In an exclusive interview for the DealMakers podcast, Michael Litt revealed how he accelerated his startup, landed $70 Million from some of the most enviable investors on the planet, is disrupting the classic board meeting, and what it takes to get funded by him. Now he is a serious startup investor and founder at the heart of Canada’s new tech ecosystem.
In this episode you will learn:
- Leadership styles from early to growth
- How to raise a round from top tier investors
- Ways to build the relationship with existing and prospective investors
- Creative ways to deal with your board
- The impact of attending Y Combinator
- Traits of successful founders
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 Michael Litt:
Michael Litt is the co-founder and CEO of Vidyard, the leading video marketing platform that helps businesses expand their use of video content and turn viewers into customers.
He is a passionate entrepreneur, avid surfer and skier, and has recently been recognized as Ernst & Young’s Entrepreneur of the Year and Marketing Magazine’s Top 30 Under 30.
When Michael Litt is not bringing leading video-based technologies to market, he serves as general partner of Garage Capital, a seed-stage fund focused on super-cluster companies looking to expand their networks into Silicon Valley.
Michael Litt also sits on the Communitech board of directors, an organization designed to help companies start, grow, and succeed.
Connect with Michael Litt:
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FULL TRANSCRIPTION OF THE INTERVIEW:
Alejandro: Alrightee. So, hello, everyone. Welcome to the DealMakers Show. Today, we have someone finally from outside of the US, someone from Canada which is obviously near to my heart because my wife is also from Canada, more on the French side, Montreal, nonetheless from Canada. And we have someone that is doing a lot for the ecosystem there and very much excited to really have him on the show today. I think that we would all be able to learn a ton from our guest today. So Michael Litt, welcome aboard today.
Michael Litt: Thank you for having me. It’s a pleasure to be here.
Alejandro: So I guess I was taking a look really, you know, going through memory lane you know on your end and I saw that you did a little bit of the corporate. I mean we’ve all done that. Some of us a little less sexier like for example myself, I’m a recovering lawyer but I saw that you were also in corporate. So how did you get started with the entrepreneurial journey?
Michael Litt: Yeah, that’s a great question. You know I think I’ve always been an “entrepreneur” to some degree. When I was in the third grade, my grandfather would go to North Carolina and buy these skins of firecrackers and bring them north to the border and he’d give me this massive cakes of firecrackers and I’d take half of them and keep them for myself. I’d take the other half and sell them to my friends at school. Then I got a newspaper route and I realized I can make more money by running multiple routes so I got multiple routes. Then I paid kids in the neighbourhood to run my routes for me. So it was kind of a natural way of being for me for whatever reason. And so then I was exposed to it at a very young age. And so the transition from corporate to doing this was very natural and in fact, the only experience I have in corporate was an intern while I was studying at the University of Waterloo`.
Alejandro: Got it. You know it’s interesting I also got started with my entrepreneurial back in school but I got kicked out of school for a few days for doing too much business. So yeah, we’ve all been there. So I see, Michael, that on your end your first real stab at starting a business was with Redwoods Media. So can you tell us a little bit about this experience?
Michael Litt: Yeah, actually before Redwoods Media, I had a blog where and you’ve probably seen this from my LinkedIn profile, where I took a part personal electronic devices, so everything from cellphones to media recording devices to evo critters and published the references on the web and actually sold that asset in escrow many, many years ago prior to Redwoods Media. It actually funded my way through a good portion of undergrad. Redwoods Media was kind of shortly thereafter and I was working at a large corporate called Cypress Semiconductors in Silicon Valley and Devon Galloway, a really good friend of mine from school, flew out to California to drive back to Waterloo with me. Now that’s about 2400 mile drive and you know too young men run out of stuff to talk about really quickly and so we started talking about starting a business. And one of the things we both had in common through all of our internships is that the companies we worked for had used video to help explain their product either in a marketing context, a sales context or sport context. And we had worked with companies to produce these videos and so we realized we could actually make these videos probably better and at lower cost than these big vendors and so we started a video production company called Redwoods Media.
