So welcome, everybody to Ask an angel and today we are with Don Pare. And I’m so excited to talk with you because not only are we talking partnership, but working with you guys on a lot of other different sides of business with OPN and the supporters fund. But today, we actually get to learn a lot more about yourself and dive into the great things that make you great. So to start off, Don, thank you very much for joining us today.
DP: Well, I believe you. It really is an appreciation and an honor. The OPN organization came to my attention a while ago, and I think they’re part of what I would call the Nouveau Ecosystem for properly introducing investors to opportunities. This is, I think they’re in a leadership position there for a number of reasons. One, is with their help the investors can better pick who they want, who they’re interested in, and that ability to create fit is what really creates a much better ecosystem. And then I think they’re brilliant on the way they work with some of their venture players and how they help them get themselves organized because that’s often a challenge and you know, yet you’ve got to stop throwing spaghetti at a wall. As I would say, write to JP, and you’ve got to start to say, “Well let’s get focused here and let’s really put together my pitch, so that it’s going to not fall off the wall, but be well appreciated and eaten by the investors.” Not to say that we’re in the food business but yeah it’s an analogy, right?
JP: I love it. It’s a great analogy and you’re right. Things have to change and you have to look at things a little bit different and someone else’s lens usually helps lend that to a different view, and today we get to look in your lens to learn a little bit more about yourself, so maybe to start things off Don, maybe you can share a little bit about your background, where you’ve come from, where you’ve been and where you’re going, and then one thing about you that nobody will know.
DP: Yeah, it’s a very interesting question but often a boring answer. Suffice it to say that I enjoyed my roots of engineering to such an extent that I was really the top of the class and I thought I had an engineering world ahead of me. There you go, you don’t find people like me from totally different –from an engineering background but then I found myself working for Bell Northern Research on a presentation for Northern Telecom on a new switch and they needed someone from the lab who was a techie who could speak English. So people can understand. So anyways there was a little group in Belmont Research called the industrial design and I said, “I got to give a presentation. What the hell am I going to do?” Because most of us at that time and I date my tele-self use the old kind of flappy slides that you put on those overhead projector stuff that you know that black and white sort of thing with the cardboard around it. I forgot what those projectors were they’re sold. So they gave me two slide projectors one was the images and one was the text but inverted in white on a dark blue background. Well, this at that time had never been done. So I walked in to make my presentation and put up the two slide projectors and immediately just blew the buyer right off his chair. But the vice president of marketing was there from Northern he said, “Where did you come from?” Because I had all the technical answers and when they ask, “Well, what does this mean for this?” I had some sort of ability to do that and that’s the beginning of the change of my career as I took on an MBA, and started to work in marketing, and worked myself through and actually became a salesman, ran RND, and ran finances, and administration. Whoo! And some great companies like Cognos which sold the IBM for five billion dollars. Somewhat, I would call the harvards of learning how to start a business because Cognos one when it was very small. In fact, it was called quasar and it was a little consulting shop. Wow, how far they went to that five billion dollar portion. So started to learn there and started to enjoy running my own companies, and seeing them succeed. Now let’s go cut this timing down a little bit and just say that there’s a few examples of where I began to work with new startup players and get them connected to some investors just by accident. And so I started to build on linkedin way back way a record and an invitation, a connection for all these players that I had syndicated with to get investment, and then I took on a company here in Edmonton which is where my parents went, why I came here, and that company was eight hundred thousand dollars in the hole, and they were going to flush it down the toilet. But I looked at it and I thought the first thing I said, “The people are great.” That’s what you need the people did they understand their market very well. That’s the second thing. Do they have some clients validation? Yes. So they had the three kickoffs that you and I use, right? Do they have good people? Do they understand their market? Their customer? So took them over and you know what, in 18 months they were sold for 75 million dollars to the largest banking software company in the states, TSA Inc. Well then, I retired or so I thought, then I took on another company called Shana Forms. This chairman and they were sold to file net, and I began to really like building Superstars and you know, helping to do that, and then I started to Invest, and I invested in a lot of these companies and did very well and some of them. Ah, I ran into one which is a story that very people know about. I was one of the larger investors in Cold FX, I mean like 5 million, 10 million dollars worth. And, but I had a tumor the size of a Kiwi that derailed me in 2008, and that’s when they ran into their US distribution problem. So I’ve also seen the downside of things, especially when you’re not able to get in there and cut your losses. So I’ve seen both sides and the experience has helped me a lot in working with companies, and today I do– I’ve done like 200 companies and the things I love to do is get them a certificate that they’re ready for investment because most of these companies aren’t. I have about 20, 000 angels that I somehow ran into and my team members as much yet again, and the certificate is well appreciated because if they have that, they’re going to present well. And I think you saw one of our presentations from one of our companies recently, and how would you say, do you think they pitched well?
