Jake Soberal has raised close to $100M for his own startup which is spawning a new tech ecosystem. His company, Bitwise Industries has attracted funding from top-tier investors like Owens Corning, GingerBread Capital, JP Morgan Chase, and Plum Alley Investments.
In this episode, you will learn:
- Where Bitwise is popping up next
- When you don’t need to raise more capital
- Mentally preparing for the startup journey
- Jake’s top book recommendation for entrepreneurs
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.
The Ultimate Guide To Pitch Decks
Remember to unlock for free the pitch deck template that is being used by founders around the world to raise millions below.
About Jake Soberal:
“The best part of my job,” says Jake Soberal, “is helping people believe that underdog cities can do exciting and important things.” Jake leads Bitwise Industries in vision casting, real estate development, and strategic initiatives. Jake grew up in Clovis, California with a dream of eventually holding national office—an aspiration that eventually turned into creating opportunity for folks of every walk of life.
Prior to co-founding Bitwise, Jake practiced intellectual property law at Walter & Wilhelm Law Group in Fresno. In 2012, over drinks and aha moments with his client, Irma Olguin, Jr., they excitedly discussed the possibility of a company that could nurture and network the critical components of Fresno’s tech industry and become a driving force for the local economy. The idea of Bitwise was born.
Jake believes we all have gifts to contribute—and an obligation to use them. He has teamed up with art advocacy nonprofit Creative Fresno to launch the Boomerang Project, an initiative aimed at reversing the city’s “brain drain” by connecting high-level jobs with talented individuals who’d previously moved away for greater prospects.
He also helped launch “I Believe in Downtown,” a grassroots campaign for the redevelopment of downtown Fresno and investment in Fulton Street. He is an advisory board member for 59DaysOfCode and sits on the board of the Downtown Fresno Partnership and Neighborhood Industries. Closest to his heart is magnet school Hamilton K-8 (“Home of the Hurricanes”) where he and his neighbors volunteer. For Jake’s wife, Sarah, and their three school-age children, it’s a venture whose progress is measured in years instead of days.
Jake holds a dual degree in history and political science from the University of North Carolina at Chapel Hill and a JD from Western State College of Law. He enjoys running, working in his yard, and spending quality time with his family.
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Connect with Jake Soberal:
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FULL TRANSCRIPTION OF THE INTERVIEW:
Alejandro: Alrighty. Hello everyone, and welcome to the DealMakers show. Today we’re going to be definitely having a blast here with the guest, definitely getting inspired and learning about building, scaling, taking a little bit longer, and perhaps delaying to get that financing in. We’re going to be learning a lot today, and without further ado, let me welcome our guest today. Jake Soberal, welcome to the show.
Jake Soberal: Good morning. Glad to be here. Thank you so much for having me.
Alejandro: Originally born in LA, but Fresno touched your heart from a very early beginning. What was your upbringing? How was life growing up there?
Jake Soberal: I’m the son of Mexican immigrants on my dad’s side and dust-bowl folks on my mom’s side. I grew up in Los Angeles until junior high school. I never found belonging. I never felt as though I fit in or whatever that might be. In junior high school, there was an opportunity in my father’s career that brought him to Fresno. Growing up in East Los Angeles in a difficult upbringing, really poor, my dad was eager to get us out of Los Angeles and go to a new beginning. So our family moved to Fresno. Although reluctant, at first, when we began to settle in here, I experienced home. All of the things that make a place special. I very quickly met some lifelong friends and met the girl that would become my wife. That experience and the experience of growing up during high school here in Fresno really endeared me to this place. I didn’t know it so much at the time because as a kid, I just wanted to get out of there and go to the center of the universe, whether that’s Manhattan or San Francisco. But deep inside of me, I was developing a deep attachment to this place that certainly has some ties to the work that we’re doing today at Bitwise.
Alejandro: I’m sure that for you, too, that must have played a big influence in terms of dealing with uncertainty, with doing your own thing, with trying to achieve a better tomorrow, getting that influence and inspiration from your dad who came here to the country and had to build everything for himself.