Alejandro: Nice. Nice. So I see that you exited this business and then you went to launch Vidyard and—did I spell it well? Because sometimes with my Spanglish you know it gets…
Michael Litt: Yeah, you know, you said it right. But you know what’s interesting is we actually didn’t exit Redwoods Media. We’re still the same corporation today. Redwoods Media was an entity as was Vidyard and what we were doing was we’re actually funding the development of the Vidyard software platform with the revenue that we were generating from Redwoods Media. We actually understood the opportunity for Vidyard because we were helping businesses produce video and when we did so they all wanted to know what was the best way of putting that video on the website to get the value from it, to understand the ROI, to understand the brand experience, etc, and so we built software to solve that problem and only stopped making videos when we realized that we had a sustainable future on the B2B software, the service side of our business.
Alejandro: Got it. Got it. So now really switching gears here and really diving in to Vidyard because Vidyard has been the venture where you have really made a big splash and you know definitely now when I speak with people from Canada, they point that Vidyard is one of the companies to follow. So I guess with Vidyard what was the, like looking back, like the shareholding team and that founding team, what did that look like?
Michael Litt: Yeah, the company team was the same as it was from the previous venture. My co-founder, Devon and I again great friends from school, Devin is what we call an engineer raised by accountants and so he ran a lot of the back office, a lot of the offside of the business and I tended to be the talking one and the one who is often presenting at pitch competitions, etc. And so when we went to Y Combinator in Silicon Valley, program said, “Hey, you’re going to be the CTO and Mike, you’re going to be the CEO.” And so we kind of bifurcated our responsibilities. I focused on sales and growth. Devon focused on product and functionality. So that was kind of the core founding team. Of course, we brought one of our video producers, a gentleman named Blake Smith over from Redwoods Media to start producing content for Vidyard and a really awesome classmate of ours was [06:03] to the table as well as our first developer, now VP of Engineering. So it was a pretty tight thing but we were both engineers.
Alejandro: Really cool. I was just going to ask you about Y Combinator. I mean Y Combinator is actually harder right now than getting in to Harvard. So how was that experience for you guys?
Michael Litt: Yeah, it’s funny they told us that same stat when we went there. Just in terms of the acceptance rate in to the program, I think by nature they get a ton of applications. They could only take so many companies. Y Combinator is a phenomenal place to start a business. We had very little entrepreneurial experience related to scaling something and one of the amazing things that YC does is it removes all the noise of starting a company, so all the stuff that you have to think about around building an employment contract and the process of helping subscription agreements for fundraising, filing taxes, all that type of stuff, they operationalized so you could focus on the only thing that matters which is building something that people love, and that is really kind of the tag line paraphrase in a way and because we were from Canada, we had moved back from Silicon Valley, again this was after our drive, to start the business and be a part of YC. And being remote from family, friends, etc, gave us this unfair advantage in that we were 100% obsessed in building this company. We had no distractions. We had no family obligations and no friend obligations and we’re literally working on a 24-hour shift. Devon would be working on product through the night. I’d be trying to sell it during the day and I would feed him the feedback I got from customers in the evening when he woke up and started working on the product again. And you know that time was such a special time and the journey of course, it was terrifying but I learned so much from YC that we still carry it to the company called Chips today.
Alejandro: Got it. So you know you typically see on this TV shows when people go in to plastic surgery the before and after. So if we had the before and after video, like what was the before and what was the after when coming out of Y Combinator.
Michael Litt: Yeah, you know, it was amazing. Y Combinator is only a three-month program but going in to Y Combinator you know what you had was you know a couple young, runny nose gentleman who had a dream and a vision to build a product but were distracted by a lot of different things and really didn’t have a clear direction. At the end of YC, you know, we had a product that for the trailing eight-week period had grown its users and revenue by 10% per week. We had some amazing customers and some big YC related brands. At the demo day, we’d already raised about $600,000. About two weeks after demo day, we closed a $1.65 million seed financing. And you know the big difference was we went to YC with nothing in the bank and the clothes in our back and we left YC with a business about a hundred customers, real revenue and over a million and a half dollars in the bank to go and start a company in. And thee experience of having that happen over you know just three months is absolutely incredible.