JP: Oh, 100%. Yeah you guys take out 95% of the heavy lifting, and they do a great job understanding their business. to me pitch is a bit different than… pitching is different than what most people look at pitching. For me pitching isn’t just pitching your business, in the context of them trying to find money, it’s understanding your business– that’s what makes the pitch easy, and when you can understand what you’re selling and what you’re building, it’s a lifetime of difference when you go up and pitch and that’s where I think the lacking point is when people pitch. They just go and put something together and pitch but nothing really comes out of it. They’re like, “This is what I do,” and you’re like, “No, it doesn’t make sense. Well this is what I do.” Well, when you actually get in and dive in a deeper understanding what the fundamentals are of the business, and you get them to understand that, then that translates better into the pitch because then it becomes more seamless and you can change the way someone projects by understanding what they’re actually trying to do. And you guys do a phenomenal job at that.
DP: Now Jeffrey, you’re our ideal angel to work with and your friends. And that’s I’m so glad you said that because that’s so needed I almost call it tough Love. I don’t know what you think about this Jeffrey, is you gotta have a bit of tough love with the venture players and you know, I was at the back conference advanced venture conference I founded, but I was there with a few others, and I was asking a question from a group that got together and there’s about 35 venture players and I said, “Are you perhaps stuck in the vicious circle of raising money?” and I said, “How many hands have all the hands went up?” And it’s through that study in my experience that I realized that their biggest problem is they balanced for a whole bunch of reasons. So I studied 500 of them and I found out why they bounced. Are you Interested?
JP: Hundred percent, fire away! Let’s hear it.
DP: You would know.. you would know this too. Well one of them is exactly the point you said, it’s the pitch that didn’t have an understanding of the market and it came across as that a big chunk of it is their valuation was out to lunch. Now you don’t agree with me on that. Oh you do! I see you run into it. There you go, so..
JP: All the time.
DP: They don’t understand their use of fun so they’re sitting there in that angel saying, “Well, how are you gonna use this money?” “Well, I just thought it sprinkled into my spreadsheet.” How well does that go over? Like a lead balloon. And that’s the sort of thing, so I discovered about 10 things that blow up on the venture side. Use of funds, I mentioned, you know often it’s the team, is the team set up, right? Or do you know what you need to set it up, right? And so that’s when I came, we came up and it’s been improved dramatically, thanks to my phenomenal CEO, Cindy Quinoa, who was the best thing I ever did hiring people. Jeff, his job, I mean JP, is a job one right and she’s added so much value and she’s taking over the company that I chair which is our VC worldwide. So once they get their certificate, then I’m confident that they’re not going to embarrass me in front of you JP. They don’t have that certificate I’d be embarrassed as hell, and there’s one that hasn’t quite got one, and you saw theirs and they’re not quite there, and it’s not going to get into that, but I’m working on getting them their certificate. Now, once you’ve got the certificate then you’re really far ahead because you can assess which angels are going to fit and I can go to, oh I, you know I like to work with partners. I like to work with angels that we built trust with. Often we built success with. I have many angels, I had one stone stone bridge where they made a 1,700% on their investment well they’re going to open the door and talk to me about another one. So it’s investors who have done very Well, and also like if I talk to you now, JP, about a company, you’re gonna say, “Well, I saw one of this and it was yeah- it was worth my time and it was worth my effort,” and holy ghost since you’ve seen it, they’ve already got an offer for a third 30 million dollar warehousing fund and a bunch of other people on. So that’s what you want to do you want you want to build success and that’s where the second part of our efforts come in because we’re not a broker. We’re actually still amendmenter, and we’re trying to introduce the venture captains into investment players who are going to add value. How the hell are you do that? That’s probably the hardest thing is that you’ve got to make that soup for the customer that’s going to taste good and that’s where we’re very lucky to have built our partnerships with the OPN group which in my opinion is just like gold, because you can look at that group, and say, “Okay, is this investment gonna fit? Gonna be of interest to them?” And then they take care of the logistics of bringing the people into it and making sure that you’re peeing your eyes are dotted, and your t’s are crossed, and you’ve got your p and q’s which is good. Because often, even though I- we’ve done all this work to get a certificate, I tell you, I listen very much to JP if he says, “I got a comment on this company because you know..”, and finally and this is the area that I believe most in, is starting to open up the ecosystem of venture investment. I know Jeffrey this is something you’re very keen on because for a long time, you know what it was like the brokers, you know, always hide who they are, what they do, everything was hidden. You know the finders, oh I’m not gonna share anything.
