programming around the age of five with Basic and whatnot.

      Alejandro: That’s impressive. What about getting seriously into gaming. How was that?

      John Kim: This is kind of an embarrassing story, but right around middle school, I started to get into online gaming using battle modems and paying hundreds of dollars just on phone bills on a monthly basis. I started playing a lot of shooter games, the [3:26] and then playing competitively. When I was in my late teens, I got a call from Samsung. They were putting together the first-ever professional gaming team. I was invited to play those games, but even back then, I don’t think I had a professional mindset. I just loved playing games. Frankly, I was good in the first-person shooter, so ultimately, I ended winning a lot of tournaments. I wasn’t a defeated champion in a real tournament in Korea and was number three back in 2000. There was a thing called WCGC, which was their first major professional gaming event and hosted by Samsung globally. I won some of those tournaments back then.

      Alejandro: It’s very interesting how it works there in Korea because there’s always an out there for the military. There’s not like in Israel, like many founders that we have in Israel, and they have to go and do the army for some time. But in Korea, there’s a way out, and that way out is working at a tech company. Tell us about choosing this route.

      John Kim: I think I played too many games during my first two years at university, so I was trying to figure out what to do with my life. I think when I won the world competition, I didn’t see myself doing more of that for the rest of my life, so I wanted to figure it out and put a pause. The way to do that was to go through the military. But as a software engineer or any kind of engineer, you can take a test and get a certificate from the government for a license to work at a tech company instead if they approve. A lot of Korean companies that got approval were in software, IT, web, and gaming. I ended up working for a gaming company called Izzy Soft as a substitute for a military program for a couple of years. That’s where I got to really understand about building a product that people love, getting the feedback, customer discovery, and also how to tie that to a scalable impact and to learn about the concept of entrepreneurship. I think that’s where I did a lot of my soul searching. Ultimately, after finishing that program, I came back. As soon as I graduated, I started my first company when I was 26.

      Alejandro: Obviously, you got that out of finishing your computer science degree, but tell us about the process of incubating Paprika Lab, which was the first company, and what was that process to really bring it to life.

      John Kim: Gosh, I just wanted to build something that people wanted to use. We kicked off this Web 2.0 company back when Web 2.0 was a big thing. I actually don’t know what version we’re on anymore, but we are spitting out the web services on a weekly basis. But even back then, I wanted to build something that had a global impact. All the web services we created were in English and targeted the global user base. We had a bunch of users come from Brazil, but ultimately because of what was at the end of 2007, as you recall, in 2008 was the financial crisis, no investor wanted to invest, especially back then when I was in Korea. None of the Korean VCs wanted to invest in companies that didn’t have any revenue, only in users. Because of my background as a software engineer, and I had also worked for a gaming company, and having been a professional gamer, an investor came back to me and counter-proposed. If we create games, they will invest. So we pivoted to social gaming because I still want to do something that has to do with social. We got into social gaming, and then we grew that for about four and a half years. We got to 5 million users, and then, thankfully, we were bought by this company called GREE. They are a publicly-traded company in Japan. Back then, they were doing [7:08] yearly revenue. I didn’t speak Japanese, but they spoke English, so it ultimately worked out. That’s how I went on my first journey as a startup founder.

      Alejandro: That also gave you access to have visibility into what the full cycle of building, scaling, financing, and exiting looks like. What was that exiting process like?

      John Kim: To be honest, this is like a retrospect, or in transparency, as you go through the startup journey, you, as a founder, get to go through a lot of self-reflection, what you’re good at, what you’re not good at. What gives you the fulfillment and purpose versus what doesn’t? One thing that I learned about myself deeply during that time was, I love this concept of building the company, getting people together, marching toward a single mission, and bringing the culture. All of those things gave me a lot of purpose. One thing that didn’t sit well with me was, what is the value of creating for society? As an entrepreneur, you can create maybe two different values. One is how to make life more fun, which would be the content business like the gaming, music, and all of that content. Then second is how to make life more useful or easier, which is more of a tool. You’re creating services that solve problems. I understood that my deepest desire was more the latter of creating usefulness and making life easier. Creating games wasn’t really that. So probably sometime, maybe three years in, I thought, “Okay. I do want to continue to build new companies, but I want to create value in solving problems for people.” I started to think about, “How do I exit and wrap up this current business?” I started to think about strategic exit opportunities. When I heard GREE was expanding into Korea, it was the perfect opportunity. We started partnering with this company early on, thinking about the strategic goals to launch in Korea and then how we, as a company, can fit into their product goals. We worked in the partnership for maybe six-plus months, and ultimately a year into our relationship, we ended up evolving that into a strategic acquisition opportunity. We sold the company for nearly $10 million. Today, $10 million may not seem like a lot of money, but back then, it was a pretty good exit. The investors made money, some of the early members made money. It was a really good exit and gave me the confidence and perspective to go do the next business, but it also gave me the financial stability to explore this with more long-term thinking. So that worked out.

      Alejandro: Your next business, your lastest baby, is Sendbird. But it did not start as Sendbird. Tell us what the process was like, especially jumping the gap with your first company and shifting and jumping into now what has become Sendbird. What was that process like?

      John Kim: I feel like, at this point, I’m a serial pivoter. [Laughter] So with the second company, we started as a company called Smile Family. Our first product was, of course, for mom, creating a local mom’s community where you can find other moms in your area, with similar-aged kids, [10:24] playdates, and things like that. You see the common theme here. I continued to want to do something social, connecting people, making the conversation, and building communities around that. I started this company, the second company, with the buddies from my first startup, so we’ve been working for 12+ years now. This time around, my technical co-founder didn’t want to build chat again because we’re seeing a lot of users engaging with each other on the Common section, and they’re having conversations there. We’re like, “Okay, ladies, this is not how you’re supposed to use Commons.” Then we realized they want a messaging feature. I think it was around 2015 when Mary Meeker, back then, I believe at Morgan Stanley, came off the Internet Trends Report saying, “Messaging is taking over the world. There’s WeChat and Telegram, and all of these apps are really taking over the entire ecosystem as the most frequently used applications.” We saw a market trend and wanted to add a messaging feature for our own application. We were actually on the buyer’s side. We looked at all of the open sources. We tested a bunch of them. A lot of them didn’t work out for the mobile environment, so we switched over to things like Firebase. Here’s another product on top of it. Then realized that none of that was catered to a modern messaging experience that worked efficiently on mobile devices. We ended up building the entire chat ourselves, which became Sendbird, and Smile Mom gave birth to Sendbird. It’s still the same company, same cap table, same co-founders, but we ultimately pivoted to Sendbird around 2015. That was the year we applied to YCombinator at the end of 2015. Luckily, we got in. That’s how we pivoted to Sendbird.

      Alejandro: Why Y Combination? Obviously, 2015 was, at that point, Dropbox and Airbnb’s, and all of these companies were already starting to be out there to be building really big stuff. I think Y Combinator, at that point, was already even harder than Harvard to get into. How did you guys come across Y Combinator, and why did you think it was a good idea for the business at that point?

      John Kim: We’re constantly looking for opportunities to go global. Although I spoke English, I never worked globally, nor had I been to Silicon Valley other than as a tourist. It was hard for me to envision myself soft-landing into Silicon Valley without a network. Y Combinator was a perfect ecosystem where we could build a bunch of networks very efficiently and also test out your business very quickly with your group or even within your batch. And also get [13:04] on what to do and not to do and have a platform to raise money. It looked like the perfect storm if you can get in. We actually applied to YC in our first product with Smile Mom. We got to interview, and I remember Paul Graham looking at Jessica and saying, “Would you ever use this product?” What was interesting was when we switched over to Sendbird, this is a problem that we’re solving for ourselves. We have solved this problem multiple times at our first gaming company. By the time we applied a second time to Y Combinator, this was a product that we were already using, and we understood the problem inside and out. You have to see through the lens of how does the market and the product and the founder all get aligned? I think with the first Smile Mom product, all of my co-founders, at first, were guys. So, they’re not moms, and some of our members were singles. So the alignment wasn’t there. But with the second product, we were using the product for ourselves. We understood the problem, so there was a better alignment. We got into the second try but actually didn’t show my co-founders because I didn’t want to try and fail again, which was going to be very demoralizing. I secretly applied, and I went to the interview myself and thankfully got in. I remember getting the phone call that night. I was on a conference call with a bunch of team members from Korea, and I had this call from Michael Seibel. He said, “Welcome to YC.” I got so excited. I was like, “Can you get everyone in the meeting room?” I was kind of apologetic. “I’m sorry I didn’t tell you about this before. We applied to YC and got in.” Everyone was surprised. Everyone was super excited. It was really good. But again, it was the ecosystem at YC that provides someone like me, an immigrant founder, the perfect landing spot to someplace like Silicon Valley, especially before COVID.

      Alejandro: What ended up being the business model of Sendbird so that the people that are listening and watching really get it?

      John Kim: We power chat in other applications. You can chat on Reddit today or Door Dash with the delivery person. If you go on a date on apps like Hinge, we power the user messaging. We are a SaaS product where we charge by the number of monthly active users that connect with our servers. So we don’t charge for every user they have, but usually, whoever connects to our server on a multi basis, we charge for those. It’s a subscription-based service. That’s our business model. I think it’s well understood among B2B, API, or cloud-based services.

      Alejandro: How much capital have you guys raised to date?

      John Kim: We have collectively raised over $200 million. We are at the Series C stage. We have done Seed, Seed Extension, A, B, and C.

      Alejandro: It’s interesting here because it has not been a walk in the park, especially in 2014 before you guys did YC because in 2014, you actually and literally ran out of money, and you were financing the company out of your own pocket. So how was that?

      John Kim: Yeah. When I first started the company, we raised Seed money, and then we had a specific time that we wanted to flip the company. Around 2014, we were trying to do something called Delaware Flip. Delaware Flip, although it sounds simple because it’s a known path, some of our investors in Korea were not familiar with the concept. They voted against doing the Delaware Flip, which really slowed down the process. They had proceeded with LPs and all of that, so it took us literally half a year to do it, which normally would take only a month or two. During that time, we ran out of money for close to three months. I had to keep the company afloat by funding through my own capital. So that, obviously, was very stressful, but I didn’t want to tell the team about it. Later on, of course, they figured it out, but ultimately it worked out. That was personally a stressful time. Then even towards the end of 2015 was when we actually ran out of seed financing again, but we got into YC. I remember sending the first email to my partner, Justin Khan. “I’m really excited about joining YC. By the way, there are two quick heads-ups. First, we’re running out of money, and we have two to three months of runway left. Secondly, we just got a cease-and-desist letter from a company. By the way, we didn’t call ourselves Sendbird back then. We called ourselves Jiver, which also coincided literally with a publicly-traded company some other company named similarly. We got a cease-and-desist letter from this company. It was our first exciting welcome mail to YC. I remember getting our partners responding back and saying, “Oh. Just fire everyone.” “No, we can’t do that. We’re a chat company.” Of course, they didn’t see that straightforward, but basically, their message was, “You’ve got to line up a team.” But we couldn’t do it because we had one person for iOS, one person for Android, we needed someone on the servers, so if you just count the number of people necessary for a chat to work, we simply could not afford to lose anyone at that point.

      Alejandro: Yeah.

      John Kim: I ended up raising during YC, which we’re not supposed to do back then. Now, it’s actually recommended. I actually had to raise money throughout the entire YC period to keep the company afloat.

      Alejandro: That was definitely a stressful year because also you had a big, big argument on the co-founders’ side of things. So what happened there?

      John Kim: Yes, 2014 was certainly a year with a perfect storm of running out of money, co-founder breaks up, and stuff like that. Thankfully, we didn’t break up, which is good. All of our four co-founders are still here today, the company and all of our respective works. Here’s an interesting story. It’s all about sufficient management. I recall seeing all my friends who started their own companies get into this huge fight around a year and a half to two years in. A lot of founders go through founder breakups. It was kind of interesting because these are all people with very different backgrounds, different years of experience. Why do people get into this fight around this small period? I thought about my colleagues or friends who just went to have their normal jobs. Maybe three or four years into their jobs, they’d have this doubt among themselves, or something like, “Oh, I’m literally bored. Maybe I want to go get an MBA, or switch jobs, or things like that. Then, usually, I think founders just hit what I call entrepreneur puberty a bit earlier because our lives are denser than people who just have normal careers as employees. I think people all get super tired and stressed about that time. When we first started the company, I remember telling our co-founders, “Here’s a prophecy I’m going to make. Maybe in about a year and a half or two years into the company, we’re going to have a big fight, and no matter what the reason, we’re going to perfectly rationalize ourselves that it’s not my fault; it’s someone else’s fault to blame. We probably could have made XYZ decisions better, but we’ll start blaming others with perfect logic. When that happens, realize that we’re just simply tired and burned out. So let’s not fixate on the actual content, but know that we’re just tired. When that moment hits, we’ll take a step back, maybe take a few days off, and come back together as a team.” Of course, I was guessing at that point, but what was interesting was, it was almost exactly a year and a half into the company when we had this ridiculous fight about the tiniest thing, almost like how some couples break up. I don’t even remember why we got into a fight, but I remember us cursing at each other. We were punching; we were screaming and breaking wine glasses.

      Alejandro: Oh, my gosh.

      John Kim: We made a huge scene at this wine bar, and obviously, the owner was upset about it too. I thought, “This was doomsday. Nobody’s going to show up at the office the next day.” Then, the next day, something magical happened. People showed up—of course, we didn’t speak at first, but people just sat there. We were silently working. I was like, “Guys, what’s going on?” We actually caught up later that week. “We just remembered that this was that day. We just had to recognize that we’re all tired and then accept the fact that we have to work through this. That brought our team together much stronger. Of course, there were other challenges along the way, many years down the road. But we would always be able to get back together and reconcile. Because we’ve gone through so many things together, now those small things will not tear us apart. I’m happy that it worked out. It’s a good reminder that all founders go through some level of stress and burnout. That’s okay. That’s normal. You just have to find a way and protocol to work through that.

      Alejandro: That’s great. As we’re thinking about adversity here, and also, we were alluding to the financing rounds, the Series A for you guys, the first time you took a stab at it, it didn’t go as planned. So what happened there? What was the outcome?

      John Kim: I remember going out for our Series A in 2017. We were a bit over $1 million in ARR. We were trending in the right direction. We were excited. I thought that was a big milestone. About $1.5 million is where you raise a big Series A. I went out and spoke to about 30 investors. Twenty-nine said no. With a lot of data warehousing, all the things I should share, they all said no, and one gave us a pitiful term sheet. It was like a flat round to our seed round. I said, “This is not a Series A.” This was pre-COVID, so I was driving up and down Sandhill Road in San Francisco, going back and forth, listening to this music from La La Land. Whenever that music comes on, I relive that memory, and tears come to my eyes. I’m sitting in this car in-between, trying to practice my pitch, and every time I’d get a no, you’ve just got to pick yourself back up and get to the next meeting with high confidence. At the end of the day, when we got about the 30th rejection, I remember sitting in the car, not knowing what to tell my team. It was a complete failure for our team. I told them, “When we get to this milestone, we’re going to go out and raise a successful Series A.” It was a painful process. I was most worried about the morale of the team. Thankfully, at that point, I was sending monthly investor updates. The inside investor had pretty good confidence, so I asked, “We’re, yet again, running out of money, but because of the trajectory of our company, I think we’ll do well. Then I asked for a million-dollar extension, and World put it together within a week. I think that’s part of the investor update is that you can build confidence and trust with investors as long as you have a good fit about that. Actually, I thought to myself, “Is this some form of racism that I’m a big part of that I cannot cross? Or is it because I didn’t go to Harvard or Stanford.” I went to college in Korea, but none of that mattered here. Nobody knew. “Am I having this glass ceiling moment? I started to have a lot of self-doubts. At the end of the summer, I had no choice but to raise because we were going to run out of money if I didn’t do it. I remember relooking at the deck, completely redoing my pitch. The second time around, we started getting three term sheets in the second weekend. Obviously, there were a lot of things that we changed, but that was a moment I was like—I keep telling myself, I think it was a quote from Andreessen, “Be so good that nobody can ignore you. Just keep executing, creating business value, have good customers, and good things will happen to you.” I think that’s what Silicon Valley is about. If you execute well and have a good business, people will invest in you regardless of your background. That was a really good turning point for the company and me.