Alejandro: Wow, that’s really remarkable. So I guess you were talking about fundraising, I believe this is public, but how much have you guys raised so far?
Michael Litt: Just over $70 million to date.
Alejandro: Got it. And obviously there is a multiple rounds that you guys have done so how has that valuation process matured or changed from let’s say since the minute you did your or the moment you did your fundraising at Y Combinator to perhaps your last valuation, your last round?
Michael Litt: Oh, yeah, yeah. I mean the business is you know we’ve raised more than the company was worth up to our series B just to give some context there. So absolutely in terms of pricing the company, there has been a ton of growth. Yeah, the reality is when you do raise money, you’re selling a portion of company and so that’s the price you know that financial investors are willing to pay but in the end of the day, you know, I tell this to a ton of entrepreneurs, a company is only worth when someone who is willing to pay for it and that is either the public market or a strategic acquire or a private equity firm. And you know we haven’t gone through that process yet so I almost look at the valuation to receive as part of the fundraising process as a heuristic and a general bench mark but absolutely not with the business is truly worth.
Alejandro: Got it. Got it. And I guess from a process perspective where you like looking at perhaps creating it like making it be competitive so that people would fight to get your cap table or how did you look at that?
Michael Litt: Yeah, you know, it’s a great question. There’s a lot of I think fallacies to fundraising. The first one is that you need to develop a pitch deck and run a formal ‘hey, I’m fundraising’ process. And to double click on that little bit, when you needed an investor for the first time, they’re plotting in their mind the beginning of the performance versus time, chart or graph, right? The first time you meet them, they’re plotting a point at zero. To get them to invest in your business at that point is very, very difficult. They know nothing about you as a person and in the early days, that’s very important to justify the investment. You know very little about the business, they might not be that much traction and they actually have no perspective as to how you’re growing or how you’re developing. But every time you meet that investor, they start plotting a point ideally further along the time graph and further up on the performance axis which is the Y axis obviously. And what we’ve always done is have great conversations with investors and update them and educate them on what we’re doing and inevitably at some point in that process, well before we need to formally raise, someone comes forward with an offer, a verbal offer, a term sheet, because they want to get in to the business. And so on that point, we’ve never created kind of a formal fundraising deck. Now each round is different and I’m happy to kind of talk about what matters at each part of the process but by no means has our fundraising been a very formally executed endeavour.
Alejandro: Got it. So did you have like a quarterly update type of email that you would send to the people that you were interested in or you know how did you manage that?
Michael Litt: Yes, so no, we actually picked in each case five investors that we thought would be a great fit in terms of their existing portfolio, partners that could support us and I would do regular calls, right. The spray and pray investors update I think is valuable you know for a lot of companies. We did not take that path, right. I wanted to build deep relationships with a very select crew of potential investors.
Alejandro: And very select, I mean you guys have Battery, Bessemer, Omers, Andreesen Herwitz, I mean pretty impressive. So how did you find these investors, Mike?
Michael Litt: Yeah, so you know, I would say at first you know you got to delineate the difference in your fundraising process in your story at each stage. So when you’re raising a seed round, you know, largely speaking, you’re raising on the concept of your business. You’re raising on smoke and mirrors. There’s not enough traction to truly value the business for what you think or what the market says it’s worth. And so you know that fundraising is about 100% smoke and mirrors. Your series A goes to 20% performance, 80% smoke and mirrors. Your B is I think is 80% performance, 20% smoke and mirrors. Your C then is 100% performance and then 20% smoke and mirrors, and that 20% is where you get you know that big valuation. And so what we kind of did was we looked at each stage of investing, right, at the series A stage, we said, “Okay, who can help us most in what we need as a company today?” And what we need at the series A stage is access to talents and support in hiring the right individuals. And so we started talking to a few funds and what we wanted was a Canadian investor that had access to a Canadian talent pool. The series A stage you live and die on being able to hire these key executives appropriately. And so we wanted to work with Omers because they are a Canadian based fund. They had a Canadian based talent pool. There’s a lot of these Silicon Valley based funds. You know they weren’t located in a geography that was supportive to us give that we had come back to Waterloo to scale the business. And so in that process, you know, Omers was one of those companies. We already have a lot of investors in our seed round that were advocating for us in to these buckets and so I won’t talk about those investors that we’re at the table that ultimately didn’t win the deal but you know it was basically part of that process. On the series B, you know, I said, okay, I want someone in Silicon Valley who has operational experience and knows how to scale a business beyond $10 million in NR.