Jake Soberal: I think that’s right. There are some interesting parallels to the work that we’re doing today from my dad’s story. Obviously, first-generation. He was working as a night watch security guard in Los Angeles as a young adult. He goes home from work and sees a commercial for this thing called The Computer Learning Center. As far as he knew, that was a place you could go to learn computers. What that meant was a better life. He did, and ultimately, that program was an inflection point in his life, which led to a high-growth, high-wage career that allowed him to afford a very different opportunity to my siblings and me than what he was able to enjoy as a kid. That experience certainly traces to the heart of the work we do at Bitwise, wanting to enable similar stories for folks who historically have been excluded from the opportunity that the tech industry offers.
Alejandro: We’re going to be talking about that in a few minutes. In your case, you studied political science, and then eventually, you landed in law school. Why did you want to go to law school?
Jake Soberal: Yeah. From a very young age, my career path of what I wanted in life was to be an attorney, then to be mayor, governor, then president. Law school was the obvious way there. I was always inspired by arguing in front of the Supreme Court, the idea of justice, and getting to be a courtroom attorney. Law school was in the plans. I didn’t enjoy law school, but I did enjoy the practice of law. I had no plans of changing that. I was excited about the ability to serve folks well. I practiced intellectual property law and served folks well in building something that was deeply important to them. Amidst that, of course, I met this exciting entrepreneur, Irma, and that led me in a different direction that’s been equally exciting.
Alejandro: Tell us about that because, obviously, being an intellectual property attorney is quite a different path from what you’re doing with Bitwise. It’s like a 360 degree. What happened there, and what was that journey of becoming an entrepreneur and bringing Bitwise to life?
Jake Soberal: I’m a year and a half out of law school when we start Bitwise. It was a complex animal, as it is, so it’s difficult to explain and understand, particularly in the early days. I feel like people in my community are looking at me like, “What are you doing, man? You’ve got a good job, and you just started.” I was practicing intellectual property law here in Fresno, building a practice at a firm that I really loved, surrounded by good people. As a part of building that practice, there was this five-foot-nothing Latina from the westside of Fresno county that I didn’t know, but I knew she was doing all of these really exciting and innovative things in tech. She had started several companies, had started a coding competition, had started a co-working space, and I wanted to be a part of the stuff she was doing. I wanted to be her attorney; I wanted to be her friend. So I sought Irma out and we began to work together in the capacity of attorney/client and got to support some of the really exciting businesses that she had started. Then we got to dig in around this competition called 59 Days of Code that was doing some extraordinary work in causing folks to build an MVP and launch a business. We formed an independent non-profit and scaled that competition. As we were doing that, we realized that we had a vision for the future of Fresno that was very similar. I think in each other came—this was somebody I’d really love to build something with. It’s like that first time if you’re any good at basketball, and you play basketball with somebody who is good also, and you begin to sense each other on the court, and it’s exciting. You think, “I bet we could beat just about anybody.” I think that same feeling emerged in Irma and me. Not long after that, we began thinking, “How do we build the company that causes the future in our city that we want?” A model began to come together. While we were working with me as an attorney and Irma as a founder, we began to spend our nights and weekends chipping away at this model and trying to get to this point where we had confidence trying to get a sense of what would it take to get this off the ground? And also seeing if we could trace to some friends and family capital around that. All the while, I was on the clock. My wife was pregnant with our first child, Tinselly, and our sense here at home was, “You’ve got to figure this out before I go into labor, or you’re going to be an attorney for this next season.” Fortunately, things wound up coming together ahead of Tinselly’s arrival, and the rest is the history of Bitwise.
Alejandro: That’s amazing. Tell us about Bitwise. What ended up being the business model of Bitwise?
Jake Soberal: At the beginning, and though we’ve evolved today for Bitwise are three complementary parts that form a mutually reinforcing tech ecosystem where it didn’t exist before. The first is workforce training. We teach people the skills they need to access opportunity in tech, and we serve almost exclusively folks coming from a story of systemic poverty or a historically disenfranchised community. We pair the tech skills training with the non-technical resource that’s necessary to make space in their lives: transportation, childcare, mental and physical health, emotional wellbeing, compensation during the period of learning. By delivering on that resource, they can create space in their lives to access the brilliance they might have in and for the technology industry. The revenue model for that is we attached workforce training dollars, government level, corporate level, and at the philanthropic level. We’re a dynamic ability to leverage different categories of dollars to bring to bear a tech workforce that is representative of the diversity of the cities that we serve. That’s the first sliver of the business. The second is tech consulting. Like in emphasis, we build custom technology for customers around the world. Our distinction is that our teams are built almost exclusively out of our workforce training programs. So we’re raising up diverse and representative talent, and then that talent is joining our team to scale one of the fastest-growing tech consulting shops in the country. What this does is twofold. It empowers our scale, and then it also accelerates the rate at which others hire out of our programs. It gives us the ability to demonstrate the objective worthiness of this talent. I can dig into some of the areas that we serve, but the last component of the business is how we move this in place. We acquired real estate at the center of the cities we serve. We improve it and lease it to ourselves and other tech and tech-enabled companies to create a supportive community that desires access to the talents, and our workforce training programs are located in those buildings. What that does is, for the student, gives you natural community, natural professional opportunity, natural belonging. For the company, it gives access to talent, and then that begins to ripple out in those places. Those three pieces form the Bitwise solution. We founded here in Fresno. As it gained traction, we launched into a California expansion strategy and now a national expansion strategy.