      Alejandro: And the Series B was a little bit different when Tiger Global came in knocking. So how was that?

      John Kim: Yeah. The second time, Series A went well, and by the time we did the Series B, it was also a pretty quick round. I think we had a few terms sheets by the second or third weekend. It was a relatively good round. This time around, our story was simpler, clearer, and the traction was there. So I initially led our Series B along with our easy investors in Parada and whatnot. Then as soon as we announced our initial $52 million Series B, it was about a weekend, and probably people in the leader stage know this. When you announce your growth stage round, all the hedge funds and everyone comes out of the woodwork introducing themselves, “We’re XYZ Bank. We’re a private equity, blah, blah, blah.” Everyone comes knocking on your door just to start building a relationship. I remember getting an email from Tiger Global, a new series of emails. I’m like, “Wow. This guy is really tenacious.” One of the emails said, “We’re based in New York, but I’m actually in San Francisco. I’d love to stop by and say hello.” I’m like, “Okay. That’s great.” We had around a 45-minute meeting, and this guy, John Curtius, thankfully visited our office. Ten minutes into the conversation, the moment he sat down, he asked questions about metrics. I had just closed our Series B, so I knew all of the metrics in my head. I was answering all of his questions. “Do you have room to take an extra $40 million?” I said, “No, I just met you. My mom told me not to take money from strangers.” I thought it was his way of briskly building a relationship. We had a good talk for 45 minutes, and he went to take his flight. The next day, he sent me a follow-up email saying, “Have you thought about it—” I clearly had not because I thought he was half-joking and was just trying to test me. I was like, “My initial goal was to say no because we just raised a round.” I thought it would not be super comfortable with that. Initially, I tried to say no. I said, “Instead of $40 million, I’d like $50 million in increments of valuation of x; no [27:23]; no extra due diligence. It was my polite way of saying no. Forty minutes later, he came back and said, “Let’s do it.” I’m thinking, “Wake up. This guy is serious.” I’m like, “I just met you. I barely remember what you look like. I’m not going to believe it until you send me a term sheet.” He sent me a term sheet right away. “Is it really happening?” I still don’t believe you. Can you send me a signed term sheet from your end so that I can talk to the board about it?” It was my first vacation in five to ten years, so I was just on my way to Hawaii, and I landed in Hawaii, opened my email, and there was a signed term sheet. Now, I really have to talk to the board. It’s my fiduciary duty to do so. I was unpacking my stuff at the hotel and immediately pinged our investors. “Hey, folks. Have you heard of a company called Tiger Global?” Back then, Tiger Global wasn’t as active as today. They just started getting into B2B and SaaS. I started calling board members, and we had an emergency board meeting. “I actually have a term sheet in my hand. What do we do?” Of course, we had some back and forth, but the deal was too clean not to do it. So we ended up taking the extra $50 million from Tiger Global, which expanded our Series B from $52 to $100-200 million in Series B. It was a good buffer. In hindsight, it was a good decision with the COVID. We had a good buffer to power growth through COVID without extra financing.

      Alejandro: No kidding. John, imagine a vision as we’re looking ahead here for Sendbird. Imagine that you were to go to sleep tonight, and you wake up in a world where the vision of SendBird is fully realized. What does that world look like?

      John Kim: Wow. That’s a fun exercise. There are roughly five billion people on this planet earth who use messaging on a monthly basis. These are not just consumer messaging, but any app that has a messaging capability, whether it be food delivery, gaming, dating, doctors’ applications, all of those things. On average, out of five billion people, people use about four to five apps every month that have messaging capabilities. If all of our vision is realized, we’ll be powering five billion people’s conversations every day, plus times four to five, so basically, from our view, that’s 125 billion conversations on a monthly basis, which is phenomenal. There will be not only foreign chat but also voice and video. We’re trying to build [29:51] vision of building out a trillion using digital platforms where we’re having all of the conversations that happen on Sendbird with an application as well as some other omnichannel. All of those conversations flow through Sendbird, and we can track all of the analytics related to it and also run sentiment announcements to it, automated moderation to keep the conversations as clean as possible because there are a lot of spammers out there. So empowering are all of those rich conversations that happen in real-time or synchronously on pretty much all significant businesses or applications globally. That plugs in nicely with like Salesforce, Genesis, whatever those things are. We’ll be the household name for all things communication over IP. I think it will be a great place to be. Yeah, I guess that would be the first step of the vision.

      Alejandro: I love it. Imagine I put you in a time machine, now, John, and I bring you back in time, perhaps to that time where you were getting your computer science degree and then thinking about a world where you could build a company. If you could go back in time and give that younger John one piece of advice before launching a company, what would that be and why, knowing what you know now?

      John Kim: Oh, boy! 1) Storytelling is very important. 2) Expectation management. I had no idea how to manage expectation back then because I always am very, very positive and optimistic. I’m like, anything can happen. I remember seeing my first business projection, where raising half a million dollars will get us to conquer the world, which now, in hindsight, doesn’t make sense—so managing expectations of all of the stakeholders, whether your customers, your employees, your co-founders, the investors. I think I did a horrible job when I was running my first company, so really learning about expectation management. 3) Really understanding the difference in people’s personalities because back then, I was trying to force my way of doing and my worldview onto other people. I thought there was one clear way to be a great entrepreneur and great employee, so I tried to force my mode of operation, forcing installation of my OS to other people and realized that’s not how people work. You have to understand and see from where they are and really understand their worldview to align. That’s how you can rally people towards a similar mission. It’s not about trying to force them to your worldview, but it’s meeting them where they are. I think those things—I think I probably spent all of my 20s and half of my 30s understanding human beings. I still am a student in that capacity, but I think those will be critical lessons, for sure. 4) Lastly, just have belief in yourself. Things will work out as long as you work hard, assist your desire to do good in the world; the world will tend to help you over a long period of time, so just keep going and don’t give up.

      Alejandro: That’s it. And John, one book that you wish you would have read sooner?

      John Kim: Too many books, but I certainly would recommend anything to do with the field called complexity science—emerging phenomena, understanding the network science, and all of that. That really helped me understand and broadened my perspective of how the world worked, how the human race works, how society or how organizations work, those super organizations work, and that helped me bring together all these different parts of the world and different parts of business into this framework that I can understand and really iterate on, so I would certainly recommend consuming all of those books. If I had read those books in my teens, I think I probably could have made a lot more skill impact early on.

      Alejandro: Nice. John, for the people that are listening and watching, what is the best way for them to reach out and say hi?

      John Kim: Just drop me a note by email. Sometimes, if I’m swamped, it may take me some time, but I try not to forget. So email me at john@sendbird.com.

      Alejandro: Amazing. John, thank you so much for being on the DealMakers show today.

      John Kim: Yeah. Thank you so much for having me.

      * * *
      If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com.

      He Built A $3.5 Billion Company And Now Raised $450 Million To Make The Internet Safer

      Alejandro Cremades Founder at acremades@gmail.com

      2021-09-19

      Hari Ravichandran grew his first startup into a multi-billion dollar business. Then, his entrepreneurial DNA drove him to start all over from scratch again. 

      On the Dealmakers Show, Hari Ravichandran told our audience how he was inspired to leave college and start his own business, about the pattern recognition he has picked up, the foundations of scale, and how to create a vision statement and strong company culture. Plus, his insights on M&A transactions and how to survive the booms and busts in the economy. 

      Listen to the full podcast episode and review the transcript here.

      *FREE DOWNLOAD*

      The Ultimate Guide To Pitch Decks

        If They Can Do It, So Can I

        Hari Ravichandran was born and grew up in southern India until he was 14 years old. It was then that his parents brought him to the United States and set his life on a completely new trajectory. 

        His parents were only allowed to come to the US for two years. Though on the way his father told him to, “figure out a way never to come back.”

        His parents really wanted their kids to have a good life and the best opportunities. They saw America as the land of opportunities. They saw it as a place that with the right mindset, hard work, effort, and circumstances you would have a lot more opportunity than elsewhere. 

        Since he was a child back in India, Hari saw his parents and grandparents building businesses of their own. Once he arrived in the US, his mindset shifted to focusing on building a stable career and lining up the education for that. 

        However, that all changed when he ended up in school out in Silicon Valley. It was the 90s and the dot com boom was warming up. Yahoo, Excite, and Hotmail had all just come out of Stanford. He saw how excited people were as they worked on projects they were passionate about. 

        He thought, “If they can do it, I can do it.” He didn’t see why he shouldn’t make the leap and build something of his own. So, he dropped out of school and went for it. 

        That decision didn’t go too well with his parents. They were big on education and it took them a good 10 years to deal with it. His father even told him not to call for help with rent after blowing his education opportunities. Of course, we can assume that they are pretty proud of him now.

        See How I Can Help You With Your Fundraising Efforts

        • Fundraising Process : get guidance from A to Z.
        • Materials : our team creates epic pitch decks and financial models
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        Book a Call

        Building A $3.5 Billion Business

        Hari didn’t start out with grandiose ideas or expecting to build a world-changing billion-dollar enterprise. 

        It began much simpler. He was drawn to the idea of doing his own thing. He didn’t have a lot of bills. He figured he just needed to make $2k a month to cover his living costs, while enjoying doing something he loved. If he made any more than that it would just be extra icing on the cake. 

        Thinking about what he was good at and the value he could give others he settled on coding. Then, he honed in on helping small businesses get online. 

        Taking the leap was still scary. He took $5,000 of his $7,000 in savings and plowed it into magazine ads with his cell phone number. 

        Nothing happened for two weeks, and it looked like he might set a new record for the fastest startup to go out of business. Then, the first lead call came in. 

        Endurance International took off as they bundled more services and offered them at an affordable price point. 

        Once they got the model working, they raised $30M in capital to scale even further. 

        Storytelling is everything which is something that Hari Ravichandran was able to master. Being able to capture the essence of what you are doing in 15 to 20 slides is the key. For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) where the most critical slides are highlighted.

        Remember to unlock the pitch deck template that is being used by founders around the world to raise millions below.

        How To Survive A Crisis

        Being a young 20-year-old entrepreneur with things growing fast, he believed everything was going to continue running smoothly and in two years he’d probably be able to retire rich. Then the dot com bubble burst. 

        The economy was a mess. Endurance ended up almost six weeks away from running out of money. 

        Of course, the only thing that really differentiates the big successes that survive from all those that don’t is the refusal to quit. 

        They slashed the team from 250 to just 14. They rebuilt their infrastructure on the fly and converted all of the free customers they could to paid subscriptions. Hari credits these tough decisions as what enabled him to make it through and become so successful in the end.  

        M&A

        At Endurance International, Hari was involved in more than 40 M&A deals. 

        When they made that big shift in their infrastructure I mentioned earlier, they had a platform that could handle millions of customers. 

        Only they had just 20k. Buying up other companies with the right customer base seemed like the fastest route to growth. 

        Endurance ended up buying a range of companies — their first company for just $30k and then ultimately buying a public company, Constant Contact, for more than $1B. 

        On the buy-side, Hari says it can be competitive out there. In these cases, he found three things that helped to separate them as acquirers.

        1. Looking at the strategic value once integrated, not just current EBITDA 
        2. Helping target companies get their financials organized, and making it easy for them
        3. Looking for a shared vision, and being the buyer who will best take care of their baby

        Aura

        Itching to get back to the days of building a young, fast-growing startup, Hari ended up leaving Endurance to start his latest venture. Aura is a company that is on a mission to help make the internet safer for everyone. 

        The idea came to Hari in 2014 when he learned that he was a victim of identity theft. Through the remediation process, he realized that digital security was a big problem with no comprehensive solution. The products that were supposed to help were confusing, difficult to use, and expensive. But, most importantly, no one product could give him all the solutions he needed.

        He was inspired to start Aura, a company that gives people the peace of mind to know that they are safe online. Today, they serve over a million members worldwide.

        Aura has already raised ~$500M in capital, has over 1.5M customers turning in $230B in revenue a year, with ~800 FTEs. Aura became a Unicorn with the last rounding of funding in June 2021.

        Listen in to the full podcast episode to find out more, including:

        • Starting over
        • Staying safe in our new digital world
        • The importance of being intentional about building company culture
        • Hari’s top advice when starting a business

        SUBSCRIBE ON:

        Hari Ravichandran On Building A $3.5 Billion Company And Raising $450 Million To Make The Internet Safer

        Alejandro Cremades Founder at acremades@gmail.com

        2021-09-19

        Hari Ravichandran grew his first startup into a multi-billion dollar business. Then his entrepreneurial DNA drove him to start all over from scratch again. He started Aura, a venture that has earned funding from top-tier investors like Warburg Pincus, General Catalyst, and WndrCo.

        In this episode you will learn:

        • Starting over
        • Staying safe in our new digital world
        • The importance of being intentional about building company culture
        • Hari’s top advice when starting a business

        SUBSCRIBE ON:

        For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.

        *FREE DOWNLOAD*

        The Ultimate Guide To Pitch Decks

          Moreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here).

          Remember to unlock for free the pitch deck template that is being used by founders around the world to raise millions below.

          About Hari Ravichandran:

          Hari Ravichandran is an entrepreneur and he has loved technology since he was 10. He programmed his first 8085 microprocessor at 13 and haven’t looked back. Hari spent the last 21 years building a start-up that grew to become a business that he took public with $1B+ in revenue.

          In 2017, a trusted team and Hari returned to their roots and started Jump Ventures, a scalability infusion firm focused on creating, acquiring, funding, and launching innovative businesses. They believe in long-term collaboration and strategically investing in businesses with a focus on driving exponential growth.

          As part of this journey, Hari launched Aura (formerly known as iSubscribed). Aura™ is a technology company dedicated to simplifying digital security for consumers. Committed to creating a unified platform of services, Aura uses adaptive technology to enable customers to manage disparate cybersecurity needs with ease.

          Innovative personal identity protection and security products such as Identity Guard and Hotspot Shield, privacy products FigLeaf and PrivacyMate, and technology services including Intrust, an antivirus are part of the Aura family. Trusted by millions of customers, Aura is the digital halo that provides real-time peace of mind.

          Hari is dedicated to bringing the best SaaS technology to consumers – which has always been the focus of his career. He loves building technology and seeing it at work. Visit their website www.aura.com or https://jumpv.com to keep up with them and get the latest news.

          See How I Can Help You With Your Fundraising Efforts

          • Fundraising Process : get guidance from A to Z.
          • Materials : our team creates epic pitch decks and financial models
          • Investor Access : connect with the right investors for your business and close them

          Book a Call

          Connect with Hari Ravichandran:

          Read the Full Transcription of the Interview:

          Alejandro: Alrighty. Hello everyone, and welcome to the DealMakers show. I’m very excited about the guest that we have today. He’s a guest that has been there, has done it multiple times. On his last company, he was there for about 20 years, built it to a $3.5 billion business, thousands of employees, and now he’s at it again. When you’ve done it so many times, you’ve also developed certain things about pattern recognition when it comes to the execution, and I think that we’re going to be learning a lot today, and you are going to get inspired. So without further ado, let’s welcome our guest today. Hari Ravichandran, welcome to the show.

          Hari Ravichandran: Thank you, Alejandro. Thanks for having me. I appreciate it.

          Alejandro: You were born and raised in India, so where in India and tell us about your upbringing.

          Hari Ravichandran: I had a unique and interesting upbringing. I grew up in India and lived there until I was about 14 in the southern part of India. My parents ended up moving into the States. When they came back to India, after the basis of the two-year journey that my dad in the U.S., he wanted us kids to move out here to have a good set of opportunities and a good life. So I ended up moving out here when I was about 14, interestingly through our rotary exchange program. It was a unique and different way to come into the U.S. when you’re a young kid.

          Alejandro: And, for you, your father was a really big influence for you to come here to the U.S., and it seems that for him, being in the U.S. was the place to be. What happened? He had to go back because he also had experience with the Fulbright Scholarship, the whole U.S. approach, and culture, and mindset, so what happened to him that really got him to say, “My son is going to be the one that is going to go there and make it happen.”?

          Hari Ravichandran: It’s really interesting because this is again, you’re talking about the late ‘80s when he was here. It was sort of a big cultural divide between the countries that had a lot and the countries that didn’t, and India was still on a projectory where there were not a lot of resources, not a lot of opportunities, etc. I think the thing that struck him here was just the abundance of opportunity where if you worked hard, you had the right mindset, you expended the effort, and if you had the right set of circumstances, you could end up having a lot of resources and a lot of opportunities that may not be available in India. Because of the way this program was structured, he could only live here for a window of time, and then he had to return back and had to spend two years minimum there before he could come back to the U.S. So even during that window of time when he thought, “If I could get my kids to have a better opportunity and have them be in this country and have them be integrated from when they’re young, it could end up being a much different life than he and my mother had when they were growing up.