Alejandro: Got it.
Michael Litt: And so you know you look at the list of companies. You look at some of the most prolific B2B SaaS investors in the world and Byron Deeter in my opinion stands head and shoulders above a lot of other investors. He’s personally been through 10 cloud company IPOs. And so from the perspective of B2B SaaS, understanding the key in economics of truly building an efficient and scale a business, yeah, he’s the best of the best. And so in that process, he was my number one target and in fact, may have been gotten a better deal than some other investors on the basis of what he could actually do to help us. But you know summarily on the series C, because Byron Deeter was a known investor, a lot of people were interested in the deal on the basis that Byron has invested in. So the upside on price, we probably gotten in C was largely because of his involvement. And so I think what you want to do at every single stage of investing, and don’t get to far ahead of skis, don’t think two stages down the line. If you’re a seed stage company, think about your series A and think about who would be best and sit down with your co-founder. Do the research, shortlist five and then to outreach. Get introductions to them. Start meeting them and just giving them advice. Again, their job is to make good investments and so they’re job is to talk to founders like you. Do not be afraid on putting yourselves in front of them.
Alejandro: I love it. I love it. And I guess that regardless of the stage, Mike, what do you think should be those three things that founders should look for in a really unbelievable investor?
Michael Litt: Yeah, the number one thing absolutely without question is what I call operational empathy. You know a business is never—it may look from the outside like the [17:06] is 100% up un to the right but growth is a step function. It doesn’t always go with the plan. And what you want is an investor who understands that and understands that you learn as you operate and if you’re in a new market, there’s going to be stumbling blocks. Investors who operate your business like it’s a spreadsheet are not going to have operational empathy or they’re going to cause you a lot of grief and a lot of pain. So how do you find operational empathy? Look for investors who either invested in a diverse portfolio of companies that have been through these types of challenges or better yet, look for an investor that actually has operational experience. And so Byron Deeter you know he was a CEO of a business, one of first cloud companies that sold to IBM and he remembers what it was like to operate and be in my shoes and ends up having a ton of empathy. So operational empathy is a big one. The next one it just comes down to operational expertise. You want an investor that has a strong portfolio that can provide you benchmarks. And so if you want to be the best, fastest, growing company, you need to benchmark yourself against those businesses and a lot of these stats are not publicly available right. So things like LTB to cap ration, those are there. But things like the concept of an efficiency score, things like productivity per rep, things like the time to ramp productively, there’s a lot of misinformation out there on the web but a good investor can actually compile all these information from his or her portfolio and inject in to your business during board meetings. And the third thing and this could be the most important is you want to work with somebody that you’re personally aligned with that you can have fun with. We’ve done board meetings or we’ve gone cart racing afterwards. We’ve done skiing. We’ve done all sorts of things which are shared interests that help develop that operational empathy and help that investor think about you and support you on this journey. And I think if you’ve nailed those three things, you’re going to be very successful as an organization in terms of building a productive relationship with that investor.
Alejandro: I think that’s great advice there, Mike. You know one of the things that for example was coming to mind when you were mentioning this is the difference with those investors especially the ones that are on your board, the ones that it feels like you’re more like reporting to and telling them how everything is and asking questions on how everything is rather than the other one is the ones I really like which is the ones that are listening for how can we help. I mean that’s a really big one for me, you know.