JP: Still like that, but yes. Yep.
DP: You’ve experienced that?
JP: Oh, it’s still like that. Yeah, I don’t know if that’ll change but it’s a very- it’s an interesting field. But I think when anything comes down to money, people are always- they want to be there after they’ve had a success to say, “Hey, look what I did,” versus “Hey, I’ve got this great opportunity. Why don’t we do something great with it?” It’s a reverse side and I don’t know if that will ever change but if the more open we are and the more ways that we partner, and do things to open that market up, the more opportunities are going to come out to everybody and I think that that’s the key to all of it. So it takes time but you just keep pushing forward.
DP: You know it’s interesting, how I start something and you finish it kind of means that we are a partner, and that is exactly it. When we have our partners, Cindy gets overwhelmed with how positive the groups were speaking to now say, “It’s about time for this new way.” It’s the new way. Follow the new way and the new way is open, helpful, you know everybody benefits. We find a way. We do- you and I have found the way together.
JP: Yep. Yeah it’s customer centric, I think you know, we were on the podcast today and it was talked about, and it was you know, ‘how important is the customer and the customer comes down to all the great things that you’re doing to keep them tied in,’ because that customer makes 10 more customers. And if you can keep one happy, they’re all going to fall in line because they’re all looking for the same type of attention, right? There they want to get out of the stuffy shirt syndrome, and I think what I liked about your analogy of the food sticking and all these other things that we tie in, the one that always frustrated me was when I played hockey as a kid, they would always tell you they come in the room and they’d say, “There’s a Scout in the arena?”, and I’d be like, “Who is it?” and they wouldn’t tell you like, “He’s there.” “Okay, great, well I don’t really care to play from something that I can’t see.” So to me in my head I needed to see and I needed touch, and I wanted to know that person is, because if I’m going to go talk to them, I want to make sure I know who I’m talking to but they never let you know. So it was always a mystery. And I found that that’s how angel investing is, how VC investing is. There’s always this mystery and I thought why do we have to have a mystery when it comes to money? When it comes to something that’s this important I think we need to do something where it opens it up, and what I liked about what you guys do, and what you’re all about is that you’re opening up that vehicle, and you’re allowing people to come in collaborate, figure out what they’ve got. You’ve got this great test vehicle that really supports, “Hey you know what we’ve approved these guys,” and “Hey I’ve invested in a lot of companies. I’ve had a lot of success.” We know what we’re talking about and then that mirrors up to the next stage which is, if I get the right partners in, we’re going to build this nice little platform that’s going to just shine and help everybody jump into what we’re doing, and change the way they think about it. So I love it. Yeah you’re doing great things. Huge fan!
DP: You know what’s interesting is my CEO, Cindy, is saying right now, he’s given a better description of what we do than our darn Sherman Dawn, but you know, look I’m going on 70 this this year, and I look at you and I hear what you’re saying I’m saying, “That’s the future. You are the future. Cindy’s the future. You’re the enlightened wave that’s coming up with a better way of doing it that isn’t laid back with greed, deceit but it’s pure. It’s clean-”
JP: Clean. I like it.