          Alejandro: Actually, when you were in the airport, and you were coming here to the U.S., there was a phrase that your father gave you that stuck with you. What was that?

          Hari Ravichandran: On the way out, you’ve got to imagine a kid that’s 14 who had never been anywhere, had never traveled anywhere, and had never been out of the house. Even when my parents were here, I was staying with my grandparents. On the way out, my father said, “Figure out a way never to come back.” That stuck with me, and that was a big dominant part of my childhood years as I moved to this country and tried to figure out how to make a life for myself and get integrated into the American way of life.

          Alejandro: How did the entrepreneurship bug come about. Is that something that you developed, or is it something that you’re carrying from the family genes? What’s going on there?

          Hari Ravichandran: It’s actually a little bit of both. My parents always were thinking around what different opportunities there were. They started a publishing company when desktop publishing was getting popular. My grandparents were in the book publishing business, so I got to see that a lot when I was a kid. After I moved here, a lot of my focus was on building a very stable, steady career. That’s really what I had been thinking about as I was going to college, etc. Then I had the good fortune of being out in California in the late ‘90s. I was out in Silicon Valley. I was living out there. It was a crazy time. It was insane. Everybody was starting a business. The dot-com boom was just starting up and going. It was like a dynamic, exciting, wonderful time to be part of the Silicon Valley culture. I really got the bug, and at that point, I thought, I see when there are people that are passionate about their work they’re doing how excited they get. It felt familiar from when my parents were doing startup-oriented stuff as well. So, at that point, I said, “I’m going to take a leap. I’ve got to go do something on my own.” I dropped out of graduate school and started my first company.

          Alejandro: That’s a big deal because, in India, there is a lot of pressure for getting the really big degrees. And getting the shiny CV. I’m sure that in this case, you were able to get into one of the best universities in the world to study a program that I’m sure that everyone was like, “Wow!” back in India, so I’m sure for you taking the decision of dropping out was not easy, and I’m sure that your parents were thinking, “Are you serious, Hari?!”

          Hari Ravichandran: That’s exactly right. There is still a lot of angst about it, I would say, for a decade after, but it’s just something about that time. This was the late ‘90s, and it felt like a whole new world order was being created. Everybody around me were people that were in school at the time. Yahoo had just started out of Stanford at the time. Hotmail had just come out of there as well. Excite, which was an earlier search engine that has come out of there as well. You just look at these things, and you say, “These folks are brilliant. They’re really smart. If they can do it, I can do it.” Like, why should I not take the step to go build something on my own? That, I remember, was very dominant back in my mind. I just kept thinking, “If they’re able to do it, I ought to be able to do it too.” It ended up being the right decision for me and for my life.

          Alejandro: Your first company, Endurance International, was quite a success. Being the first company, it’s not easy to get it right on the first try, but you were very lucky, and as they say: luck and preparation meet opportunity. But in your case, how were the early days, and how did you bring this to life? What were the early days like?

          Hari Ravichandran: You know, Alejandro, it’s like those overnight success stories where you’re going to spend years and years and years, and then suddenly, you’re like, “We’re now a success.” It wasn’t that different for us even in those days. So when I started it, I remember it was a very simple notion. I didn’t have these grandiose views of: I want to go change the world. I want to go build a multi-billion-dollar company or any of these types of things. I remember thinking, “I love the notion of entrepreneurship. I see a lot of people doing stuff on their own. I love the idea that if I can do something, I love doing, and I have control of the work I’m doing, all I really need to do is pay my bills.” It was as simple as that. That’s how I started. I was like, “How much does it cost me every month to live my life?” At that time, it was about $2,000 a month. I thought, if I can do something I love doing and pay the $2,000, then everything else above that is just gravy; it’s just extra dollars that I can get.” That’s the simple notion I started with. The next thing I thought about was, “What am I actually good at? What can I do that could be of value to other people? I know how to write code. The internet is just starting. So maybe I can help smaller businesses that don’t have a lot of technology-savvy to come to use the internet better, maybe get them to board over the internet.” That’s how I got started with the first business. Then it was a bit of risk-taking where you have to say, “Okay. This feels scary.” Entrepreneurship is in the zone where it can be unsettling, and you’ve got to take the lead. I remember this: when I was first getting started, I didn’t know how to get customers to come in and help them get started. I had been working at some micro at the time. I had saved up about $7,000 or so, and I thought I would go talk to people. I would ask, “How do you get customers?” People would say, “You should advertise. You should go to these magazines and advertise.” I took about $5,000 of the $7,000 that I had in savings and bought three ads on Wired Magazine, PC Magazine, and I think it was The Buzz Magazine, at the time, which was the third magazine. Then I put in my cell number, which had just gotten to be popular. Cell phones were just getting popular at the time, and I was doing my consulting job. I put all of this in, and I remember calling my parents and saying, “I’m going to take this big lead, and I’m going to put most of my savings into this thing to get started. My dad said, “If you blow the money, don’t call me for rent because I’m not going to cover this because you had a good opportunity.” So there’s stress there. For two weeks, I sat there, and I waited for the phone to ring. Nobody called, and I thought, “Man! That’s the shortest startup in the history of all startups. It’s only two weeks, and it’s already out of business.” Sure enough, one evening, I’m driving back home, and I get a phone call. I pick it up, and the guy says, “Hey, I’ve got a bookstore. It’s an offline bookstore. I want to get online. Can you help me do it?” I said, “Yeah, I can do it.” And that’s really all it takes. It takes that one thing, and then the momentum builds up, and it started working out pretty well.

          Alejandro: What ended up being the business model of Endurance International.

          Hari Ravichandran: We were helping small businesses use the internet better, so whether it’s in an email, web services, marketing services, the full bundle of solutions that help small businesses use the internet better. Again, enterprises have IT staff, small businesses. They’re very passionate. They build great solutions, but they don’t have a lot of resources. So for a very affordable price point, we’re going to get them online and get them to use our services.

          Alejandro: Tell us about, also, capitalizing the business. How do you guys go about doing that?

          Hari Ravichandran: It’s interesting. Again, to this day, I still believe this is the right way to do it, which is, wherever you can be very thrifty, in the beginning, to make sure that your product is working and customers are actually paying for it, try to be asked, direct as possible, which is what we did for about a year or two. Then when the model started working, then we went out, and we raised a bunch of venture capital. This was in the late ‘90s. We had Alta Ventures, Advanced Technology Ventures, and BancBoston Ventures. We raised about $30-ish million from them, and then we invested all of that money into our platform to be able to build the technology up so that we could scale lots and lots and lots of small businesses because they weren’t paying us very much on a monthly basis. That was the initial model.

          Alejandro: And, obviously, a lot of ups and downs because here you were involved for a little bit over 20 years with this company, and now you’re involved with your latest one, which we’re going to talk about in just a little bit. In this case, for you, you were able to experience the dot-com bubble and the bust.

          Hari Ravichandran: Yeah.

          Alejandro: And here, you were also pressured. You had raised quite a bit of money, so all of those investors wanted to eventually see their liquidity event, and that was probably in the form of an IPO.

          Hari Ravichandran: Yeah.

          Alejandro: In this case, what was it like going through that craziness of the dot-com bust.

          Hari Ravichandran: It’s crazy. It’s ups and downs, ups and downs, and all of Lakeshore windows of time one morning. You know, it was funny, Alejandro. I was 20 when I started this company, and the dot-com boom was so good, and the company was starting to go up and up. We made all of the passwords on our servers retire at ’22. So we thought we were in it for two years, and we were all going to make a lot of money, and then we were going to retire. Again, as a young person, that’s how your mind works. The thing about it is, after we raised money, which was at the peak of the market, the market started going the other way, and it was baffling. You don’t understand what is happening because you have this vision in your head of exactly how things are going to go down and what’s going to happen next. There’s this big jarring event where you’re like, “I didn’t expect it, and I don’t know what to do now. There is a lot of internal strife within the company itself, and there’s a lot of strife with the capital markets, externally, as well. So it was a very challenging time. We had a six-week window where we were going to run out of money, and we basically had to convert our entire business model from advertising focus to just what it was in the early days to a subscription business. We didn’t have a billing system. We didn’t have some of the engineering that was needed to be able to put plans in place for our customers, all this type of stuff. We had taken the company at that point, at the high point. The company was about 250 people. We took it down to 14 people. We were all out in the Boston area. We literally worked eight weeks non-stop. We were just one unit. We worked hard. We completely rebuilt a billing system, integrated all of the pieces we needed to, and then we took all of our free customers and made them convert to paying customers, whichever ones were willing to do so. That then became the lifeline to be able to build on top of and into a company that eventually got to be a $3.5 billion business.

          Alejandro: We were talking about the dealmaking side of raising capital. I’d like to hear, too, because we typically talk about the acquisition side of things, but more from the seller’s point of view. For the people that are listening, they have heard from previous episodes about the book that I just launched, Selling Your Startup. In this case, let’s talk about the buyer’s point of view, which is, on your end, on Endurance International, you actually did over 40 transactions. So how was that integration process for you guys? How did that work out?

          Hari Ravichandran: That’s a great question. As I was saying, as soon as the dot-com bust happened, we converted this thing to a subscription-based model. It was interesting. We had this big platform that could hold millions of customers. We only had about 20,000 when we converted people from free to paid, so we had to fill up all this capacity. The way we thought we could do it was to go buy other companies that had subscriber bases that we could then port to our platform. On the buying side, we went from—our first yield was a $30,000 company that we acquired to the last deal I did in 2015/2016 was a public company. We bought a company called Constant Contact for over one billion dollars. We went from the early stages all the way to the larger transaction size. The thing that we learned through it is, you really have to do a few things because if you are simply valuing a company based on what’s tangible, what’s there, just your numbers, what is the growth rate? What does your revenue look like? What’s your EBITDA margins and all of the metrics. People always come to the same viewpoint, which is: this thing should be worth between this and this, like some range, and it’s usually a tight range. The few factors that always were helpful for us is to look beyond that to say, “If we buy this thing for what it’s worth, but we put it inside a bigger system, what could that be worth as part of the bigger hole. That was one big thing. The second thing—if you are an entrepreneur, like myself, you know you have a lot of passion. You build things, and you work on things that you absolutely love building and working on. So many times, entrepreneurs are very focused on what is the right avenue to drive growth for the business? They may not be great at keeping their books and giving you financial audits and things like that. We always work really hard to not have it be a negative against entrepreneurs. We would actually go do the work on their behalf and then take all of the stuff that they had and put it in a format that we would understand. So, making their job easier for them which can also give you an edge, especially in this market where it really is a seller’s market right now because the equity markets are very strong, with lots of capital in the system. Entrepreneurs, if you’re about to go sell a business, you might have one to three different choices, so how do you win when an entrepreneur says, “I’m going to go with this person,” when the pricing is all in that pipe band, it’s that personal relationship. It’s how much are you making their life easier? Do you understand their vision? Do you want to work with them, and do they feel like, “I’m giving my baby to somebody that’s going to take good care of it.”? Those types of elements are always super helpful to us.

          Alejandro: This is a company that you built from the ground up out of your garage, and eventually, you took it public. Finally, you decide to step aside and to go at it again with another company. What was the decision process like? I’m sure it was scary but exciting at the same time because Endurance was everything you knew from a professional perspective. I’m sure that was a pivotal moment for you.

          Hari Ravichandran: It really was. When I left Endurance, we were doing just about $4 million of revenue every single day. We built that from zero, and I was doing about $1.2 billion in revenues as I was leaving. You incrementally keep on building and keep on building, and one day, it’s a big company. The thing I started noticing toward the end is a lot of my DNA was very focused on growth, building, etc., which, in a public setup, the way you build it is a little bit different than a private company. I really missed being able to build something from the ground up again and have it ramp-up. The most fun times I had, even if it was a small company, was huddled together with a group of really passionate people that wanted to work with you, being connected to the customer, thinking about what products we could build. I started missing that as we got bigger and bigger. What you see is definitely something that still sticks in my mind. I left Endurance. Five or six of us had left. We ended up subletting the small office space in the Boston area. The first day I went in, I pulled into this basement garage, and upstairs I knew my co-workers were upstairs. I remember thinking, what am I doing? This is crazy. We left this thing with 4,000 people and a billion dollars of revenue to walk upstairs. We have no product. We don’t know what we’re going to build. We have no employees. We have no capital, and we’re starting from scratch again. I remember thinking, Wow! This is really scary, and I haven’t felt scared in a while.” It actually was a good feeling because it excites you, it motivates you, and makes you want to push yourself, and gives you something to shoot for. The positive of it is, it really drives you, and keeps you young, and keeps you motivated, and I love that. Of course, the challenging part is, like many startups, you have to overcome a lot of hurdles to actually get to a place where you can be relevant in the market.

          Alejandro: Tell us about Aura, your latest baby. How did the idea of Aura come about, and what are you guys doing?

          Hari Ravichandran: In 2014, I had a personal incident that happened where somebody had filed a bank loan in my name. So my identity had gotten stolen. I remember thinking, “This is bizarre.” I go online and try to figure out what the solutions are for it. It was an overwhelming feeling because your feel like, “I’m not sure if these people are going to steal my money. What’s happening? I’m not sure how it will affect my family? How does it affect my credit?” I remember thinking, “It’s surprising to me that nobody has solved this issue.” I put it in the back of my head. We were still working on Endurance, so I was busy for a part of two years. Then, when we left, the other three guys had left Endurance with me at the same time. We were chatting and saying, “That seems like a big problem that’s going to keep on getting bigger. Data is getting used in a lot of negative ways against consumers and families. All of the capital is going toward enterprises and toward big enterprise security type solitons, and nobody is focused on the consumer, and there are around 50 solutions out in the market that get so overwhelming, you have no idea if you need a password manager, you need a VPN, you need other types of security for your IoT, transaction, monitor, and protection. Beyond that, when you start to add all of these up together, like a family might pay $80 or $100 a month for a particular solution, which is too much. So we thought: how do we use scale technology to take this very complicated, fragmented problem, create one solution around it, and keep the pricing of it much lower so people can afford it? We probably already see the pattern recognition here for small businesses. That was the same thing we were doing by putting a bundle solution together in an integrated manner to help them use the internet, and now we’re trying to do the same thing for cybersecurity for consumers. So that was a pattern we recognized. We were passionate about the problem. Our mission became to create a safer internet, which seemed very worthwhile. I’m a dad; I’ve got three kids, and I feel like as I see them grow up as digital natives, making sure that they have some security, some set of governance around the devices that they use and that they’ve been born into, basically, is something that is very appealing that I feel like in the long-term, is going to be leaving a mark and make the world safer for people.

          Alejandro: How do you guys make money here?

          Hari Ravichandran: We’re a subscription business. Typically, customers will pay us between $12 to $15 a month for the whole bundle of solutions through monthly plans and annual plans. It’s integrated, so it’s got all of your anti-virus things that you need, VPN, transaction monitoring, anti-virus protection, all in one for about $15. Now, we have about 1.57 million customers that pay us, so the company will do about $230 million of revenue this year, so we’re off to a good start, and it’s starting to ramp-up.

          Alejandro: No kidding. You guys have been in business for just four years, so wow! It’s a rocket ship! In terms of culture, as well, you were coming with the advantage of having built a business to over 4,000 employees, so you really know how it goes from early to growth to ramping up, and maybe some of the constraints of growing so quickly, and all of that stuff. What have you learned about culture the first time around that you knew you were going to be implementing for your second time?