Michael Litt: Yeah. One quick point, I heard an amazing thing that I don’t do which I want to implement so if any of my board members are listening to this, heads up, it’s coming, a company at the very first slide of the board meeting, they have a slide that says board influence revenue and board influence pipeline. And they ran a leader board of who on the board is influencing the most pipe and the most revenue and they give a bottle of tequila or a bouquet of flowers or something to the board member that represents them the best in the market and they loved that. Because board members and investors always sell you on the ability to help you find customers but it doesn’t end up being the priority because their job is just to find deals but you hold them accountable. They can help hook you up and hold them accountable at your board meeting I think is a great strategy.
Alejandro: Got it. And talking about boards, I guess you have quite a bit of experience on this topic so what have you learned from really putting together a powerful board of directors? What does that look like?
Michael Litt: Yeah, I’m constantly learning. One of the most valuable lessons I’ve learned is that a productive board meeting is really about the prep work and developing a template which is easily understood and doesn’t change board meeting to board meeting specific to your business. That then means the investors could easily parse the information and understand what they’re looking at. The next one is the calls you do with each board member ahead of the meeting are very important. So I do a 15 to 20 minute call with each board member where I tell them upfront what the red flags where from the quarter, so what where the bad things, what were the good things, and if there is an executive or somebody in the meeting that I want them to kind of lean in to on a process or provide some specific guidance to, I’ll ask them in that prep call. And so the board members come in. They know what the red flags are. They know what the green flags are. And they know what their job is in the board meeting. So that preparation is very important. What I’m moving to now is I provide the resources, the content ahead of time because when you think about if we do a Q1 board meeting, you know, the board meetings is likely taking place six to eight weeks after the quarter has closed. And so what we do is we send out the materials and when the board gets together, 10% of the meeting is on those materials, 90% is forward looking: strategy, how we’re thinking about strategy, why we’re thinking about the strategy that way and getting their expert opinion in to the growth and the future of the business. I think it’s very easy to fall on this trap of constantly doing updates, but nobody wants to be in a meeting that is historical, that’s 90% backwards looking and 10% forwards looking. So what I’m actually going to start doing is having a board call which is an hour long to go through the backwards looking stuff ahead of the meeting and in the meeting, we’re only talking about the future.
Alejandro: Got it. Got it. Well, if you’re a board member and you’re listening, now you know what’s coming your way.
Michael Litt: Absolutely.
Alejandro: So that’s good. So I guess going back in to the fundraising, I always tell founders that there’s a big difference between being in a negotiation when there’s someone that loses and someone that wins, and being in a partnership when you know when you’re shooting for a valuation where there’s a true alignment, there’s a true partnership. So I guess talking about valuation and the people that are on board, was there a true alignment on the valuation and also I mean was there anything driving that minimum check for you guys that you were shooting for?
Michael Litt: Yes, that’s a good question. You know I think absolutely you’re never going to level set on price, right, and in my opinion the negotiation begins at no. And so in that way, you know if somebody hits you with the price that seems good, they’re not hitting you with their best price so their final offer, right. There’s always room for movement. There’s always upside. The way I almost kind of start a fundraising process is I think about how much money we want to raise and what we can accomplish with that money and I build a little bit of a model around that. I know it’s very rough because it’s almost hard to know exactly what you’re going to do for the next two or three years when the business is less than two, three years old.
Michael Litt: But once you’ve kind of identified that you think about the type of dilution you’re willing to take and then you think about what an effective price is, right. And I almost look at public market multiples in terms of multiple on top line as well as multiple on revenue. And you can almost anticipate that private multiples are going to be a little more aggressive, a little bit higher. And so you know in some cases, you know if we haven’t needed to fundraise and someone wants to hit us with the term sheet, so let’s say we’re having a conversation with an investor and they start getting excited, we’re not fundraising for another year but they want to get in to the deal now, they’re going to have to pay a price which is close to what it would have been a year from now in order to get that deal done.
Michael Litt: Right and so generally that’s how the conversation goes, right. The investor says, “Hey, I’m really looking to do this.” And I say, “Well, here’s our projected revenue. So you’re going to pay a multiple on that projected revenue when we need to fundraise because otherwise there’s no point in us taking this money now. Otherwise, we might as well just wait.” And I think that’s a very powerful tool that helps you optimize price and optimize kind of expectation. Now when you do raise a round like that if you don’t hit those growth targets, you don’t hit those revenue targets, you’re going to have some uncomfortable conversation.