Alejandro: From recovering lawyer to recovering lawyer, to here, how was the transition for you from having the attorney hat to having the operator hat because it’s not an easy transition?
Jake Soberal: For me, it felt natural. Not because the two careers are perfectly analogous, but because I think what excited me about being an intellectual property attorney was the idea of building—building a practice and helping the clients I serve build whatever it is that they were working on, and usually it was a business. Bringing that into the startup space wound up being super exciting because we could go faster. We could build at a speed that I’d never experienced before. The autonomy was also like a drug. You can try stuff, and there’s no one telling you that it’s the right or wrong answer in a way that is just not characteristic to the legal industry. For me, I think it excited the things that were most natural to me in being an attorney and gave me an exciting playground to build. Then to get to do that alongside someone with more experience than me, who is candidly smarter than me, Irma made for a really fun opportunity to build this as a team.
Alejandro: In this case, typically, you hear the startups, “Ah, we go to Silicon Valley. We raise a bunch of money. We make it happen.” And then everything is a celebration. Obviously, in this case, it was none of that. It was five years literally pushing things through before you even thought about raising capital. Why did it come about like that? Give us insight as to what that was like because it’s not the traditional route of a hyper-growth company.
Jake Soberal: That’s exactly right. The reality is, when you start a company in Fresno, California, if you imagine your toolbox, venture capital is not in it. That’s just not what we do. The guts of starting a growth startup are that you lose money. You do that in Silicon Valley and say, “Of course, that’s the way you do this.” You do that in Fresno, and it’s like you’re failing. “Why are you bad at building a business?” For our first five years, we launched the company in Fresno, and we had a bit of friends and family capital. We wouldn’t have known to call it that. That sustained the business. Then we grew, and we had to be profitable or find and navigate to unique opportunities. But what happened is the company began to hit that hyper-growth trajectory, and we quickly realized, “We can’t afford this.” That was four or five years into the business. We knew that this thing called venture capital existed in some far-off land. We said, “We’re going to figure it out. We believe so deeply in the work that we want to find the resources necessary to scale. What that meant was really trying and failing at raising money. By way of example, in Silicon Valley, you know: this is what goes into a deck. This is how long it should be. There’s no hard and fast rule, but people know the general rules. We built this 72-page booklet, and we started going around the meetings in the Bay Area. It was sitting in a meeting—I won’t disclose with whom. We made a pitch that now probably made no sense, but we made a pitch, and somebody is now asking us questions. They asked, “Are you raising your Series A?” That was literally the first time Irma and I had ever heard the words Series A, so we quickly looked at each other, and we said, “Yes. This is our Series A.” That’s how we learned those words. Then we kept iterating on that. It took us 18 months to raise that Series A. It was a $27 million round, and it was the first thing we had ever raised, so it was big, and we were something of a unique company. We didn’t understand that eventually, we would land on the line between venture and social impact, so we had to navigate to that spot. I think the delaying factors were both our greenness and lack of knowledge in raising capital. But also, we encountered some real bias. Then, I don’t present as Latin; Irma does. We’d literally sit in rooms where we would be answering questions, and they would ignore Irma for an hour. We would encounter explicit bias and skepticism that somebody doing foreign labor had any place in the technology industry. The fundamentals of our business ran into deeply entrenched opposition. It took the finding of real navigators and people who are the best humans on the planet to get us over the hump. And the folks I’ll point to, Mitch and Freada Kapor, who led our Series A; Rich Dennis, who co-led our Series A; Morgan Simon at Candide Capital; and John Duong at Lumina. Running into these folks who saw through our inexperience, who were deeply aligned to what the business was trying to do from a social impact standpoint and said, “We not only want to invest; we want to help you figure out how to couch this in venture terms so that we get the capital we need into the business to scale it.” So we got a master class in raising from those folks, and all of them are still involved in the business. I owe a debt of gratitude in getting over that hump, and we did raise the Series A. From there, I think as we’ve learned how to trace the things of the business to the things of venture capital, we’ve had an easier time raising since.