          Hari Ravichandran: It’s really interesting. The first time, we didn’t think about it that much. It was such a fight to just stay alive and keep going. You’re thinking, “I’ll get back to building culture, and that’s going to be important.” But then you find, whether you like it or not, whether you’re going to work on it or not, there’s always a culture. It could be a good culture, it could be a culture you can influence, or it could be a culture that doesn’t develop because there’s a vacuum there. This time around—I was listening to Masters of Scale, which is a podcast that Reid Hoffman does. They were asking Reed Hastings a question, saying, “What do you think about strategy versus culture?” Everybody that is a really successful company always says, “My culture is great,” but it might be because their strategy was great. It turned out that there was a culture that’s part of the strategy, and now the culture becomes the dominant thing. I loved his answer, which was, “When I did my first company,” which is what Reed Hastings was saying, “I know we focus a lot on strategy.” They had a good sale. They sold it for $17 million. It was good that they sold it because if they hadn’t sold it, it would have collapsed. He said, “The second go-round, I thought, why would you not do both? Just because you have a great strategy doesn’t mean you can’t work on a great culture,” and that’s how he built Netflix, and obviously, it’s been a huge success story. I found that inspiring because, to me, why wouldn’t you focus on both of those elements where you have a great strategy that can drive a big-scale business. But make sure that the people engine and all of the people that are working on it really believe in the journey and line up behind the strategy, so building the culture around it. I’ll tell you another story. With Endurance, I remember we were at an offsite at the Ocean Edge out of Cape Cod with all of our executives, our board members, etc. I think the company, at that time, was doing about $750 million in revenues. I looked at the team, and I said, “We’ve gotten this far. It’s been a great ride, and now we need to figure out how to go from $750 million to $2 billion in revenues. People were all shaking their heads. They were all excited about the vision. That night, I was out having drinks with some of the executives, and one of them looked at me and said, “You said that you wanted us to go figure out how to get from $750 million to $2 billion. I don’t know if you realize this, but literally, for the first $750 million of revenue, you always just told us what to do. I don’t know how you expect us to go from here to there when we have no training, and we haven’t worked together as a team to solve problems on our own.” I remember thinking, “Oh, gosh. I’ve made a huge mistake here” because everything was so top-down, like go do this; go do that. I never let the teamwork together to try to solve problems, make mistakes, learn. So this time around, that is a huge part of what we’re very focused on, which is you have to be the arbiter of decisions, but can you give the team a lot of room to figure stuff out on their own, make mistakes together, know how to work through problems constructively, and build that solid foundation underneath them? If you don’t do that, you’ll get to some number, whether it’s $10 million, $50 million, $200 million, $700 million, and you can’t scale it beyond that. For it to scale, the whole machine has to work. That was a great lesson for me and something that we’re applying very carefully on the Aura site.

          Alejandro: Got it. Quickly, here, how much capital have you guys raised to date?

          Hari Ravichandran: We’ve raised about $400-ish million total. I guess $350 million to $400 million total. It’s been over a series of four or five rounds. Including the debt, it’s probably a little bit more than that. The most recent one that we raised was our Series E, where I think we raised about $150 million in capital in total. A lot of that being deployed, now toward growth, scale, and ramp-up.

          Alejandro: You mentioned how you speak with the teams, how you prepare or get the mindset for achieving whatever goals are there in front of you. Imagine you go to sleep tonight, Hari, and you wake up in a world where the vision of Aura is fully realized. What does that world look like?

          Hari Ravichandran: I had a good friend that once told me that when you set up the vision for a company, you imagine the world without your product in it first, and then you imagine the world with your product in it, and how has the world gotten better? For us, if we think about the full realization of Aura, it is such a massive challenge for us, not just in the U.S. but everywhere else. So people feeling safe and having a sense of wellbeing around their digital life would be the real realization of our dream. If families wake up and say, “I’m not particularly worried about somebody stealing my money, stealing my data, getting a whole bunch of annoying robocalls, and things like that which jam into people’s lives, and have the sense of wellness and wellbeing and feel like, “I’ve got my stuff covered. Somebody is taking care of it. I don’t need to stress for my family and me.” When that happens, I feel like we will have achieved our dream at that point if we can get there.

          Alejandro: Nice. Imagine I put you into a time machine, Hari, and I bring you back in time to that point to where you were thinking about doing the dropout of Stanford and building your first company. If you had the opportunity of going back in time and having a chat with your younger self and giving that younger Hari one piece of advice before launching a company, what would that be and why, given what you know now?

          Hari Ravichandran: What I would tell myself if I had to go back in time is: have the humility to keep your mind open, to learn from everything around you, and not feel that the journey is a manifestation of my own ego, but it’s about something bigger than that when you’re building something that leaves real tangible value for your customers, for your employees, and everybody else, and not have it be so centered on tying up my own identity with a thing that I’m building, but think about all of the benefits I’m deriving for everybody else around me by being much more openminded, learning a lot. That would have helped me a lot in my early days. When I was a young person, I was so driven by achieving and accomplishing and not thinking as much about the benefit I can drive, the outcomes I can drive for other people, how do you build something that has sustainable and lasting impact. That would have been good advice for me if I could go back.

          Alejandro: I love that. That’s very powerful and very profound, Hari. For the people that are listening, what is the best way for them to reach out and say hi?

          Hari Ravichandran: Definitely, I’m on Twitter; I’m on LinkedIn. My email is hari@aura.com. Feel free to drop me a note anytime. I love to always hear. If there are entrepreneurs that have questions, I’m happy to answer them. I love working with folks that are passionate and excited about ideas, so I would definitely love to engage in whatever way possible.

          Alejandro: Amazing. Hari, thank you for being on the DealMakers show today.

          Hari Ravichandran: Thank you, Alejandro. I appreciate the time. It was great. I really enjoyed that.

          * * *
          If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com.

          Ways To Fund Your Company For Growth

          Alejandro Cremades Founder at acremades@gmail.com

          2021-09-18

          What are the different ways to fund your company for growth? The idea of running a business and being an entrepreneur has been the viral topic of 2021.

          Probably at least since the pandemic began. According to the Washington Post, around 10 million people quit their jobs this year to pursue their dream careers.

          Around 42% of the American workforce are on their path to being freelancers or business owners.

          The idea seems promising, but many people fail when it comes to implementing and bringing their business projects to life.

          Starting a company from scratch is challenging. Growing it and seeing satisfying progress can be even more of a real struggle.

          We all love successful business stories, but we don’t really know the hard journey new companies take to scale and reach the top.

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          The Ultimate Guide To Pitch Decks

            Some of the factors why companies fail are:

            • Poor or lack of management
            • Lack of capital or funding
            • Entering a market that is too saturated
            • Not having a marketing strategy
            • Not adapting to the market demands or listening to their customers
            • Sticking to an outdated business strategy/model

            Instead of focusing on failure, have you ever asked yourself, what is the key to growing your company?

            What is the right strategy to fund your business, keep you consistent, and meet the needs of the market?

            The more you research, the better the chance you’ll find useful resources.

            Reading motivational books written by successful business owners, having the right contacts, observing and studying your competition.

            These are good starts to keep you on target and moving forward.

            Once you have a clear idea of what your business is going to be, now it is time to put it into practice.

            Funding is one of the biggest struggles for those who are just starting out in the entrepreneurship world. This very first step often leads them to give up, but there are many ways to do it.

            Keep in mind that in fundraising, storytelling is everything. In this regard for a winning pitch deck to help you here, take a look at the template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.

            Remember to unlock the pitch deck template that is being used by founders around the world to raise millions below.

            1. Having The Right Contacts

            An informal loan such as funding from family and friends can dramatically help you raise funds in the early stages.

            Build a list of potential investors and filter it to ensure that you are working with individuals that support and believe in your project.

            Define a contract to avoid future conflicts which may put your company at risk. If you are uncertain and lack experience or knowledge, working with a lawyer is highly recommended.

            What are some of the benefits of relying on someone that you know?

            • They can be flexible. Friends and family often offer loans without security or accept less security than other funding sources such as banks.
            • Friends and family often lend funds at a low rate or without interest.
            • You could expect a longer repayment period by seeking funding from friends and family. They may also look for a lower rate of return compared to banking alternatives.
            • Your friends and family already know your circumstances, work ethic, passion, and character making them less likely to need a detailed business plan for your startup.

            When receiving funding from friends and family, you might end up having a list of people in your circle telling you how to run your business, and they are often inexperienced.

            Therefore, you want to set clear boundaries on their role and know their expectations before accepting funding to determine if it is the right choice for you.

            If you can work it out, this is one of the most effective ways to fund your company for growth.

            See How I Can Help You With Your Fundraising Efforts

            • Fundraising Process : get guidance from A to Z.
            • Materials : our team creates epic pitch decks and financial models
            • Investor Access : connect with the right investors for your business and close them

            Book a Call

            2. Bank Loans

            Asking a bank for a loan is somewhat old-fashioned since our society is progressing so rapidly, and the opportunities to fund a project are endless.

            Seeing it from a different point of view, working with a bank may be safer than we might think. Banks are large entities.

            The bank acts as an investor but doesn’t ask for a percentage of your profit. The worst-case scenario is if things do not go as you expected.

            The bank may request you to pay the loan within a certain deadline. You may or may not have a personal guarantee beyond the assets of the business.

            Getting a loan from a bank may appear easy, but here are some things to consider before asking:

            • Do you want to take on debt versus equity?
            • The waiting process might be long and tiring
            • The best rates aren’t always available to new businesses
            • You’ll deal with a lot of paperwork
            • Be prepared to receive a “No” answer

            3. Crowdfunding

            Crowdfunding can be a great option. Not only to fund a new business or to scale your existing one but to connect with customers, build your brand and even impress other investors.

            Before starting a crowdfunding campaign, be very specific about why you are asking for funds. Explain your plan, how you will use their investment, and what they can expect to see in return.

            Funders may be regular consumers, people in your network, or professional investors, and even institutions.

            This typically kicks off by uploading your campaign online on specific platforms. Crowdfunding can be easier since people are often asked to contribute a small amount of money. It’s one of the best ways to fund your company for growth.

            Still, there is a lot more to this strategy than most expect. Get pro help with setting a funding goal, creating a marketing plan, and crafting text and videos.

            4. Finding Angel Investors

            You should first identify who your angel investors are to know who you are asking for funds. Typically, these types of investors have a net worth of more than one million dollars.

            They are a great go-to for the earliest days of business growth. Before approaching angel investors, ensure that you have a strategy and plan.

            They are often eager to hear your pitch, and this is an opportunity that you don’t want to miss.

            Convincing them to invest in your business is about

            • Prepare a captivating pitch
            • Having a great pitch deck
            • Sharing the vision
            • Building trust and a personal connection

            Would you like more practical information on how to raise startup capital for your business? Check out this video I have created with some added details you’re sure to find helpful.

            5. Pitch Your Idea To Venture Capitalists

            How can venture capitalists help? Venture capitalists invest their money while risking losses in exchange for the chance of much higher returns or exit opportunities.

            Often through acquisitions or IPOs. To pick the right investor and get the funds, learning the ways to reach the ideal venture capitalist is vital. As is knowing how to present the opportunity.

            What do venture capitalists want in return?

            • 10x to 100x return potential
            • Fast growth
            • A committed team
            • The strongest team
            • A really big market

            What are some of the benefits of working with or getting funds from venture capitalists?

            • They are experienced professionals in the field and are able to provide plenty of advice
            • They can inject large amounts of capital
            • Venture capitalists can provide a wide range of additional resources and support
            • Venture capitalists have a massive network of connections in the business

            Such investors can help you put your business in the spotlight and attract your ideal clients.

            They can also help you with growing your business faster (since their main benefit is your company’s success and scale).

            Venture capitalists are able to bring a lot of broad and deep experience in scaling your growth. Seeing beyond the horizon you see can be invaluable.

            These investors will typically help you continue to find additional investors to keep your company growing over time. They are certainly valuable ways to fund your company for growth.

            While there are many advantages of landing VCs, you will certainly have a lot of work to do in connecting with them and nailing the presentation with a strong pitch deck.

            6. Use Your Own Funds

            The first place to get your early seed money is often in your own pocket. Startups aren’t usually profitable for the first year.

            So don’t drain your bank account. Instead, set aside money for living, and use the rest on your new business.

            Include credit cards, personal loans, and other income sources that you can utilize to carry you through the challenging first year.

            While creating a strategy to expand your business, be sure you are weighing the pros and cons of having an investor or a business partner.

            Or at least the best moment to bring in more outside funds. Using your own funds might be a good fit at the beginning.

            Many successful business people have applied this bootstrapping strategy to their company. They never regretted it.

            Investing in yourself is often the smartest move. With creativity and resourcefulness, you’ll be surprised at what you can achieve.

            Using your own funds is risky, but having a business partner might also be risky since you have to give away part of your company.

            Instead, using your own funds and keeping 100% of your shares means having complete control in decision making and management.

            7. Potential Clients

            The consumers who might be interested in investing are those that believe in your product as much as you do and the capital to back it up.

            It doesn’t have to be a lot either. You can offer pay-in-advance subscriptions or pre-ordering and having consumers pay for your product or service before the launch.

            These methods are especially effective when you have an excellent marketing strategy to create “hype” around your business.

            You might even attract other investors when they see your popularity.

            There are many side benefits of this as well. Including creating a passionate and loyal community that really wants you to succeed. They may even turn into your best advertisements.

            This not only applies to individuals but corporate customers as well. In some cases, they have stepped up to fund the development of new products, have helped with bundling products, or providing other resources.

            This may even be the precursor to a future merger or acquisition. Understand how to use the many ways to fund your company for growth.

            8. Social Media

            Everyone with an internet connection and access to different social media platforms can generate money.

            Have you ever heard about the pre-launch or pre-sale strategy? Many young entrepreneurs have been using this method to sell their products without even launching them into the market yet.

            The biggest number of new businesses was recorded in the mid-2020 due to the pandemic. People who quit their jobs or were fired due to the circumstances decided to take a step forward and set up an online business.

            They started out by promoting it on social media platforms such as Instagram or TikTok. Guess what? Their audience grew extremely fast, and they could scale their company in just three months.

            Some of them even expanded their offices and hired more staff.

            This isn’t just for brand new startups either. It can be used by more mature startups, and by launching new products and services to spark new growth and revenues.

            How?

            • Create a product and present it to your online audience
            • Promote it on the most relevant trending social media platforms
            • Be consistent posting every day (do it yourself or hire someone professional)
            • Announce a pre-sale and ask them to join your newsletter or mailing list
            • In about two or three weeks, start to post your success through case studies and testimonials

            Final Thoughts

            As you move through the funding rounds to gain that much-needed capital, it’s essential to determine what kind of investor you are looking for.

            Do they meet your expectations and needs? Can you meet their expectations? Know their role within your company, and how their position will benefit you and your company.

            You might end up with loved ones who have unrealistic expectations of their role in the organization or a venture capitalist on the other side of the country with no involvement.

            Also, never underestimate your audience. Gaining funding from potential consumers is an effective way to attract investors.

            Funding your company for growth might seem difficult, but it will work out if you utilize the proper strategy and refuse to quit.

            Conduct research into the different ways to fund your company for growth. isolate the strategy that will work best for you.

            You may find interesting as well our free library of business templates. There you will find every single template you will need when building and scaling your business completely for free. See it here.

            This Entrepreneur Raised $230 Million To Help You Buy Now, Pay Later With Zero Interest

            Alejandro Cremades Founder at acremades@gmail.com

            2021-09-16

            Philip Belamant has been there, made mistakes, and come up with great solutions for the customers that have helped him build multi-million dollar companies in developing and developed economies. 

            Philip recently appeared on the DealMakers show to tell his remarkable story from zero to $2.2B. Plus, how he leapt back into founding a new startup, and raising $300M for his latest venture. 

            Listen to the full podcast episode and review the transcript here.

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              Early Life

              Philip was built for business from the very onset.

              Being the son of a French immigrant to South Africa who married a South African and built a successful payment business in South Africa. He was supposed to be a protegee but decided to make it on his own, building a business from the ground up. He had a supportive parent who understood business and could help advise him on important business aspects at any time.

              Having the optimism and vision of the future kept his dream afloat. Perhaps the most important step he took that projected his career on an upward trajectory was when he decided to study for a degree, where he took an interest in biometrics and mobile technology.

              He took his spare time to learn some basics of computer science in early 2000 when there was no real computer science degree in his university at the time. He was research-intensive and did a lot of research and studies online on the topic while building a few projects on the side.

              He had a real breakthrough when his team built the winning project for a university competition sponsored by Microsoft for their biometrics security system. Silicon Valley came beckoning to him, where he had the first encounter with an iPhone. He was able to jailbreak one and felt that he should join the mobile gaming world.

              After completeing his honours degree at UJ, he started  his business, PBel, with the idea of social gaming on mobile devices such as Nokia 3310s and Samsung D600s.