DP: Clean you know, and I’m saying that’s what all I want to do now, is support that I started it and when I started it boy, oh the stories. I could tell you I was fired once for having too much integrity.
JP: It’s an interesting way to be fired but yeah. Working too hard and getting fired for it, yeah I can understand.
DP: By the way, this was a company that I had delivered thirteen quarters of a hundred and fifteen percent quota.
DP: They- but they wanted to do some finicking with how they were gonna present revenue and expenses, and I just as the chief there I just said, “No, no,” so they let me go.
JP: And there’s no room for dirty in business. I don’t think at all. So you know what, you stick to your scruples and you do the right things and that’s what I believe everyone should do, and they got to learn from the pros. So you did that. You start off and you make a mark, and you stick to it because then that gets people around you learning from that same mark and then everybody doesn’t think the same, thinks twice before something bad is going to happen they don’t do it. And that’s the best way of starting your career and working through things.
DP: And that only happens because of people like you and Cindy and man many others that I’m talking to now. That are the new leaders and that’s what gives me satisfaction if you’re asking me what turns me on. That’s what turns me off to see this spread and to see it have the benefits, building the unicorns. I believe there was one fellow on the phone with me today, he said, “Don, I’ve got a company. It’s done very well but I don’t feel i’ve got the motivation in the staff and I don’t feel like you know, I feel alone as the CEO.”, and I said, “Well, there’s a way to get that going.” And we talked about it because there’s more to it than just the dollars and cents. It’s about involving your people in the goals that you set and giving them championship roles with some of the products which is what you do. And, but in my opinion now strategically, we do about eight to ten firms every quarter and we believe once they’re certified, they need to go through OPN.
JP: Well, I love it. That’s very awesome of you. We don’t normally drive accolades but thank you, it’s very nice of you to say. Thank you.
DP: But there’s two reasons for it: OPN is a great place to get a feeling for whether you really do have that company that you can take forward in life and it’s very the type of feedback you get from a guy like yourself, is very astute and you guys know how to deliver it you know what I mean? And the second part is, when you’re ready and you present to the group all I’m hearing back from the team that I had is there’s investors are following up. There’s money being talked about even on the one that wasn’t completely certified by us but he’s getting calls too. I guess he’s close enough we got to work on some stuff but – and that’s something I have no ego. You know, I’m just so thrilled to see the expertise, my CEO, I don’t even think that RVC Inc. would have left the calgary area and gone into a worldwide platform without her and she’s added, oh, it’s great when you can have a group that adds so much value. She brought in this fellow by the name I think you’ve met him Sam Duncan, and Sam builds the best pitch deck in the world you know. He worked with that one that you saw, the you know, our First Step, which is a company. First Step is actually changing the whole landscape of people being able to afford homes. That’s the other thing is which companies do I like to focus on? They have to have a social impact. I don’t have to do them all but a company like First Step allowing people at your age to buy your home in Toronto with one-third the down payment and two-thirds the monthly cost, about time to disrupt, right? You deserve to have that as an option. That will be an option. What will that do? Oh it’ll be fantastic! Why hasn’t it occurred? Well I hate to say that. I know the reason. We actually talked to a bank about this thing and they said, “Oh god, no. We don’t want you- no, we don’t want anything to do with this. We don’t even want you out the door.” Disruption, was the IBM mainframes and the PCs, right? So we look at society where we have a lot of restrictions now with COVID, but you see us land on the moon and not just North America but other countries as well it shows you we can do it. We have climate problems, we can build solutions to capture that carbon and get rid of it now. I’ve seen them. I’ve got a few in my repertoire right? And that’s the job you and I have. Oh, what a job of exciting deliveries. If we can bring these puppies out and start making a difference going forward where a lot of the things that we’re upset about that we built can be reversed.