Alejandro: Eighteen months is a crazy amount of time. Typically, when you’re raising, and it takes more than six months, there’s something that needs to be changed and is going back to the drawing board. In this case, if you were to be able to go back and do things differently, to be able to optimize and be able to reduce that timeframe of 18 months, what do you think you would do?
Jake Soberal: One, we were having all the wrong conversations. The investors, particularly at the Series A stage for Bitwise—very unlikely to be a Kleiner Perkins or Sequoia. There is a well-defined category of investors now, even better defined now than it was when we were raising the Series A, which are the right conversations. Kapor Capital, family offices like Rich Dennis, and folks who straddle the line like Motley Fool has been a huge investor in Bitwise, and they are investing in an extraordinary set of companies, purely capital lens, but deeply aligned to our work. Getting to those folks more quickly with the conversation would be one. You simply can’t spend your time on every single conversation if you know it’s unlikely to be a fit. I think number two is we had to learn how to articulate our business to the things of venture, to the return profiles, to the unit economics. We were not building a business school curriculum here in Fresno and certainly didn’t realize we were building a venture growth company. We were just doing the work. We didn’t ever pause and say, “What are the unit economics here? What does scale look like?” We were just building the business—our own ignorance; we just had to learn. I think those are the two things, where knowing then what we know now, we could have accelerated and maybe avoided some of those bumps and bruises. The other not obvious thing, you go out to raise, particularly your first time, you’re usually either out of money or soon to be out of money. So you take 18 months; we ran out of money several times. It was a turbulent journey there.
Alejandro: And you went from 18 months at the Series A level to 90 days at the Series B. So why 90 days?
Jake Soberal: Hey, we take good notes. [Laughter]. We really studied what happened with the Series A and said, “When we go out to raise again, we want to optimize this experience, and this is how we’re going to do it.” We built internally what we call a Strike Team that was dedicated to: how do we stand up to materials? How do we stand up the right meetings? Who do we want to talk to first? And how are we not going to spend any time on conversations that are going to be syndicate followers, want to get the lead in place, want to get several term sheets? Here’s how we’re going to elicit those, define that process, and then we executed on that process. Some of that is luck. But much of it, we think, was learning from our first experience. Too often, we tend to treat capital raising as almost like a religious experience where everything has to come together organically, and it has to be just right in terms of timing, and you don’t want to raise too soon or too late. I think the reality is, at least our view is, you can create those circumstances, and you have to actually do the work of creating the right circumstances to ready the company to execute on a round and close it. At least for the Series B, that worked well for us.
Alejandro: Now, what is the total amount, Jake, that you guys have raised to date for Bitwise?
Jake Soberal: We’ve raised near $100 million into the operating business.
Alejandro: Nice. Going back to Bitwise, what have been for the business some of the barriers to entry, obstacles, and stuff like that?
Jake Soberal: I think one of the things that has been a real challenge is getting to the point where you’re able to communicate, on the business side, the key drivers in the business. That then guides how we grow and how we explain our impact externally. Drivers, for us, for a long time, you try and get—we wound up being decentralized with it thinking of drivers in this category or this, and drivers in this category or this. Today, we know that the drivers of growth in the business are our ability to serve students and serve them well. What that means is, the more students we can serve, the more we drive revenue to our workforce business, the more we are able to hire and scale into our tech consulting business, and the more people want to be in our physical spaces. The ability to serve more students drives growth across every category of the business. It’s the first domino. Placing that business in more cities allows us to serve more people. We began to understand that going to additional places would help us scale the business. It also had the primary effect of allowing us to serve more people in more cities in a way that grew their macroeconomy. So I think getting to that understanding was really critical and important. Underlying that was being able to articulate that to our various stakeholders, being able to explain that to a city of, “Here’s how we want to come alongside the work going on in your city, and we want to amplify and accelerate it. Being able to explain that to government workforce funders that “Here’s why you ought to think differently about your spending and instead of just investing in truck driving and the building trades as pathways to work. What if we thought about the tech economy and roles as computer programmers and digital marketers and on and on? Then being able to articulate that unique value proposition of a two-way enterprise customer on the tech consulting side. Here is why we can serve you faster and better. The ultimate technology we’re building might more powerfully meet the needs of your end customer because our tech workforce looks like your end customer. Those pieces getting to that understanding, I think, was slow for us, but as we did, it has facilitated the equally exciting scaling of the work.