              Starting Out from Scratch

              Philip recounts his experience in a joke, “Fortune favors the young.” Fresh out of university, he goes to his dad for advice on how to start a business, and he is advised to seek some investors. He successfully gets the necessary investment of between $5,000 – $10,000. That allows him to put together a team.

              Philip reckons that he learned most of the things in this venture developing mobile games. His team had the hurdle of building mobile games for multiple phones with vastly different operating systems.

              The business grew fast, and they had a large number of users. They were successful in launching the mobile games and had a good following. Then his team realized that most people were very much interested in winning prizes and not necessarily playing the games in a way that would make for a sustainable revenue model. People exchanged credits in the game in a peer-to-peer manner and could use airtime credit to enter competitions so that they could win prizes.

              Philip used his acumen to act fast and change his business model into a payments platform. However, some of the investors weren’t happy and decided they needed a refund, as he had changed the business model overnight.

              When he had pitched them a different business altogether. Now they were sandwiched between taking the right steps for the business or refunding the investors. They went and took out a loan with support from his father, of $12,000 to pay the investors and roll out their new business in South Africa and Namibia.

              Fortunately, his hunch was right, and the business was soon making  $100k to $200k a month. The business grew from the two initial countries to 22 other African countries, and with that, he had hit the road running.

              The business grew to more services as it grew beyond its original borders to services such as virtual card issuance, lending products, airtime lending products, and even built the first cash to virtual card product for Uber in Africa.

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              The Merger

              His father’s business was a magstripe business and since both were dealing with money, on the cards and other major technologies, it was easy to note that their businesses would flourish more if they worked as a unit.

              The result was a sale and merger of PBel into Net1 technologies that was listed on Nasdaq and JSE book Stock Exchange. By the time Philip reached the age of 25, the Net1 group had a market capitalization of $2.2 billion.

              Many others might relax and think they had made it under such immense success, but not Mr. Belamant. Having developed a successful business in Subsaharan Africa, he felt it was time to leverage the learnings of operating in very challenging environments and apply them to Europe.

              He came up with the idea to redefine how Buy Now Pay Later would work by choosing to work with the end customer rather than the retailer, and offering more value directly to the client.

              The fintech he created, Zilch, is forward-looking as it gives the customers an opportunity to borrow at no interest and earn revenue from the fee that can be paid once or in four installments.

              The company has been forward-looking, reflecting the founder’s ambition and vision. He has been able to secure $230 million in financing from large corporations such as  Goldman Sachs. He hopes to one day become publicly listed, but until then, the company posts its reports quarterly, which has brought investors aboard.

              Storytelling is everything which is something that Reuven Aronashvili was able to master. Being able to capture the essence of what you are doing in 15 to 20 slides is the key. For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) where the most critical slides are highlighted.

              Remember to unlock the pitch deck template that is being used by founders around the world to raise millions below.

              The founder has been visionary and ensured they have strict compliance regulations and has a similar strategy for the US and EU markets, and with the great success it had during the unprecedented pandemic, everything seems to be going well for the firm today.

              Listen in to the full podcast episode to find out more, including:

              • Learning from mentors
              • Beng ready to start over as many times as possible
              • Learning to manage investor expectations
              • Spotting a trend early on and riding the wave
              • His top advice on what it takes to start a business

              SUBSCRIBE ON:

              Philip Belamant On Raising $230 Million To Help You Buy Now, Pay Later With Zero Interest

              Alejandro Cremades Founder at acremades@gmail.com

              2021-09-16

              Philip Belamant has been there, made mistakes, and come up with great solutions for the customers that have helped him build multi-million dollar companies in developing and developed economies. He was able to achieve remarkable success despite dropping out of college to pursue business. His latest venture, Zilch has raised funding from top-tier investors like Goldman Sachs Asset Management, dmg Ventures, M&F Fund, and Gauss Ventures.

              In this episode you will learn:

              • Learning from mentors
              • Beng ready to start over as many times as possible
              • Learning to manage investor expectations
              • Spotting a trend early on and riding the wave
              • His top advice on what it takes to start a business

              SUBSCRIBE ON:

              For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.

              *FREE DOWNLOAD*

              The Ultimate Guide To Pitch Decks

                Moreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here).

                Remember to unlock for free the pitch deck template that is being used by founders around the world to raise millions below.

                About Philip Belamant:

                Philip Belamant graduated from the University of Johannesburg in South Africa, where he completed both his BscIT and BscIT Honors degrees.

                At age 21, he started up his first company through winning a Microsoft Project Firefly competition and Belamant has also founded a number of fintech ventures, many of which have won awards.

                Philip also launched mobile payment services in 15 different countries across India, Africa, and Europe and was the founder of a Top 40 fin-tech company in Africa.

                The services he launched in India, Africa, and Europe reached more than 20 million users and his Top 40 fin-tech company in Africa had more than one million users in the first six months.

                Belamant also created and launched the first of its kind Cash-to-Mastercard solution in South Africa for Uber which was way before Uber became as large as it is today!

                See How I Can Help You With Your Fundraising Efforts

                • Fundraising Process : get guidance from A to Z.
                • Materials : our team creates epic pitch decks and financial models
                • Investor Access : connect with the right investors for your business and close them

                Book a Call

                Connect with Philip Belamant:

                Read the Full Transcription of the Interview:

                Alejandro: Alrighty. Hello everyone, and welcome to the DealMakers show. We have a great founder today, a founder that has been there, has done it, and now multiple times. So I think that we’re going to be getting really inspired with his story, and especially with his tremendous growth that he has experienced during COVID and some of the friction, too, that he has experienced during these times. So without further ado, let’s welcome our guest today, and that is Philip Belamant. Welcome to the show.

                Philip Belamant: Alejandro, thanks for having me. I’m excited to be here.

                Alejandro: Philip, you were born in South Africa, so tell us about your upbringing there.

                Philip Belamant: South Africa is a really dynamic country and an interesting place. It’s always like that, I guess. If you haven’t grown up in a country, it’s hard to understand it from the outside in. It’s a very complex country, with a lot of dynamics in the country, but a huge amount of opportunity. I think it’s always a bit like this in my view, particularly with developing economies and growing economies is that one has to make it in your own life. You can’t expect necessarily always to be able to join some amazing huge beautiful corporate. You have to be entrepreneurial in a lot of instances, even in how you might go about your corporate job. I think South Africa has contributed highly to how I view the world, how I view business, and how entrepreneurial I am in the way I see things.

                Alejandro: In this case, you did go the entrepreneurial route very, very early. Were there people in the family that influenced this, or how did you find that inspiration to know that one day, you were going to build your own business?

                Philip Belamant: Absolutely. My father is a technologist and went the traditional route of getting that first job. He was French, and he moved over to South Africa early on and met my mother, who is South African. He got his first corporate job and [3:16], but hugely driven, a very smart guy, and he went through a few positions in the corporate world and decided to build some proprietary technology and breakaway with a partner of his from that company who had the network, and knew people, and funding sources, etc. They broke away, and I’ve learned all of my entrepreneurial side of how I think about things from my father, who then started his own business that became very successful in the payment space. So I always had my father as someone who would guide me through this process and how I think about things, and he also very much has supported me in my aspirations to go and become an entrepreneur. I think that’s something he’s probably always driven me towards rather than just going and working at a corporate job, is what I would say to that. So definitely, my father influenced me heavily in that regard.

                Alejandro: In your case, as they say, it’s all about being at the right time in history. You decided to go and study biometrics, AI, a little of mobile as well. We’re talking about the early 2000s. That was before the craziness of AI. Now you have AI applied to absolutely everything. What prompted you to go in that direction?

                Philip Belamant: That’s a great question, actually. For us, to be fair, when we were at school, computers and computer science wasn’t really even a subject. You had to do that in your spare time, and that’s what I did. I was really fascinated with coding. That’s where I started—Turbo Pascal and all of these old-school languages. It was a passion of mine, something I was very interested in. When I went to university, luckily, they had a few courses that were in mobile development, and I was quite forward-thinking at the time, frankly, and for the university as well. I was fortunate that they had some of these courses in biometrics and mobile technology. We had some great professors and lecturers. It’s like anything, I think the foundation of the course was pretty good, but it was my interest that was very peaked by this. I did a huge amount of work online, and doing my own studies, and researching things, and building projects of my own. That culminated in my thesis for my Honors Degree, where we had to build, as a group, something in a project from Microsoft. We did well in winning that project with our biometrics system. That did open my eyes to what else is out there because that link to Microsoft gave us access to see what was happening in Silicon Valley and what was going on elsewhere in the world. You realize that this was going to be a massive space. I still remember us playing around with the iPhone. On the first iPhone, we had to jailbreak and bring from the U.S. to South Africa, just to play around with it. This silly Coye fish pond app was one of the only apps you could get. That’s where we thought, “Wow. This will be a huge opportunity if we can start building apps for this product before it blows up.

                Alejandro: You, obviously, took the chance, and you left the studies side of things, and you actually went at it. How was that? I’m sure that it was a little bit scary to go at it with your first business.

                Philip Belamant: Absolutely. I think maybe this is where fortune favors the young, to an extent because you’re a little bit naïve, and it’s probably a good thing. You’re not so calculated in everything you do. You have far less to do. I definitely think that plays into it, but I left university and spoke to a few people I had met along the way and said, “I’ve got this interesting idea to do social gaming.” This was on Nokia 3310s and Samsung D600s. There was no Facebook or things like this. I had this idea to do social gaming, and I had met some great people along the way who were really smart. I said, “Why don’t we just go out and try and do this.” I spoke with my father about the idea. His advice was, “Go and look for an investor and see if you can get started.” That’s what we did. We found an investor. You’re not talking about big money. You’re talking about rands, way back then, so you’re talking about $5,000 – $10,000 to start. We put together a team of two to four of us, and off we went and started building games. That’s where the learning curve, I think, happened for all of us in mobile development, where you’re building multiple versions of the same product against all of these different phones. You had different operating systems. You had different brands, and you had different parameters for all of them. So you had to port one application across thousands of different devices, types, and screen sizes. It was much different from what you see today in the app store world, where you go, and you build something beautifully on Android, and off you go, and it works everywhere off of the app store. On the iOS store, it wasn’t quite like that. We spent a huge amount of our time learning how to build and engineer our games. Ultimately, we grew that quite well, and we had a number of users using the product. But ultimately, as most startups go, they don’t always go exactly as you think. People were able to use anytime credits to play our games, and they could actually transfer these credits to one another. Over time, what we realized is, no one was playing the games. Everyone was just transferring the anytime credits to one another or using them for competitions. So we thought, “Maybe we’ll stop making the games, and we’ll focus on this type of peer-to-peer payments or competitions.” That’s what we pivoted toward, and that became very successful for us. If we hadn’t done that, we would be here today.

                Alejandro: I hear you, but also, that caused some friction with some of your investors that were not too happy with that switch. So how did you go about that, and what was your lesson learned from that?

                Philip Belamant: Yeah, that really was my first big lesson, I guess, in how to manage expectations of someone who has given you their money. It’s an interesting challenge. At the time, we presented a business case. We suggested that we were going to be doing one thing, and, obviously, we then decided we should pivot to doing something else. For us, it was the best thing for the business. It was the right decision. We were not getting the type of traction in the gaming space that we wanted, and we could see a really huge amount of value in the other space. The investor turned around and said to us, “Well, you sold us one thing. You gave us a business plan. We want you to stick to the plan. If you don’t do that, then we want the money back, and you can carry on, and you can do what you want. But you’re not going to do it with our money.” It was a huge decision for us because, of course, to go and repay the capital they had put in so far and now go figure out what you’re going to do was a huge decision. But ultimately, we took that decision. We just were seeing so much growth in the other side of the business, the payment’s side and the airtime game side, that we just took that difficult decision, and ultimately, we then borrowed an additional 150,000 rand. I think that must be $12,000, which was a lot of money in rands. We went and rolled this product out to [10:41] in South Africa and Nubia at the time. We were able to pay that money back in about a week. The product started to launch and grow so well. Before we knew it, we were making close to 100-200 grand a day. A few months later, all of a sudden, we had this investor, who initially came in, forced us to pay their money back because they didn’t like the pivot, and then was upset with us after the fact because the pivot was making so much money, and now they were no longer involved. It’s just such a strange thing to manage.

                Alejandro: Unbelievable.

                Philip Belamant: Ultimately, I think that was my first real lesson in being responsible in how you take on people’s money and setting expectations for those investors.

                Alejandro: 100%. What happened next?

                Philip Belamant: After that, we just built the business quite significantly. We had a number of key partnerships with some fantastic people selling into Africa. We were live in about 22 African countries with a number of services. We started to move into a lot more payments-types of products like virtual card issuance, lending products, airtime lending products, all of which were really popular. We built the first cash card product for Uber, for instance, in Africa that allowed people to use cash to take an Uber, which was quite interesting. So we did a lot of these interesting projects. Over time, we saw it to work more closely with my father’s company, which was a magstripe card issuing business initially and had moved into social wealth and government bond distribution, but really card-based. They didn’t have mobile take, and we really weren’t a card-based business. We were a mobile business issuing virtual cards, so quite complementary. I merged my business into this business, and that company’s name was Net1 listed on the Nasdaq and reverse-listed on the JSE book Stock Exchange. That business focused on financial inclusion and all of the products that come with that. That’s where we got significantly into a responsible ending and building interesting and engineering interesting financial services and products that would add a huge amount of value to the customer base. That was the risk of the journey in that regard up until about six to seven years ago where I completely exited that group, moved over to the UK, and started to look at this new venture.

                Alejandro: How old were you when the company reached $2.2 billion in market cap?

                Philip Belamant: At the time, that must have been about 14 years ago. I must have been 25 around there.

                Alejandro: That’s amazing! Three thousand people in staff, $2.2 billion market cap. What a tremendous ride! In your case, having built a company like that, what really got you to say, “It’s time for me to turn a chapter?”

                Philip Belamant: I think, Alejandro, the important distinction there, is that you had—my father’s business doing great, and we merged with that business, and this was not built from the ground up, from zero to $2 billion all on our own with our own feature. This was a combination of companies that brought us to this value. Ultimately, that was a phenomenal achievement for everyone and really exciting. But ultimately, there were a lot of things that one has to take into consideration when you’re working with governments and distribution of wealth. These things are complex. You can’t necessarily move as fast as you would like to be hugely innovative. When it comes to Fintech, that’s where you’ve got to be. That’s really what I love. People, I find, tend to call themselves peacetime or wartime. I’m certainly a wartime person, and I love the build and the hustle to get something up and running and really growing faster. That’s what I love to do.

                Alejandro: Nice.

                Philip Belamant: When I moved over to the UK, the whole idea was, I really didn’t want to leave South Africa. It wasn’t a case of being pushed away; it was more a case of “Let’s go and have a look at a developed market and find something interesting that we can go and build in a space that I love and know very well and have a real run at building something of massive value.” So I moved over to the UK about six to seven years ago, 2013 or around then. I was talking with a bunch of people around a company called [15:21] of Australia. I started to notice a company called Klarna in the UK out of Sweden and a company in America called The Firm. What I found interesting about these businesses is that about 15 years ago, we had an interesting product, an installments product, that we had rolled out in South Africa specifically to challenge and close down with the aim of closing down as many payday lenders as we could. That product allowed our customers to have a physical plastic card in their hand, Mastercard, and they could walk into a store with their phone, they could dial up on USSD, and they could go and actually transact in that store. We would advance the money to the retailer on their behalf, and we would let them pay back in installments for no interest of any kind. That was 16 years ago. People were mostly buying food, healthcare products, and services. When I saw these other companies operating here with awesome cool brands who, pretty little things like [16:26] and Nike, I was sitting with father and laughing a little bit looking at it, and these guys were saying, “We’ve transformed credit. It’s completely new.” We were laughing a little bit because we were thinking, “Well, we were doing this 16 years ago in the middle of Africa.” But it’s certainly very interesting that it’s almost been reborn and, of course, upgraded with all of the latest technology. That’s where I thought, “This could be a fantastic opportunity to go and democratize access to absolutely free credit in a massive way here in the UK, and hopefully in many other countries too. That’s where my view was. I took a look at it and thought, “I have the experience. We’ve built this with partners at scale before, people like Mastercard, etc. Why don’t we go and leverage those relationships and all of our experience in building a deck book and running at a very low default rate? In tough countries like Nigeria and South Africa, why don’t we go and apply all of those learnings and roll that out here in the UK? That’s how I came to think about Zilch.