JP: I love it, and Don there’s one thing you talked about earlier on that I really think we want to dive in a bit more because everybody has different ways on how they shape a business, and the you know from a pitch to how they raise funds, or how they run their service, or their product but there’s one part that you touched on that I think is really important that I and I think you’ve learned it through all the businesses that you’ve been part of, the ones that have sold, and the primary piece then all of them was “team”. How important it is- it to you when looking at a company and wanting to help them and help them grow? How important is that team make up the entirety of this business? Is it important? Is it number one, number two, number three, thing on your list? How important does ‘team’ really fit into what you’re doing?
DP: Well, I know this isn’t a surprise to you Jeff at all. ‘Team’ is job one. It is the key you’re looking for an understanding of the market; you’re looking for a chemistry between the team; you’re looking for expertise, and knowledge, experience; and you’re also looking for that sense of ‘je ne sais quoi’ that the person is a lead leader, passionate. Often, I love it when the CEO has some marketing or sales you know, foot spa as they say and can deliver, and I like it when you’ve got to accompany that person, others who have different dimensions of thinking and can add value. You know, that we start our work with a fundable strategy in order to bring out all the necessary information, so that an angel gets what they need right? but when we go through that, we test. The team is the biggest thing we test but time we’re finished with the fundable strategy, we know if we’ve got the team. In fact, often, they may have added a couple of players peripheral to the company at the moment, a consultant, or whatever. And then it becomes very clear when they volunteer for a major strategic initiative that they need to be part of the team. So sometimes the team actually gets built out but it’s job one. And it’s job one for all the angels. If we haven’t got a team that’s got all that plus a morality factor that we like to look like at, then it’s a full stop. I mean it’s not something we’re gonna work through. Have we fully stopped? Yes, probably five percent of the deals we look at. We full stopped on that, oh maybe ten percent. We just won’t go ahead. The other thing we look for in the team that- what do you think I left out?
JP: In what sense? Oh you mean if..
DP: The team.
JP: The whole part of the team side?
DP: Yeah what do you mean-
JP: Or all the other buckets you’re looking into that make up the whole team and driving up this business?
DP: Well, yeah you cut it for me but either way but-
JP: Well, the CEO, whoever’s running that company is on top of that ship, so that’s also important but we can go into other things from finances, product but if you got an A team and a B product. I’ll invest any day.
DP: Okay, you said it. Let’s face it, the other thing that is important to us because we’re at the beginning of heading towards certification and that is, are they mentorable? You look at that before you take on a company. You’re looking at the CEO and saying, “Is this guy going to listen to me? And is he going to..”. Now you know, that our first wave is two certificates, do you know what they are?
JP: No, but you can certainly share them. I probably would butcher up the exact words but fire away please.
DP: The first certificate which you and I are now co-looking at is a certificate of Valuation, and we look at all sorts of inputs to get that done but often when I sit down with a firm, they don’t know what they’re worth. Often they can’t defend what they’re worth. I was in an investment meeting and the person was asked by West Coast Angels, who I’ve worked with a lot. You know this is first time getting to work with Toronto guys and I love them. And one of the West Coast Angels said, “Well, how much you’re worth?” He said, “8 million.” “As a startup? Without any revenue?” How the guy, “Well, we just thought that’s what we’re worth.” Do you think that deal went any further?
JP: Well, it may have but it probably would have beat them up on the valuation to get it to where they felt it probably lived and should have been.
DP: You know what, they were so high in their mind, they didn’t even bother to look so you’ve got to get your act together there. And you know we don’t normally take the valuation that a company would give us and then we do a public comparable to it but then we look at fundamental factors. Just like you do and that’s how we adjust it, and normally they understand it. Like if they don’t have any validation, then it’s not going to be the same as if they did, so they’re thinking, “Oh, I want to value myself like so and so,” but that person is sold, traction, validation. Well, you know what I’m talking about. I don’t want to pour for you on.
JP: No, no, this is good! The audience needs to learn this. This is what it’s all about. When you’re figuring out valuation, you got to dive into all these different elements because proving your valuation if you’re going to go in high, you better have the metrics and the reasons for it.