Michael Litt: And so you just have to be prepared to take that risk and to put that target on your back because once you get in to the series B and series C stage, your business could effectively now be worth hundreds of millions of dollars. And when my co-founder and I were sitting in the bedroom that we started this company in, we never envisioned that, right. We just wanted to solve a problem for a specific set of customers and staying true to that it’s so important, and staying true to that is going to help you optimize your price as well.
Alejandro: Got it. And I mean you’ve seen a lot. You’ve seen a lot, Mike, when it comes to financing, so is there anything crazy that you’ve seen like off market demands that perhaps you know you can give some heads up to people to be careful to watch out for those?
Michael Litt: Yeah, you know what, it’s about so much more than the money and the price. As you probably know from experience, there’s many different ways that investors can put money in your business, right. At the very early stages, you’ve got safes and notes and all sorts of interesting instructions there but later on, when you’re doing price grounds, you’re dealing with prep shares and prep shares take preference to the equity that you as a founder hold and some investors are willing to give an aggressive price in exchange for things like participating pref or 2x cap on participating pref. And when your business is growing, everything is going great, you know you might want to optimize for price because it sets the baseline, maybe you’re taking a secondary offering in that process, and you’re optimizing for that price. Of course, commons generally get discounted in that process but it is what it is. What happens though is let’s say there’s a down market and that could be coming, right. We’re nine, 10 years in to a bull run. Public markets are starting to [look at their fee 27:13]. A pullback is likely imminent and your business runs out of money and you got to recapitalize and you have 2x participating pref, now the hurdle for you to make money upon liquidity is that much higher. And if private company multiples compress significantly, you may have just signed yourself up for another five, 10 years of operating before you get back to the price that you could have been at. So in my opinion, never optimize for price over term. Always optimize for terms and what I’ve always told investors is we’re not interested in doing something if you want to do some funky stuff like ratchets, etc. If none of these makes sense, you know, Venture Deals by Brad Feld is a great book. It’s still relevant. It goes through a lot of these details. Make sure you have an advisor as in a founder who has raised money before that can help you think through these stuff, read through your term sheet and help you understand the downside because you could get burn for sure.
Alejandro: Got it. And I love that you’re talking about potential market corrections. You know the other day I was actually speaking with a friend that has raised quite a bit of money in the hundreds of millions. And he was a little bit concerned about you know the market and the timing because the problem is that when you’re on the hyper growth path, you’re always one round of financing away from going out of business. So I guess from your perspective, Mike, what kind of recommendation would you give to those that are starting to think about how to prepare for the storm or haven’t perhaps even thought about preparing for the storm?
Michael Litt: Yeah, I mean it’s interesting, right, because a lot of entrepreneurs that are kind of new entrepreneurs were probably in school during the last economic recession which you know happen kind of in the fall of 2008.
Michael Litt: In the fall of 2008, I was working in Silicon Valley at Cypress Semiconductor and I was on 1st street in San Jose and 20,000 jobs are lost. And I lived in a building that primarily employed people working in tech. And my company asked me not to go in to work the day they performed the lay off because they didn’t want any full time seeing that the intern was still employed. And so as a student, I was completely, completely sheltered. Now, I realized this could—this is going to happen at some point in my adult life. It’s the natural state of macro economics. And so if you’re a business owner, you know you have to think about what is going to happen to your market in a pull back if it’s caused by high levels of commercial debt and your product that companies are using to invest in growth and they switch from investing in growth to investing in efficiency and sustainability, you might see a lot of turn. You might have to start discounting your customers. If you’re burning $2 million a month in search of growth, you better have a path to profitability or scaling that [permit 30:05] back significantly relatively quickly when the shoe drops. You best have a war chest, right. If you’re looking at raising right now or raising in early 2019 and you’re getting down to the short strokes of cash in the bank, do that raise right now because the opportunity is here. The money is there. There’s so much money in venture right now that is available. So many companies are getting funded that probably shouldn’t be and you got to think about protecting that asset if you ultimately want to. You know the other path is to think about selling the company now as well, right. There’s so many different paths that people can take but consolidation is needed in the market and so we’re ready for it and we’ll embrace it if it happens.