                Alejandro: So that’s the birth of Zilch. For the people that are listening, in order to get what Zilch is all about, why don’t you share with us the business model and how you guys actually make money here.

                Philip Belamant: Yeah, perfect. Zilch is a buy-now, pay-later company. Effectively, the fundamental difference between Zilch and what you might see in the market today is that fundamentally the customer for Zilch is different than the customer for the other incumbents—the incumbents’ customers, in fact, the retailers. Typically, they have a B2B2C model. They build this technology, sell it to a retailer, and the retailer then sells it to the retailer’s customer. The incumbent, the BNPL providers, typically are always aligned within looking after, first and foremost, the retailer. As a consequence of that, they add value to the end consumer. With Zilch, we did it the other way around. We said, “Why don’t we go and add value to the end consumer first and be aligned with them. As a consequence of that value, bring some value to the retailer. That’s the difference, really. I guess the best analogy I could probably put down to close the loop on this or explain this is, if you think about Amazon, way back at the beginning, and we remove all of those narratives around the story, and you look at the online bookstore. What Amazon built was this delivery infrastructure. If you think about it, what they could have done is they could have taken that same delivery infrastructure and sold it to one bookstore at a time, integrated with the bookstore, and sent to that bookstore, “If you want to sell a book online, we’ll show it to your customer for you, and we’ll ship it for you to your customer. It sounds familiar, right? I actually think that would have been fundamentally different for them as an outcome. They probably would have become a commodity. They would have become a shipping company like UPS or DHL. I’m not saying those are bad companies. They are massive and amazing companies, but they’re not Amazon. What I loved about what Amazon did is, they actually said, “Hang on. Where I get the books, and how I get the books, and how I ship the books is not your problem. Why don’t I go directly to the customer and say to them, ‘They can have any book in the world, and we’ll ship it to you in a day, but you got it from me.’” With Zilch, this is exactly the approach we’ve taken. We looked, and we said, “Hang on. Every BNPL provider has the same business model. Actually, they’re making it the customer’s problem. Who are they integrated with? Who are they not integrated with? Where can you spend it? Why can’t you spend? With Zilch, what we’ve done is we’ve said, “Let’s remove all of that for the customer, and we go directly to the customer and say, ‘If you want to pay over time and installments, you can do that any way you like with Zilch—online, offline, tap-in, pay over time, Amazon, eBay, anywhere you want to go, we’ll give it to you, but you got it from us.’” That way, we forge a relationship with our customers, which is phenomenal. Today, we’re offering pay-in-full, and I’ll come to that revenue model you talked about. We’re offering pay-in-full today, which is brilliant because customers see huge value in that. What’s amazing is that we can come up with any new way to pay tomorrow. We can build it in two weeks, and we can ship it for a dime to all of our customers who can use it at any retailer in the world instantly. A lot of the incumbents would need to speak to their retail partners and ask if it’s okay to launch those products. Because, remember, the end consumer is not theirs. It’s the retailer’s customer. That’s why we think we have something truly unique, and that’s why when you compare our growth year-for-year, and you compare that to someone even like The Firm, which is an amazing business and is in a six-times bigger market than us—we’re currently about four times ahead of where they were at the same point in their journey, mainly because of this phenomenal over-the-top model we’ve built. So, how does the model work? We make a variety of revenue streams, and that’s a combination of fees from the retailer, a fee from Mastercard, data revenue, and advertising revenue. When our customer checks out, and they split the transaction in four at any retailer they like, what you find is, they don’t have to pay any fees or interest of any kind, and they get to pay over six weeks. So they pay 25% when they check out and 25% every two weeks, and it cost them nothing, which is pretty phenomenal. And the name of the game in our business really is how fast you can turn that book and how many times you can make that commission on an ongoing basis within a year. What you’re looking for is, of course, to mean that your result in revenue with it per Anum is higher than the average cost of your bad debt losses, your cost of sales, etc. That’s the business that we’re running. So you’ve got this really awesome massive affiliate business combined with the card-issuing business and a lending company all in one.

                Alejandro: Got it. For a company like this, it takes money to build it. So how much capital have you guys raised to date?

                Philip Belamant: At the moment, we’ve raised just over $300 million. The latest extension we did included bringing Goldman Sachs into the cap table on the equity side but predominantly on the debt side. So, of course, we have to fund all of these receivables, so this business is a bit more complex than some others. This business requires equity capital and debt capital at the same time. Goldman had come in. That $300 million today is roughly about half of equity capital and then half around debt capital so that we can fund receivables. Really, that’s just to help us grow. We’ve been growing at about 35-40% in underlying sales month-on-month for almost the last 12 months. So we’ve gotten to the point now that we want to take the lending off balance sheets and bring in a third party, especially someone as fantastic as Goldman, and that’s what we’ve done.

                Alejandro: As you’re thinking about use of proceeds when you’re raising that capital, how does it change when you go from one financing cycle to another one in a business like this? We were talking about this earlier, which is meeting investors’ expectations and them being aligned with how you’re deploying the money. How has that changed over time for a company like Zilch?

                Philip Belamant: That’s a great question. I think we can talk about that for a while, but the short answer I would give to that is, the one thing we learned from our previous business and this experience with the previous investor is one needs to almost run the business with a high degree of corporate governance regardless or not whether this is a private company. What that does, I think, is that it gives everyone that peace of mind that the use of proceeds is in line with the model that’s being presented. And, of course, as you scale, you have thresholds to how you’re going to spend that money and why people feel comfortable that you’re not misusing the funds effectively. That’s what I learned. When we set up Zilch, our aspiration is to actually list this business. That is the direction of travel for us as a business. So we really are running at a high level of corporate governance, even today, as a private business to ensure that we have everyone’s expectations managed. We do quarterly reports; we make sure that everyone knows what’s going on in the business that’s invested in our company. I think that’s what’s given companies like DMG or Goldman Sachs this high degree of confidence in us, and in our team, and in our ability to use the fund appropriately. But ultimately, it’s what you might expect. In the earlier rounds, the use of proceeds all goes into building the team, engineering, building the product, building this thing that we have to go and launch as an MVP. Then slowly, that changes into what you would normally expect: growth. So that’s marketing of product, and then continuing to invest in data science, and engineers, and customer support. A large majority of our proceeds today, when we raise money, goes into growing the business. That’s marketing the company, custom acquisition, our swelling engineering team, which is critical for a fintech, and data science, which is today the heartbeat of what we do. It’s really intrinsic to what we do. For us, customer support is so critical. You’ve got to be the best at customer support. If you go and have a look at Zilch today, at least in the UK, we are the most rated and most highly rated on Trustpilot across any of the VMPL. We’re really proud of that. You have to have phenomenal customer support. So this is what it’s all about for us. Then, you start to look at heavy compliance regulations. We’ve always built our businesses with compliance and regulation in mind and at the forefront of our minds. If you look at, for instance, our strategy in the UK, we went and applied for our FCA Consumer Credit License two years ago, well before the regulated announced that they were going to regulate VMPL. Ultimately, we have the same strategy for the U.S., and we have the same strategy for the EU. Because we are direct to consumer brand, we are not a B2B2C brand. We believe that we must have the consumer’s protection in mind when we offer them our service. I hope that gives you a nice succinct view of how that has changed over time. As the business grows, compliance, regulation, marketing, and sales become a much larger portion of the spend. Whereas, as I was saying in the beginning, it’s all about engineering and the build.

                Alejandro: So, in this case, imagine you go to sleep tonight, and you wake up in a world five years later where the vision of Zilch is fully realized. What does that world look like?

                Philip Belamant: For me, today, the way we work and how we think about the business is, today we want to be the best way to pay over time anywhere. That is our aspiration for today. We think that’s a succinct message; it’s clear and allows people to understand the differentiation of our product and the value our product brings. I think that’s a great starting point. But ultimately, what we would like to do is remove the words over time. So we’d like to become the best way to pay for anything. That is where we would like to go. You can already see this in the journey of our product features. We started with Paying For—we recently launched Pay In One with Cashback. What is phenomenal now is our customers can choose to actually check and pay everything and get cashback. They can choose to split in four. They can go retrospectively and change their minds, by the way, on both of those decisions, which is pretty cool. Moving forward, there are so many things we are looking at introducing that might be different ways to pay. So that may be longer durations, or that may be very different ways to fund those payments. Could you fund that just with [28:42] currency, or are there lots of other ways to fund those transactions? Ultimately, we want to become the best way for people to pay. Then, really jumping forward in the future, we do think that our name represents where things will most probably end up, and we hurdle towards this, and that is that we would like to see a more sustainable world, certainly so, and we think the way to do that is probably to own less things over time and to arrange more things over time and allow for redistribution. We think that our model perfectly tees us up to bring that to our customers over time too. So if you jump forward two steps, it’s where we think we’re going to end up over time, which will be somewhere around there.

                Alejandro: That’s amazing. I love that. Especially when you’re saying that “Over time, we’re going to want to own less things.” I completely can see that. Imagine, now, that I put you into a time machine, and I bring you back in time. Imagine all this knowledge that you’ve been able to get over the years, and I bring you back in time to that moment when you were still in university and you were thinking about doing your own thing. “Look at these companies that we could start. Look at this competition.” And you were able to sit that younger Philip down, and you were able to give that younger Philip one piece of advice before launching a company. What would you tell that younger self and why, given what you know now?

                Philip Belamant: That’s a great question. From the top of my head, I would say, “Just go and do it.” That, really, I have to say, is probably what’s helped me to get into entrepreneurship is not really thinking about it too much. I think if you go and start to think too much about something, especially when you look at business. Look at all these analysts, and they’ve got all this great advice. You can go and have some beautiful McKenzie documentation, and all of the facts are there. But the reality is that business is made up of so much more than just the facts in the market. There have been so many examples of things that just work, and people still don’t know why. So what I would say is what happened and encouraged by my father was, it really wasn’t even a conversation: “Should I? I’m going to go start this company.” And away we go. For me, I would say the advice for someone in that position would be, “If you’re going to talk about it too much, then you’ll probably end up doing nothing.” I would say, “Stop talking about it and go do it.” That would be the advice.

                Alejandro: I love it. Philip, for the people that are listening, what is the best way for them to reach out and say hi?

                Philip Belamant: People can find me on LinkedIn: Philip Belamant. My surname is quite unique, so you won’t find too many of those. Otherwise, you can always contact us through payzilch.com if you’d like to get to us that way. And anyone looking to join our business or be part of our journey, all of our job positions are on payzilch.com. You can check them all out there too.

                Alejandro: Amazing. Philip, thank you so much for being on the DealMakers show today.

                Philip Belamant: It’s a pleasure. Thank you so much for having me.

                * * *
                If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com.

                This Entrepreneur Raised $100 Million To Streamline Your Business Processes

                Alejandro Cremades Founder at acremades@gmail.com

                2021-09-14

                Jakob Freund’s business has grown from a small services business to a large venture-backed enterprise with customers like NASA.

                On the Dealmakers Show, Freund shared how he transformed and scaled his company. We talked about his success in coding an organization, building your credibility, and generating early customers.

                Jakob also talked about how long to test your idea before giving up or going all in. Plus, we covered the open-core business model, when to raise money, and the art of leadership.

                Listen to the full podcast episode and review the transcript here.

                *FREE DOWNLOAD*

                The Ultimate Guide To Pitch Decks

                  Coding A Successful Business Startup

                  Jakob Freund was born and grew up in Berlin. He found his love for technology on his accountant father’s home computer before he hit 10 years old.

                  He was not about to buy him any computer games to play on it. Though he did offer to teach him to code. He began by programming calculators.

                  Then discovered he could program his own games. He even boxed it and printed labels so he could sell it to friends and family. Though it wasn’t exactly a viral hit.

                  This led him to study business IT in college. He immediately gained a passion for business process management, designing workflows, and automation.

                  His first job out of university put him in a project manager and consulting role. Though he spent his nights and weekends working on his passion for BPM.

                  He created a website on the topics and began creating a community and forum. This ended up connecting him with his current cofounder who he teamed up with to begin working with in this space.

                  It was still early for what they were working on, so they decided to write a book on it, and educate others.

                  It became pretty successful and gave them credibility and early leads to begin building their consulting business.

                  These initial customers turned into references which they could leverage even more.

                  Their customers were pretty large, ranging from 1k to 10k employees. Though they still hadn’t struck on something which was scalable.

                  They had tried building and selling a few types of software to make that leap. They had several failures.

                  See How I Can Help You With Your Fundraising Efforts

                  • Fundraising Process : get guidance from A to Z.
                  • Materials : our team creates epic pitch decks and financial models
                  • Investor Access : connect with the right investors for your business and close them

                  Book a Call

                  How Long To Test Your Idea Before Giving Up Or Going All In

                  For five years Jakob and his cofounder really relied on their consulting work as they tested software ideas and ways to scale.

                  Finally, they struck on an idea to provide support on top of some existing open source technology, and to create additional revenue with their own tool on top of that.

                  They decided to give themselves 12 months to see if it would work. Setting a goal of 10 plus customers to prove the concept.

                  Jakob says “You don’t want to give up too quickly. Then, again, when you’re beating a dead horse, you should get off that horse too.”

                  His solution for deciding the difference was to give themselves a clear timebox.

                  Many ideas may give themselves tighter timeboxes. In this case, they were going after large enterprise-sized organizations.

                  Companies that can take 12 months to make a purchasing decision, with a lot of red tape. This time they hit their 12-month sales goal in just six months and decided to go all-in on it.

                  The Open Core Business Model

                  Today, Jakob’s startup Camunda runs on what he calls an ‘open core’ business model.

                  This means the core of their business is a free open source platform that anyone can use. Like NASA does for their work on Mars. Other large customers choose to pay for their commercial version, with extra features and support.

                  Today, their annual fees for this product can run into millions of dollars. Yet Freund says they also choose to give away software access for free to causes they care about, from human rights to fighting climate change.

                  When To Raise Capital For Your Business

                  Camunda has now raised around $100M through their Series B round. Storytelling is everything which is something that Jakob Freund was able to master. Being able to capture the essence of what you are doing in 15 to 20 slides is the key. For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) where the most critical slides are highlighted.

                  Remember to unlock the pitch deck template that is being used by founders around the world to raise millions below.

                  Rather unconventionally for startups today, Camunda didn’t take in their first round of capital for 10 years, and until they had more than $10M in annual revenues.

                  Obviously, by that point, VCs were hunting them down and cold prospecting them. In these scenarios, some founders worry about giving up too much information.

                  Especially when these firms are also soliciting all of their competitors.

                  Jakob says he didn’t have those reservations. Instead, he says “don’t be afraid of giving away too much information.

                  Focus on your strength, on your customers, the market, and be fast in executing in all that matters.” Your execution can set you apart.

                  So, why finally take capital after so long, especially when you are already profitable?

                  Jakob says that he had spent some time in San Francisco which really opened up his mind to new ways of seeing things and the startup ecosystem.

                  Then he also saw that going from a team of 20 to maybe 2,000 one day would help them magnify their impact.

                  They decided to take the money when they didn’t need it, versus waiting to be in a position to try and run an outbound fundraising process when they needed the money.

                  Negotiations and terms are always in your favor when you can do this.

                  Today, Camunda has over 300 employees spread across Germany, the United States, Australia, Singapore, and the UK.

                  They see a future in which their technology facilitates the automation of any business process you are running.

                  Listen in to the full podcast episode to find out more, including:

                  • The best books for startup founders
                  • Managing cultural friction
                  • Leadership as an art
                  • His top advice when starting your own business

                  SUBSCRIBE ON:

                  Jakob Freund On Raising $100 Million To Streamline Business Processes

                  Alejandro Cremades Founder at acremades@gmail.com

                  2021-09-14

                  Jakob Freund’s business has grown from a small services business to a large venture-backed enterprise with customers like NASA. His company, Camunda has raised financing from top-tier investors like Highland Europe and Insight Partners.

                  In this episode you will learn:

                  • The best books for startup founders
                  • Managing cultural friction
                  • Leadership as an art
                  • His top advice when starting your own business

                   

                  SUBSCRIBE ON:

                  For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.

                  *FREE DOWNLOAD*

                  The Ultimate Guide To Pitch Decks

                    Moreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here).

                    Remember to unlock for free the pitch deck template that is being used by founders around the world to raise millions below.