DP: Right, and you better have all the questions covered off. There are 25 basic questions that affect valuation and I haven’t looked at your 25 points but I bet you they’re identical, and that’s what you’ve got to do. So the other thing is you know, well, and I don’t know what the time left in our interview is but I’ll make sure I answer your questions, is are they on top of their market? When I was with Cognos and we were pivoting into business intelligence and I was senior marketing, at that point we actually signed up procter gamble as a customer to help us develop the business Intelligent product. That’s what I mean about understanding your market. I often get in front of ventures and have they spoken to their potential customer, “No we’re afraid to do that. No no.” Right at the start you’ve got to get in bed with one or two customers and this concept of market awareness, and knowledge, and validation, procter gamble became the first key success story. Then from there it went to the brick and so on. And that company in business intelligence went from next to nothing to taking over the french company object world in three, four years just because they did it right. So that’s market knowledge is if those two are not ticked off, then we’re then- we’re not going to look at them and you know it’s just not worth it.
JP: So how much of this finding their valuation, understanding where the business side comes from and you mentioned it, the mentoring side. Are they coachable in mentoring? How much do you think that this from a startup point, a pre-seed to seed round company, how much do you put weight on the mentoring side? Do you tell them, “Go out and find one or two people,”? Have them talk them on a regular basis kind of? How do you structure that mentoring side? Because it does sound that you taking all the experience you’ve had over 30, 40 years in business and investing, it’s pretty valuable. And you know, someone who’s never done any of this never even run a company before is now in the thick of it running a business, running their finances, hiring people, trying to build a company, and working with someone like yourself is going to be of huge value but your time is limited too. So is there any recommendations you would give to a startup and say, “Hey, you know what right off the bat, go find someone in your space. What do you recommend?”
DP: Well, I recommend two things that the mentor you seek is someone who’s hit a home run in your space. And I hate to say this but there’s a lot of academics and consultants I’ve come in behind trying to rescue a company from. One, that just said, “Well, I want to build a Jack Welch’s company and how he organized. And he had all these boxes they were to fill in and they filled the boxes and they spent all their money, but none of the boxes could help them. So I said, “That’s ridiculous. Come on now, we need to do this properly. So you need a mentor who’s done it.” What I’m talking about a mentor, he’s done it, who started from scratch or very small who’s actually built a startup to a large success. So that is the first thing you’ve got to ask on your question. Prior to that though you ask the question do they need a mentor? Without a mentor you will say fail 95% of the time. So you know getting a mentor is Pennywise and pound wise. It’s a darn good step to take. Choosing a mentor is equally importantly right? This and the third point about a mentor is, does the mentor know how to mentor? Now, the reason I mention that is I’m doing a lot of mentoring of mentors. For example I’m working with a few guys like yourself you know. I don’t know if you know Mike Volker out in the West Coast who runs Van Tech, who’s guy you gotta know. He’s just- he’s as old as me. We were called as speakers to go out to Chile and tell them what the angel investment network’s about and what the crowdfunding which is another thing I give talks all over the world on. And crowdfunding, equity it’s coming whoo it’s gonna be fun. And he and I had two talks to give that were separate. Sorry, we had one panel and I had one talk. Well after we did the panel I invited him to join me in my talk, and then they had arranged three other sessions for the two of us. They just- they got up and clapped standing ovations. So is your mentor someone who knows how to mentor and that’s a fundamental thing like you’d love to speak to mike voelker because he could be a mentor of yours and I can introduce you too. Mike has his own investment combination a bit like open him but he’s also got the van tech group which is you know similar to OPN. I think they’re still a little bit looking for their you know, for some of the things that you found. so there could be some good exchange there. So yes-
JP: Mike Bulker out of Vancouver?
DP: Yes, Mike.
JP: Yep, I actually reached out to him. We haven’t connected yet but I have reached out to him to see if I could connect with him. So I would love an intro because he did seem like a very interesting person. So..
DP: Mike is- he’s you know, he’s been a broader investor than I have. I tended to put a lot of money in smaller things. He’s been a broader one and he seeks as a player he asked me for mentorship in valuation, so you know all often values some of the companies, and you know sometimes it’s a different value than what the company’s trying to push. He finds it very useful as would you. You get an independent valuation separate from the angel, separate from the company that says, “No, you’re not worth 20 million but you’re worth 16.”