Alejandro: Got it. Got it. And that’s great advice, Mike. And in your case, I mean you guys have grown so fast. I mean in just a couple of years, you’ve gone from managing a couple of dozen people. How many people do you have now in your team?
Michael Litt: We’re approaching 300.
Alejandro: Wow. So how has your management style or perhaps the leadership evolve or matured from the times where you guys were like 20 to perhaps now?
Michael: Yeah. That’s a good question. I mean I have a product management background. I’m an engineer. Product is in my blood and you know in product especially the early stage, what you’re managing is zeros and ones, right. You’re managing code. You’re managing functionality. You’re getting that in people’s hands. As you start to build the business, you shift from managing product to managing people. And human beings are highly variable compared to variables that you use to build software products. And highly complex and so the systems and the frameworks that you use to build product, you have to think about building out in to your business. And if you don’t have any experience with that, you can absolutely read books but I highly encourage entrepreneurs who come from the technical world or who had never managed or scaled business before, never truly been a CEO, to seek out an executive coach, someone who’s been there and done that and can help you think about the framework for optimizing your exec meetings right, for helping you think through, how to build a pull culture versus a push culture. Like this stuff comes organically to a lot of people up to about 50 if you’re lucky maybe 100 employees. But beyond that, the 101st person that joins your business is expecting a very different experience than the 10th person that joined your business and you have to be prepared for them and you know the point where your 10th employee joins, you ask them to bring their laptop from home. They don’t have an employment agreement. Maybe you miss a pay period and you retro actively support them and they’re willing to deal with it because it’s a small business. That 101st employee, they want their t-shirt. They want their computer. They want to be set up because their expectation is probably coming from a varied company and their journey and the lore of their experience starts then. And they don’t really care about what happened from the previous 99. So you have to think about these things and I have certainly become a much more effective business leader in this process but of course I have a lot to learn and understanding that I don’t know what I don’t know I think has been one of the biggest and most important aspects of my personality and my approach to scaling this business.
Alejandro: Got it. Got it. That’s really great advice there for those that are scaling the business. So I guess, Mike, in terms of the region I mean I was speaking the other day I had on the show Kevin Ryan and we were talking about how the ecosystem in New York City has been developed. In the past 20 years, there was not even one start up and I guess now the same thing is happening there in Canada so how are you seeing the ecosystem you know like maturing in the region?
Michael Litt: Yeah, absolutely. You know I think Canada’s time is now. The government has made a bet on the digital industries basically what they call technology. They’ve put a ton of money in to AI research, the Vector Iinstitute in Toronto, the University of Waterloo is spewing out incredible grad. UW does not take any intellectual property on technology developed as an undergrad and so you don’t have the mess of having the university on your cap tables, etc, etc. So it is truly Canada’s time. And I was talking to an investor that represented a sovereign entity in the London, UK a couple of weeks ago and they made the comment which was to truly scale an ecosystem, you need talent, you need money, and you need mojo. And it’s kind of funny coming from the UK and this gentleman kind of acted like Austin Powers interestingly enough. And I think Canada has talents and mojo. Like we’ve got downers who are building cool stuff. [34:54] Labs just launched their new company or the rebrand called Binorth. They launched the focal smart glass. It is just around the corner from where we are and it’s the most compelling smart glassed product I’ve yet to see, the most compelling AR product. I’ve used them. They’re absolutely incredible. It’s homegrown here. We’ve got another company that is looking at raising around I just had a call with the founder yesterday. It’s going to be somewhere between a $500 million pre and $1 billion pre. They’re just growing like crazy in a market industry that I’ve never expected there’d be opportunity in. And all the money that’s coming in to these companies is generally coming from outside of Canada.