                    About Jakob Freund:

                    Jakob is Co-Founder and CEO of Camunda – responsible for the company’s vision and strategy. He’s also the driving force behind Camunda’s global growth and takes responsibility for the company culture. As well as holding an MSc in Computer Science, he co-authored the book “Real-Life BPMN” and is a sought-after speaker at technology and industry events.

                    See How I Can Help You With Your Fundraising Efforts

                    • Fundraising Process : get guidance from A to Z.
                    • Materials : our team creates epic pitch decks and financial models
                    • Investor Access : connect with the right investors for your business and close them

                    Book a Call

                    Connect with Jakob Freund:

                    Read the Full Transcription of the Interview:

                    Alejandro: Alrighty. Hello everyone, and welcome to the DealMakers show. I’m super excited here. We have an amazing guest today. The story here is incredible because it’s not about going from consulting to building more like software and something that scales on the hypergrowth side of things. I think that in many cases, I see massive companies that are built as a result of really understanding your customer and then building something that scales around that. We’re going to be learning everything about how he did it and also about his story from the early days to where they are today, which is now a rocket ship. So without further ado, let’s welcome our guest today. Jakob Freund, welcome to the show.

                    Jakob Freund: Thanks for having me. I’m happy to be here.

                    Alejandro: Originally born in Berlin. Tell us about growing up there.

                    Jakob Freund: I was born and raised in Berlin, and that happened in the late ‘70s, so I grew up on the Western part of Berlin before the Wall came down. I had a happy childhood over here. I started my studies in the early 2000s in Vidareutbildning. We started Camunda as a company in Berlin in 2008. We had no idea that it would turn into such a tech startup eventually. It’s really a coincidence that we started here.

                    Alejandro: 100%, and we’ll talk about that in a little bit. In your case, you moved just a tiny bit there in Germany. You did business IT in university, but what got you into the whole computer world in the first place?

                    Jakob Freund: That’s a great question, actually. That was back when I was nine years old, so in the mid-‘80s. My dad had a computer, and I wanted to play computer games. And he said, “Well, Jakob, I’m not going to give you any games on my PC XT, but I can tell you how to code, how to program.” I was like, “Is that interesting?” He taught me how to code in Pascal. He used to be a teacher in accounting, and he taught me to code. I programmed to calculate interest rates, which was at nine years old not exactly the most exciting thing to do, but then I read the manual of [3:29], I figured that you actually manipulate strings there, as well, and I learned the tutorial about how to program a hangman game, so I programmed that so I programmed my own game, basically, and played that for a while. Then I put all of that to sketch and printed labels and then tried to sell that as nine years old to my friends and family, and nobody would ever buy it, but it was my first experience with building and selling software.

                    Alejandro: That’s amazing. And after university, you started being a project manager, a consultant, and all things led to you working at this company, where eventually you met your co-founder. So how was that relationship? Because that definitely transformed into you guys one day starting to brainstorm maybe like bringing a potential solution to the world, but how did you guys meet, and how was that connection where you felt there was something that you guys could do together?

                    Jakob Freund: Yeah, it happened back in 2007. The story was that I finished my studies in 2005, started as an employee at a company in Berlin, as you said, as a product manager for integrating their platform of banks. Ever since I met the topic in my studies, I was super interested in business process management, this whole thing about how to design, manage automated, this was progress to make an organization more efficient and more effective. I just found it interesting, like coding your organization, and pretty cool, actually. I felt that customizing—I didn’t find a job in that space right away, so I started as their program manager. During the nights and weekends and after work, I put up my own website about the topic; BPM [5:16] was the name. The website attracted a certain audience, consultants, professionals in BPM. A forum was there for a community and also my to-be co-founder, and he was already a freelancer in the Java space for workflow automation. Someone had formed that site. He and I met online in that forum and then met at a conference. We had a few drinks; we had a good connection, and when I said, in 2007, “Bernd, I’d like to start my own business.” He said, “I have my own business. Why don’t we team up and focus on BPMN together and build a consulting business?” I was like, “Yeah, let’s do that. That’s great.”

                    Alejandro: That’s amazing. Then tell us about really getting started with the consulting business—giving your notice. Then here you two guys are building a consulting practice, so what did that look like?

                    Jakob Freund: As I said, in 2007, I was working. I actually quit my job as a project manager before that and then worked for a year at a BPMN software vendor as a solution architect, so again some full-time experience as an employee in that market. That was helpful. I gave my notice and left that company. It was exciting, but I was in my late 20s, so I had a girlfriend that turned out to be my wife later, but I didn’t have any kids yet, so I wasn’t too scared of the whole thing. Bernd Rücker and I sat down; we brainstormed, and we had the idea about “There’s a standard coming up called BPMN and about process modeling. It’s new. People don’t know it yet. Why don’t we give training to teach people how to design and broaden their processes in that standard? And why don’t we write a book about the whole thing?” We had connections to a publisher, and they said, “Yeah, that might be interesting.” So we wrote that book about BPMN, and it became a pretty big success in that specific domain. That helped us to build a reputation, a brand as experts for that BPMN process modeling thing, and also brought us leads and business as consultants and trainers in the first couple of years.

                    Alejandro: Tell us about building up this consulting practice with your co-founder.

                    Jakob Freund: It’s sort of a [7:28] problem to be honest because, in the beginning, you have to be slightly dishonest. You’ve written yourself as expects that have lots of experience. In our case, a lot of experience about how to introduce BPM and BPMN in your organization. The reality was that we had limited experience, so we had to be a bit exaggerating that we have seen so many things already, and that’s the marketing part of it at the beginning. Then you get your first couple of customers. How did we get them? First from networks, and my online website, so people that were selling our agency services to were visitors on the website, so we had those first connections. Then we had, let’s say, a half-dozen engagements with a bit of coaching, training, actually using the BPMN standard, mapping business processes. As soon as you have that, you have a flywheel going. You can draw from those half-dozen engagements. You have a couple of references that you can leverage, and from that, it’s really just building upon what you have done to kickstart the business.

                    Alejandro: It’s a different type of approach because now you have the hypergrowth going, which is you have more money to get the wheel to turn faster. But when you have the consulting, it’s like you need to add more people in order to have the wheel turn faster. How did you guys manage with that? Also, for the people that are listening, who were those typical clients, and what was the typical job that you guys would consult on?

                    Jakob Freund: it was actually bigger organizations right from the start. It wasn’t SMBs. In Germany, for example, there are many insurance companies that have around 1,000 to 10,000 employees. Only one-fifth of those are in the German-speaking area. All of those insurance companies would need to reinvent themselves and automate the customer experiences and think about the processes now more than ever. But even 13 years ago, that was a big topic already. In that sense, insurances and banks held those traditional bigger enterprises were our clients right from the start, which I believe was actually very helpful later, and we turned all of that into a software business. But that came later, as you already said. In the first five years, we had this—not really scalable business model of consulting, just building up the brand like sending a bill at the end of the month, being profitable, not needing outside funding of venture capital, etc., just doing our thing, basically, and enjoying the independence, not having a boss to report to, and all of that was the driving force in the early days. We always were on the lookout for: let’s find something that scales better than consulting. Typically, that is software. So right from day one, we thought about, “Couldn’t we provide some sort of software in our space?” We did have attempts that failed in the beginning. So we had that idea about, “Let’s put that process automation software that we bought somewhere else into the cloud so that people could automate their processes as a service,” which was a totally new thing back then. We tried that out, and it failed completely. So we had one or two bigger failures, but we kept going on the consulting side that fueled our business until the third attempt; we hit a nerve in 2013.

                    Alejandro: Typically, when you were trying this, and this ended up leading to Camunda, which is your baby, but when you were trying all of these different ideas and initiatives, was that related to your consulting business in a way that you were trying to automate what you were already doing on the consulting, or were these like moonshot ideas that had nothing to do, and you were just trying to figure out if it would stick or not?

                    Jakob Freund: No, it was totally related. Our consulting business was about business processes and how to model them, design them, and have a flowchart that we can discuss and even automate them by using existing automation technologies. There were products from IBM, from Oracle, etc., so we knew those products quite well. As consultants, we were able to implement your process using those products. The ideas we had were about alternatives to those products. So, in that sense, yes, it was very closely related, and the first to attend and just didn’t succeed or stick, and the third one then did. It was iterating on the idea of how to provide better process automation technology that was connected toward our consulting.

                    Alejandro: You had an advantage because you had direct access and interaction with those potential customers, so what do you think that process was from putting something out there, seeing if it would stick or not? What would define that stickiness? Then, how did that end up being Camunda, where you said, “I think this one has legs.”

                    Jakob Freund: Yeah. I think in our specific case, you always need to think about the type of business that we have, so bigger enterprise customers, not consumers, not small companies, not even startups necessarily—bigger enterprises with certain budgets but also certain expectations, and then the matter of business processes and process automation. What we did was, the one that also worked out for us, we took an open-source project of process automation that we knew very well. It wasn’t ours, but we knew it very well. We said, “Customer, we can provide annual support for that open-source automation technology.” We put a price tag on that like €12,000 or so per year—relatively low, very low from today’s standpoint. We said, “We can provide support.” That was the very first thing, a very seamless transition from consulting to an annual subscription that means just supporting it. But then, on top of that, we also provided this amazing addition tool that sits on top of the open-source thing that gives you certain real-time insights into what’s going on, like operations. That comes with an annual extra fee like $20K or whatever. We bundle all of that together into an initial offering of $20K to $40K per year list price. We did that in 2012, and we offered that to our consulting customers who had the exact same problem that we were solving with the product. We gave ourselves, I think 12 months, and said, “if we can sign between 10-20 enterprises on a price tier between $10K and $30K per year, we might have something going. Like a few deals—rather it be big deals, but a few deals. If there is sufficient head run that emerges across that small sample size, you can speculate. If ten insurance companies buy that, then 100 will buy that as well.

                    Alejandro: What was the timeline for that because it’s not the same as to say, “Let’s get these guys in three or six months,” versus, “Let’s keep at it for 10-12 years until we’re able to secure some people”?

                    Jakob Freund: Yeah. That’s an important thing. That’s a [14:43] have to run from the beginning. In the first two attempts, we had to understand at a certain point that this wasn’t flying. It’s hard because you want to be perseverant. You don’t want to give up too quickly. Then, again, when you’re beating a dead horse, you should get off that horse too. So how do you find that moment? By giving yourself a clear timebox. I believe 12 months is not always quite sufficient. Sometimes, even too long already, but for a product like ours, an enterprise software product that you need to get into an enterprise organization, that sometimes takes 12 months to even approve a purchase in the first place, but all of the bureaucracy and the red tape, and 12 months, I believe, is a decent recommendable timeline.

                    Alejandro: Nice. In this case, Camunda ended up being sticky enough for you guys to really go at it, and here we are with Camunda today. For the people that are listening and watching, for them to get it, what ended up being the business model of Camunda? How do you guys make money?

                    Jakob Freund: In 2012, after six months, we hit the milestone that we had set for ourselves for 12 months. Then, towards the end of 2012, we said, “This is it for us. We go all in.” And going all in means transitioning, which in our case meant positioning from consulting to a software business. That was with only 15 people; it was still a big challenge. We hired full-time engineers. We didn’t do so much consulting anymore, so you need to retrain your staff. Some even left because they said, “I want to be a consultant, but now the product is becoming the big thing here,” and that sort of stuff. We started with support for open source and then added more extra features, and we started our own open-source project in 2013. We really had it under control. That’s also today’s business model. Our product on a platform as it is for today is used in its open-source version for free by many different organizations. For example, NASA uses it to process data sent back from Perseverance, like the pictures and stuff from Mars, and then are processed on our product on the open-source version, which is very cool. So we have a big community of open-source users, but we also have those more conservative, bigger enterprises, [17:00] insurance banks that prefer paying for the commercial version that doesn’t just come with support anymore but extends additional features on top of the open-source support. So it’s an open-core business model. You’ll find that, as well, with Elastic, Confluent, and many others.

                    Alejandro: In your case, how much capital have you guys raised to date?

                    Jakob Freund: We have raised €25 million in Series A and €80 million in Series B. In dollars, close to $100 million.

                    Alejandro: $100 million. That’s a lot of zeros for being in Europe, Jakob, so when you hear those kinds of amounts in the U.S., that’s normal. But in Europe, it’s a big deal to raise that kind of money because typically, once you’re past the Series A, then you need to figure it out, you need to think about bringing investors from the U.S., which is where they have the biggest pools of cash to deploy. How did you guys go about ramping up and also raising and transitioning from that early stage of a Series A round to a Series B? Because you guys have gotten a lot of great European funds to come in and invest.

                    Jakob Freund: Yeah. Series A and B are also business-leading in our case because we raised a Series A in 2018, so after ten years. We went ten years without any answer coming at all profitable and stood growing more than €10 million ARR. At that stage, we raised the Series A. That is, of course, a bit uncommon. That’s also how it happened, by the way. The European ecosystem of tech staff is becoming very attractive also for U.S. investors. There are traditional players over here that have established themselves very well already, like Highland Europe and the people reporting for the Series A. But there are also even the West Coast VCs [19:00] and others that are now hunting in Europe. Nowadays, it’s much easier to raise venture capital than it was five years ago or whatever in Europe. In both cases, with that Series A and also the Series B that happened two and a half years later, like this year in early 2021. In both cases, it was reactive. So we were hunted by VCs. They reached out to us in a cold fashion. We never pitched to a VC. We just had conversations with those that were already interested. We had a shortlist of interested VCs and then picked the one that resonated best with us. So Highland Europe for the A, and Insight for the B.

                    Alejandro: That’s interesting because in many instances, those people that are cold emailing from VCs, they’re trying to survey the market. They have probably formed an investment thesis around investing in a company like yours, and maybe they’re talking to all of your competitors too. How do you find that balance or the medium or that confidence to engage without wanting to educate them much so that they don’t go to a competitor when they’re in surveillance type of mode?

                    Jakob Freund: Yeah, I know that. I get that concern, but I’m not sure if I have the best possible advice. You have to admit that as a company, we believe in transparency and being straightforward, honest, and candid above pretty much everything that we do. So we don’t overpromise, nor oversell, not to customers, not to potential employees, not even to VCs. Then we also believe that if you have—strategy is one thing, but execution is what really matters. You need to be able to execute on your strategy. I was never concerned about discussing our market, our business, and everything with those potential investors because I knew what would set us apart and determine our success is how well we would be able to execute or to capitalize on the opportunity. Here, I believe we are in a unique position because of our history. There’s not a single company I would define today as a straight competitor for us. I believe that is because of that unique situation that we are in, so maybe it’s also a bit special. To come back to your question, don’t be afraid of giving away too much information. Focus on your strength, on your customers, the market, and be fast in executing in all that matters.

                    Alejandro: Your position was also very unique, as you were alluding to, because on the Series A, you guys were already making it happen. As the saying goes, you don’t know what you don’t know. When you’re making that kind of money already, it’s like you don’t really need it to survive. You’ve already been ten years pushing this thing, so what was that event that triggered you guys to say, “Maybe it makes sense to now get some outsider capital and ramp this up.”?

                    Jakob Freund: It wasn’t a single event; it was a number of events. I was getting educated over time. For example, I spent three months in San Francisco back in 2014 with a mentorship from the German industry of economics or German companies that want to expand to the U.S. market, which we did already. So that’s maybe also worth mentioning. We’re growing in the U.S. the fastest, actually. There I got in touch with the whole ecosystem of [22:34], but I didn’t know about anything until then. Then I understood the mentality behind it, the idea of fast innovation, the agility, and also the excitement that comes once you figure out, “This actually has a big potential.” For most founders, I believe it’s not really about the money. Getting rich is a welcome side effect, but it’s about having an impact and really building something that has a big impact, and there’s this huge reward. Building and selling software these two things: building and selling it is very exciting. So doing that, not just to know with 20 people, but with potentially 2,000 people, you can just have a much bigger impact. It’s like, “Wow.” You can realize amazing ideas. This dawned on my co-founder, leadership team, and me after a while. So in 2018, the time was just right. We were over the [23:30] with Highland Europe. They approached us in 2017 already. They made a great impression. They were competent, and super nice, and not pushy, not aggressive, not arrogant, which is what you sometimes see with VCs, which really puts me off. They were already recruiting themselves as potential partners, and we were like, “We don’t need the money. We are profitable. However, if we want to do all of the things we want to do, we need to spend money faster than we would go to revenue in the next few years. So let’s secure funding while we don’t need it instead of to start looking for it when we do need it.”