JP: Yep, that’s how it makes a big difference in a deal especially, if you’re the one running and leading the deal.
DP: Yep exactly, and it’s and you know, he’s sitting there trying to do what you’re doing. And he’s saying, “These guys are too high and I can’t find a way to get him down a bit.” You know, you were- you asked me the best question anyone ever asked me a while ago of does the valuation is accepted– “Is your valuation process accepted by the venture player?”, and I said, “Yeah, it took us a long time to find one that could work and it’s an interesting angle on you know using some of the burkas stuff that’s out there but kind of reverse engineering it in. it’s fun. And then I just get a big kick out of the result. I’m still essentially motivated by seeing venture captains get into orbit and tell me, “Oh, it’s fun up here. Enjoying myself!”, or as Greg Burkhart received, “Oh, just finding living in this foreign country that he’s in just beautiful in the ocean.” I don’t mind that, if you can create that those dreams for the venture players and if you do it for the investors like that’s equally fun you know. You see your investors are in a good space too. I remember I got a- there was a group investment. Group out of California and they did a lot of investments. They were big. They were what we call a ‘whale’ and he phoned me up after they invested in the exit from messaging direct at like he invested at 20 cents and it was sold at 3.72. So he made a fair amount of money on it and he phoned me up. He said, “Don, of the 200 deals we had there’s only two that did well and yours was one of them.” I like to hear that.
JP: Yeah speaks volumes [ inaudible 37:48 ] right?
DP: He had you know- I had people I had a major guy in and son that invested. So I had some really amazing fellows that had invested in seeing that return and they were friggin ecstatic. And that’s what you like to do too. And it’s the job you and I have is extraordinarily challenging because you were trying to work both sides of the equation at the same time. So there are times I wake up in the middle of night and jot some ideas down and I’m sure you do the same thing.
JP: Yep, very true. So just to kind of to wrap up the question side of things, before we jump into the rapid fire, one last thing about not so much again on the valuation side. I think that really carries a lot of volume and a lot of weight but when you’re working with these companies and you’ve got them the mentorship, and you’re working with these teams, and of course as we said team is a big important factor which is– are they coachable, are they able to drive it through? What is the- what’s the end result that you’re really trying to drive that early stage company to? Is- they’re just trying to get them to an understanding of ‘this is what I’m building and this is what I’m selling’? is it we’re gonna line them up to get them ready to sell? You’re gonna work with them on the investment side but is it really trying to shift their mindset and is it shifting their mindset from being a product company into a selling company? What is that shift that you’re trying to get them to understand that makes them venture capital bound?
DP: Yeah, it’s actually the hidden sauce in our process. We’re trying to balance everything in the company and we do it through a process that is simple but incredibly far-reaching in how it works with people, and motivation, and processes. And that’s our seek secret sauce which you just said because that’s why our companies have a 95% exit success factor. it’s that secret sauce. Yeah. So you know, when we certify them what that means is they’ve got that all done to a large extent and they’ve been able to: one, get all their team on the same page which is often missing. How many times you’ve gone to a pitch where not all the players making the pitch are really on the same page? A couple of times, right?
JP: Yep, it’s actually quite frequent because they don’t understand the principle or the behind the business, what it’s doing but that’s also treated the wrong way instead of open communication. It’s privileged information, so how do you change that dynamic?
DP: Exactly and you know, so appreciate your observations because they’re right on and when you were speaking the first step with Jason, you noticed that although they had different perceptions of where the company and his knowledge, they were dead on the same mission, the vision, and the goals, and where they were going howard. That’s what you- so that’s a key. How do you get that? And then how do you transmit that to a possible investor so they see it clear and say, “I love it! I want to get behind it.” So that’s a certificate and they get their certificate of valuation too, so they come out at the end of what we do with two certificates, and then they go into the art part of ours, our process– which is about practicing. Every week they have a couple of practices that we put them through on pitching to various experts that we have. We have partners like you that we rely on to take a look at their pitch and often give us very vital information which you did on one company. I remember that and we listened to it. They weren’t ready so we brought them into crowdfunding, and what I would call a friends and family round, and they raised 600 grand there, so they had all the money that they needed. And that was your advice!