Michael Litt: And so the challenge Canada has is that the wealth hasn’t really figured out this industry and our wealth in Canada largely comes from commodities trading, right? Oil, gas, natural resources, etc. There’s a few funds that are starting to do interesting things. One of our board members, Dennis Kavelman, who was the CFO of Blackberry, has joined up with Patrick Pichette who was the CFO of Google and they’ve launched a growth fund that’s kind of co-located in Montreal and Toronto. Really excited to see that stuff happened but again there’s not really a ton of competition there for them here. So great place to start a company. If you’re raising money, it’s likely coming from south of the border but that’s okay. In the end of the day, the money is still green and it’s important for Canadians to realize that the vast majority of your market activity is going to happen south of the border and abroad. And being Canadian gives you an unfair advantage to tackling EMEA because culturally we’re fairly similar to say London or Dublin as a landing place to start expanding those markets. So the time is now. It’s a great ecosystem. I’m super supportive of it. I personally invested in over 65 companies now and you know have been fortunate enough to participate in the upside on some of these businesses so very excited to see what the next generation brings.
Alejandro: Got it. And just out of curiosity I mean 65 is quite a number. So you know based on your experience and when you come across these founders, are there any particular patterns that you have been able to recognize on people that have potential?
Michael Litt: Yes, absolutely. And again at this stage that myself, my founder, my co-founder and my good friend, Mike Invest, we do it as a group. You know what we really look for is really, really, really talented product and technical leadership with domain expertise. So if you’re building product for a specific market or an ecosystem, ideally you have experience in that world to have real user and product empathy. And then other side of the business, we look for what we call a chip on the shoulder or the warrior instinct.
Michael Litt: There are so many people that are trying to start companies because it feels like the cool thing to do but it is very, very difficult and the highs are high and the lows are even lower. And so we’re looking for someone that has this like and I had this, this point to prove, this chip on their shoulder. This insane motivation that you can just see in their eyes and hear in their voice and you can validate with their background. And often user individuals that do not come for money, it’s the rise of the merchant class. They’re really trying to prove themselves and prove this market and that combined with some domain expertise and knowledge, generally leads to success because if you can raise a little bit of money and be super obsessed about your market and iterate quickly on product, you’re going to find a path to success as long as there’s opportunity, as long as you can move fast enough and afford yourself enough time. And I would say all those 65 companies, over half of them ended not necessarily doing exactly what they said they were going to do at the pitch, but that’s okay. That’s exactly what you look for is iterate to success and understand that iteration never stops happening.
Alejandro: Got it. Got it. And the last question I wanted to ask you ,Mike, is you’ve been through quite a bit and you know the experience that you have accumulated is remarkable. So I guess going back in time, if you could give just one piece of advice to your younger self before you got started with all the entrepreneurial journey, what would that be?
Michael Litt: I would seek out experience leadership much earlier in the process. I would seek to work with CEOs of companies that were a couple stages ahead of me. I would kind of seek their legions, their help, their support. I would invest in an executive coach much earlier. And I would just look to accelerate my learning on the basis of figuring out what I don’t know and what barriers I’m going to run in to along the way. I think that is one of the biggest pieces of advice I can give founders. And don’t assume that if something is working, it’s going to continue working in perpetuity at scale. You’re going to hit walls. You’re going to hit barriers. Your business is going to have to be redefined and rethought at multiple parts of the process and the only way to realize that is to talk to other people who have done it as much as possible.
Alejandro: Got it. Got it. That’s great advice. So Mike, for the people that are listening, what is the best way for them to reach out and say hi?
MichaelLitt: Twitter is pretty effective. I’m generally on there a few times throughout the day. My Twitter handle is @michaellitt. Another way is to go download a cool Video. Send me a video message. My email is [email protected] It’s one of our products. It’s a great way of getting my attention. I love seeing people use it effectively. Otherwise, I’m also on LinkedIn and you can find me under Michael Litt.
Alejandro: Amazing. Well, Mike, it’s been a pleasure to have you on the show. Thank you so much.
Michael Litt: Yeah, thank you, Alejandro. Best of luck.