Alejandro: Now, let’s think about the future. Imagine that you go to sleep tonight, and you wake up in a world five years later where the vision of Bitwise is completely realized. What does that world look like?
Jake Soberal: That world looks like really vibrant technology economies in what we call underdog cities: Bakersville, Fresno, Merced, Toledo, and the next wave of cities that we’ll announce later this year. And those tech economies having tech workers whose diversity looks like that city. What that means is that we’ve built an inclusive growth economy in cities that didn’t have it before, so driving individual outcomes and driving macro-economic growth in those markets. We think that not only has an economic impact on those lives and those places, but it has a significant impact on democracy because as folks get into a job that is able to sustain them and enables them to enjoy prosperity, they become not only active taxpayers, they become active voters, they become civically engaged. Now, the voices that are leading in our country are representative of our country. They actually represent the diversity of our country, and we’ve given everybody a seat at the table. For us, that’s the ultimate ambition, and it happens one individual student at a time and one city at a time, and we’re super excited to create that future.
Alejandro: Nice. One of the questions that I typically ask the guests that come on the show is, imagine if I put you into a time machine. I’m able to transport and bring you back to that time where you were working at the law firm, and at this point, you’re speaking with Irma, you’re thinking about what’s possible, the future, etc. Here you are, now the older Jake, coming in and having a chat with your younger Jake, and you’re able to give yourself one piece of business advice before launching a company. What would that be and why based on what you know now?
Jake Soberal: Oh, man! There are probably several pieces of advice. At every stage, I would want that individual to know that it is going to be harder and take longer than you would expect. I think the reason is, we come into these things with rose-colored glasses, and we pretend as though the growth of this business is not going to consume unhealthy amounts of space in my life. So you wind up trying to do it all at once, trying to be a dad, a husband, a founder, all at the same time with no boundaries, and that can send you off of the rails. I think if I had better understood the size of the task, I would have been better at all three of those functions along the way. I think that would be the soft advice. I think the hard advice would be: raise all of the cash anytime you can and as soon as possible because trying to do this work and build a scaling business with no cash made for some of the most difficult moments in Bitwise.
Alejandro: Yeah. There are a lot of people that are thinking, “Should I raise all the money that I need or all the money that I can get?” What would you say there?
Jake Soberal: I think it does depend on the business, and it depends on your unique goals. My bias would be always yes, particularly if you have a business that is ready to put to work cash. You find yourself in a really awkward spot if you raise a bunch of cash, which is possible now and then can’t deploy it. That’s the other end of the stick that nobody tells you about. But if your business is ready to put to work the cash, it is so excruciatingly difficult to try and build and sustain the business without having that resources at the table. I think the one asterisk is there are some people for whom the primary goal is to own the maximum amount of their business at all times. Irma and I have prioritized building the business that we want to build that we think is important to build over that extra percentage point of ownership every time. I think in the wash, what comes out is a business that we can grow that much larger because of the capital we’ve been able to convene around.
Alejandro: Jake, one bonus question, and for the people that are listening that maybe they’re going to find this inspiring. What has been a good book that you’ve read that you think would make a difference for the people that are listening to perhaps take a read and why?
Jake Soberal: The most impactful I’ve read during the course of Bitwise was written by a pastor named John Mark Comer. It’s called The Ruthless Elimination of Hurry. It was literally life-changing for me. It frames some of the ways we try to live today and some of the ways that are breaking us and gives a fresh perspective on how we survive this journey of being a founder and also being a healthy human being.
Alejandro: That’s amazing. I love it. For the folks that are listening, Jake, what is the best way for them to reach out and say hi?
Jake Soberal: Info@BitwiseIndustries.com You can navigate to anyone of us at BitwiseIndustries.com. We are BitwiseIndustries on all of the social platforms, and we’d love to engage with anybody that is interested.
Alejandro: Amazing. Jake, thank you so much for being on the DealMakers show today.
Jake Soberal: Thanks for having me.
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