                    Alejandro: Nice. For the people that are listening, Jakob, to get an idea of the size of Camunda, is there anything that you can share in terms of the number of employees or anything else?

                    Jakob Freund: Yeah. We’re not just publishing in revenue numbers, but the Series B speaks to the growth rate of what we’ve seen in the past three years as well.

                    Alejandro: Yeah.

                    Jakob Freund: Employees-wise, we are north of 300 right now, so that’s also a nice growth rate. We are the first organization nowadays, so we’re not headquartered anywhere, but we do have official forms of presence in Germany and all places in the U.S., London, Singapore, and Sydney, Australia.

                    Alejandro: Nice. When you’re growing so fast, I’m sure that you’ve experienced cultural friction too. Tell us about this. What have you learned about cultural friction, and how do you deal with it?

                    Jakob Freund: Yeah. Culture and leadership, I would say besides building and selling software, is the other most exciting part of building such a company. I’m really feeling how I’m growing myself, also, as a CEO. And growth is painful sometimes. Of course, you’re making experiences that are also nerve-wracking and frustrating. For example, when employees become dissatisfied or frustrated about developments—let’s say, for example, even cultural friction between geographies like it was fewer types: Americans and Germans, for example. We went into Germany, and we have many people from Germany. Our staff is growing very fast in the U.S., so we have many Americans on our staff now as well. Then you sometimes have those fewer typical or even real differences between the local cultures. So the way an American often appears in the meeting, the way a German often appears in a meeting, they can really put each other off. So you’ll need to navigate that. I think, for example, one mistake I would say that I have made was by trying to neglect that, even to deny that there are those differences. You know this whole thing about, “No, no, no. Let’s not talk about cultural differences when it comes to nationalities. We are one happy family,” so not paying sufficient attention to those existing cultural differences. I once read a book by Erin Meyer, which I can highly recommend. It’s really great, and it speaks about the different cultures in different countries and how they can often lead to misunderstanding, and how you can navigate that. We actually hired here for a workshop with an entire team, remotely by Zoom, and made all of us aware that those differences do exist, and that’s okay. That doesn’t mean that one approach is better than the other. It just means they’re different. We need to be aware of that and then find a consensus on how we want to communicate in certain ways. That’s, for example, one painful learning that we have made.

                    Alejandro: Let me ask you this. As we’re thinking about growth and as we’re thinking about the future, imagine you go to sleep tonight, and you wake up in a world five years later where the vision of Camunda is fully realized. What does that world look like?

                    Jakob Freund: There are so many things that could be better in this world, [laughter]. There’s so much crap that’s going on.

                    Alejandro: I understand.

                    Jakob Freund: But when it comes to Camunda as a business, and maybe even our contribution, if you will, we have this idea that you can automate any process anywhere using our technology. We’re serious about that. I mentioned the NASA example. That’s pretty exciting and unique. Because Camunda is the universal orchestration, as it’s called, you can put it on top of everything like machines, software, people, and it orchestrates the process from start to end. That is also happening even with actual robots, etc., through Camunda. Most people have never heard of us. We have this immense potential, and many people haven’t heard of Camunda yet. Hopefully, five years from now, Camunda will be a very omnipresent technology for making automation happen. Like, what can be automated should be automated, but people can actually focus on more interesting stuff. So that’s one element here. To come back to what I just said, we do have, for example, a Camunda problem for the common good, so we give away our software for free and for causes that we believe in, be it about climate change or be it about human rights, so we have organizations that we help and that normally wouldn’t get access to that sort of technology because it’s very expensive. Nowadays, our annual fees are sometimes in the millions. Often, NGOs wouldn’t be able to afford that. But we could have a big, big impact with automation on many things that should be improved in our world. Seeing that actually happening five years from now, again at scale and all around us, would also be amazing.

                    Alejandro: Imagine that I put you into a time machine, and I bring you back in time to those years where Jakob was a consultant, a project manager, where you had met your co-founder, where you guys were thinking about what a world would look like where you would bring a company into it. Imagine that younger Jakob actually listens because we know that our younger selves probably wouldn’t listen that much. But let’s say that younger Jakob actually was willing to listen, and you were able to give that younger Jakob one piece of advice before launching a company. What would that be and why, given what you know now?

                    Jakob Freund: Figure out sooner and faster how you can find and enable and lead people that can do all the things that you would often jump at doing yourself because you think you can do them so much faster and better—the arrogance. Leadership is an art, and once you’ve mastered that, you can make things happen that you could never make happen by yourself.

                    Alejandro: I love it. Jakob, you were alluding to it earlier from this book from Erin Meyer around culture. I’m wondering if now if I asked you what is one book, besides that one that you wish you would have read sooner that maybe had a big impact on you, which book would you say?

                    Jakob Freund: There are so many, but I think Ben Horowitz, The Hard Thing About Hard Things. I think that’s a classic. That really enlightened me.

                    Alejandro: I love that one, especially when you’re dealing with how you embrace the struggle because everyone looks at the articles and the media outlets, and they see how beautiful everything is, but it’s not so beautiful getting there. There are really tough days.

                    Jakob Freund: Absolutely.

                    Alejandro: Jakob, thank you so, so much for being on the DealMakers show. It has been an honor to have you with all of us.

                    Jakob Freund: Yeah, thanks for having me. It was really exciting and my pleasure. By the way, I remember the name of the book now. I think it’s The Culture Map.

                    Alejandro: The Culture Map. There we go. Thank you, Jakob.

                    Jakob Freund: Thank you.

                    * * *
                    If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com.

                    How To Identify A Potential Acquirer For Your Startup

                    Alejandro Cremades Founder at acremades@gmail.com

                    2021-09-13

                    Whether you created your business with an acquisition in mind, or simply want a backup plan for the future, this article explains the process of figuring out the optimal acquirers for your startup. 

                    Remember that mastering the storytelling side and how you are positioning your business is critical when it comes to engaging and speeding up the process. This is done via your acquisition memorandum. This is super important to reach a successful acquisition. For a winning acquisition, memorandum template take a look at the one I recently covered (see it here) or unlock the acquisition memorandum template directly below.



                    Let’s take a look into acquisitions as a whole, and how to create a shortlist of potential buyers.

                    Why Consider An Acquisition? 

                    As I discuss in my recent book, Selling Your Startup, finding an acquirer for your startup company comes with a host of benefits, including:

                    • Cashing Out – You may be tired of struggling to make this possible, have incurred huge emergency expenses in your family, or are just ready to extract the value you created and do something else. 
                    • Current Valuation If your business is focused on a set trend, you may receive a bid higher than what the business is reasonably worth. Certain markets are highly sensitive and can receive an influx of sales during peak times. Yours may be maturing, or be at peak value for either strategic or financial buyers.
                    • More Time – As you will have to focus less (or not at all) on the business you sold, you can put time and effort into other projects. These could be more profitable in the long run. You could also use some of the money and experience gained from the previous venture in order to reach a greater level of success, with more control.


                    It’s worth mentioning that sometimes, finding an acquirer is one of the only ways out of a tough situation. You may not have enough funds, time or effort to keep the business afloat. Selling the business is a whole lot more attractive of an outcome, as opposed to simply ceasing operations.

                    You should make sure that you are serious before engaging in active negotiations with an acquirer. The process could be lengthy and costly, with legal fees. It may also have a negative impact on staff morale, as well as the obvious monetary loss if the business is profitable. Though it is never too early to start identifying them and positioning your company to achieve the best possible exit.

                     

                    How To Identify Potential Startup Acquirers

                    If you’re set on getting your business acquired, the next step should involve finding interested individuals or entities. Build up a list of potential acquirers first, before selecting the best fit for the business. Here are a few methods you can use:

                    Keep It Niche

                    Reach out to people that are well established within your chosen niche. This can be beneficial for a variety of factors. Firstly, the potential acquirer will have a better understanding of your business, which could lead to a clearer vision in regards to expansion and profitability. If the two of you are on the same page, negotiations will likely be much easier.

                    In addition to this, contacting a select number of people will make them feel as if they’re being offered a unique opportunity. Keep in mind that not all potential acquirers are actively looking for a business. Some prefer to keep their cards close to their chest until the moment arises.

                    Make It Known

                    After following tight guidelines during the initial stages of your search and having no success, you can now make the hunt more public. Consider listing your business for sale if it is a small business. Or use introducers who may know active buyers if you are a larger company.

                    Before publicly listing your business for sale you may consider informing everyone within your business. The worst way for them to find out about a possible takeover would be to see one of these listings. It could severely damage the trust and reputability of your company (and yourself) moving forward. The people that should know include employees, investors, and suppliers.

                    The opposite may be true for a larger organization selling in stealth mode.

                    Find A Specialist

                    There are a handful of agencies that will reach out on your behalf. They can help you to network with the right people and ultimately present you with a list of interested parties. A specialist agency, broker, or advisor can help showcase your business, generate hype and explain the opportunity to potential acquirers. Organizations like this will charge some form of a fee, so be sure to factor that into your exit plan if needed. You can also filter. via the questions buyers ask.

                    This is similar to finding investors for your startup something that I cover in the video below.

                    Stay Connected With Possible Buyers

                    Now that you have a collection of possible buyers, networking with them is key. This will help to build a better relationship to aid with negotiations. It could also be lucrative if you choose to repeat the process of selling a business again in the future. Here’s how you could stay in contact with people who made your list for potential buyers: 

                    • Social Networks – Never underestimate the power of adding someone on Facebook or giving them a follow on Twitter or LinkedIn. You can occasionally interact with them this way, whether that be in the form of a post comment or personal message.
                    • Attend Events – When an event arises within a specific niche, you could always tag along to reconnect with important contacts. Not only will this establish your connection with the previously interested buyer, but it will also give you an opportunity to seek out more.
                    • Offer To Lend A Hand – Very few things in this world are more sincere and helping in building a connection than reaching out to someone to offer them help. This help could come in the form of offering your services or simply provide advice or introductions when it’s needed. Going out of your way to help someone else will do wonders for the level of trust you receive, too.


                    What To Look For In Acquirers

                    Regardless of whether you opted to keep a percentage of the business or not, you normally still have the obligation to ensure that the company is a success in the future. This duty is mainly centered around investors, employees, and the acquirer themself. Don’t forget your customers either.

                    Here are some factors you could use to evaluate the impact of an acquirer on the business in question:

                    Previous Success Rate

                    Have they acquired another startup in the past – how did it go? What is their operating experience?

                    The easiest way to check this is through a website such as Edgar or Crunchbase and even LinkedIn. Search for the owner’s name or a company that you know they’ve been heavily involved with previously. From here, you can check the relevant company’s website or view their financial reports (if published).

                    Amount Of Available Capital

                    Sure, you want to get a nice pay-out from the acquirer, but they shouldn’t use all their capital during the acquisition period. You want to make sure that the buyer has a decent amount of money left over, which can be used for business expansion and overall sustainability. Here are a few areas that are likely to require a strong flow of capital: 

                    • Advertising and other marketing methods.
                    • Training staff new techniques or educating them on fresh practices.
                    • Upgrading technology to meet the requirements of the new owner.
                    • Maintaining the payments made to suppliers.
                    • Expanding the team by hiring additional staff members.


                    Obviously, you cannot expect the new owner to share their exact amount of available funds. You can however have a conversation about places that require more investment and hear their opinion regarding each. Their credit rating is worth knowing too.

                    Keep in mind that in fundraising, storytelling is everything. In this regard for a winning pitch deck to help you here, take a look at the template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.

                    Remember to unlock the pitch deck template that is being used by founders around the world to raise millions below.

                    The Values Of The Acquirer

                    When it comes to an acquisition, it’s important for the acquirer to do everything by the book. Not only will this preserve the reputation of the business you’ve built, it will also give peace of mind to employees. A smart way to do this is by asking the acquirer about their future plans. If they give you a list of things they want to do, you could ask how they plan to meet these objectives. Make sure they are inked into legal agreements.

                    The mention of ‘cutting costs’ could raise a few red flags. Lowering their overheads in legitimate ways, such as purchasing supplies in greater numbers, should not be an issue. However, if they discuss re-evaluating the current team, you might need to think carefully before signing on the dotted line. They may just end up stripping your company and shutting it down, or selling parts as scrap.

                    Visions For The Future

                    As previously mentioned, it’s within your best interests to make this acquisition a fruitful one, for everyone involved. You want the new business owner to keep pushing the limits in terms of growth, with a clear vision in mind for the future. If the potential acquirer is already experienced within the industry of your company, this will be a lot more natural for them. However, if this is not the case, double-checking their plans and laying out a thesis could be the way to go.

                     

                    Understanding The Mindset Of An Acquirer

                    Finding an acquirer can be made a lot easier if you share their mindset. To enable yourself to get into their mindset, you have to understand what they are looking for in regards to the acquisition.

                    Many will have the funds necessary to recreate this in their own business, but a takeover can often seem more appealing for the following factors:

                    It’s Already Established

                    As a business owner, you will likely know that the beginning is usually the toughest part. Getting the initial eyes on your business and establishing yourself within the industry is one of the slowest and most time-consuming parts of growth.

                    This includes things such as increasing your market share, finding and implementing the right technology, and hiring the right people. Acquirers are often looking for businesses that are already in a profitable situation, with their main goal being to stabilize the existing model and focus on expansion.

                    The Tedious Work Is Done

                    Another thing you have likely encountered when creating your business. The tedious tasks such as legal agreements, organization, and lots of iteration are already done.

                    Not only do they take a long time, but they also offer no immediate ROI. You are essentially building this in the hopes that your business is a success further down the road. While this is certainly an important aspect for new company creators, larger acquirers will want this to already be in shape before their interest is piqued. They just get right to the results.

                    An Entirely New Market

                    When an interested party buys into your business, they can reach a new market. This is most prominent in two ways:

                    First, the new acquirers can tap into your loyal customer base. This allows them to reach more people, as these clients are often glued to one business. Loyal customers also provide free marketing, in the form of word of mouth – This can either be in person or across social media.

                    The second option is that this business already operates within your niche. Perhaps they sell a product that is in the same industry but caters towards a different demographic. If products can be sold to similar clients, it offers them the opportunity to cross-sell. This can be particularly lucrative as they can up their existing numbers, and also gain from the sales of a completely new product.

                    In addition to this, they can negotiate a better rate with suppliers if they need a similar asset during production. Buying more can help to keep costs down. They can also be more general with marketing, paying the same price to promote multiple products instead of one.

                    If you can identify a strategy like this, present it to the interested parties. It will benefit you greatly and can certainly boost the price you receive as a result.

                    See How I Can Help You With Your Fundraising Efforts

                    • Fundraising Process : get guidance from A to Z.
                    • Materials : our team creates epic pitch decks and financial models
                    • Investor Access : connect with the right investors for your business and close them

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                    Identifying A Potential Acquirer For Your Startup

                    In conclusion, there is no set route regarding how to identify a potential acquirer for your startup company. It’s important to make use of the methods you have at your disposal, whilst also paying close attention to the costs and net associated with each.

                    After you’ve got a list of potential buyers, take the time to evaluate each. You could also work on networking and building relationships for future communications. While the perfect candidate may not be the one prepared to pay the most, it could certainly be within your best interests to sacrifice a small percentage of profits in return for a successful acquisition.

                    You may find interesting as well our free library of business templates. There you will find every single template you will need when building and scaling your business completely for free. See it here.

                    John Doe Founder at alejandrocremades.com

                    February 3rd, 2020

                    Hi Ivana!

                    That's an amazing stage to be at. You've done well and now you can shine!

                    Advisors have to love your project as much as you do, but also give doses of reality when needed. You want someone who isn't too passive but also someone who can give you a kick in the tail when you need it.

                    In regards to compensation, it really depends on what they are bringing to the table: Wisdom, connections, investors, etc. all have differing value sets and the more you cut into the pie, the less you will have to give later. I'd start with your team deciding how much you are allocating for future investors, founders shares, and for advisors I usually have seen 10% of the total pie allocated to be divided between your core advisor panel.

                    Last bit of advice, don't just go for a profile, go for passion and an advisor who can contribute. There's a lot of companies that have rock star advisors, but high profile doesn't mean it'll be best for your company.

                    Read 2 answers