DP: I think you might remember which company that was.
JP: I think so. I was- that was a year ago, right? Like a further back, right?
DP: Yeah are they selling cards? Does that remind you?
JP: Yup. Oh yeah.
DP: Yeah and I knew you were stooped in then, so I already knew about you. So once you’ve done that certificate then it’s the stuff you and I are made of which is you know, here it is. This is what they’re trying to do, would it fit here in front of this group or this group? Oh, I know George would like this one and so that’s the some people think it’s all a numbers game. Well there used to be right now the broker firms are dead in the water that two, three percent success rate, and they did a study on it. Turns out that COVID has just killed, what I would call the broad investor inquiry model. Killed it. Now that’s interesting because you know, that means that going out with lists and emails, lists and stuff is dead.
JP: Too much volume right? People can’t handle the volume, so a warm welcome makes it go a long way but partnerships and being able to drive the best content, or the best startup, or the best value is what’s going to tweak someone’s interest a lot sooner. Especially, if you’re the lead, right?
DP: And you know what, what you just announced there is a disruptive change in the ecosystem. Get with it.
JP: I love it Don. I love it.
JP: Yup, I’m gonna record that last little section and just blast it everywhere but I am a big fan. I love that! All right we’re gonna jump into rapid fire questions. I think we learned a lot. I think I remember-
DP: I’m 70 years years old. I’m not as rapid as I used to be.
JP: Well, I think you’ll be able- I’ll make them as quick and spicy as I can and you can just throw out some numbers and info. We’ll make it quick. All right, what’s your favorite part of investing?
DP: Getting to meet the client and see his dreams.
JP: Awesome how many companies do you invest in per year?
DP: Probably 10 or 11.
JP: Okay, any specific verticals you focus on?
DP: Yes, we focus on what I call the ‘star tech’ and the star tech are like edtech, fintech, green tech. And it’s the application of AI and other technologies to a particular sector. And our community of angels invest in alongside our or with or by themselves in hundreds of companies. So you can’t forget we have our community that we’re trying to lead. Part of our community is your community in an open system. Okay.
JP: I like it. What are the timelines for investment? If they come to you from day one, today, whatever. What’s that last day where you guys just make the decisions on?
DP: Well, this is where Cindy has a you know, a shotgun into my head with what I say here. Normally, it takes us approximately two months to get the certificates done. The one- the reason I say normally is that we’ve had a client we worked with when it was only six weeks but we’ve had another client where it took three months. The biggest issue is a lot of the questions are coming on the venture itself and then we go to the market. Well pre-COVID, three or four months post-COVID, six to 12 months.
DP: We used to have a situation where the angels could get together, and discuss, and look at slides but they don’t do that anymore. And they work on the virtual side. So COVID is- there’s no question about it, delaying things.
DP: So let’s pray for vaccines that work and back to the three to four months, please.
JP: Done. Anything that you look for when making a choice in a company? Any due diligence work from paperwork, legal financials, anything, that you really need to see in order to make a decision that you think needs to be there all the time?
DP: Yeah, the person has to be honest.
JP: That’s it.
DP: -Nails pops out.
JP: Yeah you can’t- you don’t have to debate that one. I’m all for it. Yep. Exactly. All right, do you lead rounds?
DP: Oh yes. Yeah.
DP: We’re leading the investment on a few companies. We’re not a fund, so we’re not really.. we’re a community of investors but as the mentors will take them forth and get the players in to invest like on First Step which it’s a beautiful disruptive firm, and will bring houses to people that deserve it, is a company that we’re leaving the investment around it. And the good news is we- I think we’ve got a lot of intent for their warehousing facility which is the 30 million, and we’ve got a few people on board for the equity. So we’re actually sending notes out saying, “We you got the end of February. If you want to get in on this because this is a unicorn return rate that I’ve got planned here. So don’t get many of those.”
JP: I love it, any preferred terms? Like do you care if it’s convertible notes, prep shares, safes?
DP: Well, you know, it’s a good way to answer that question is, we look at all the source of investments that could come into a company. So some companies, it’s different and as far as the way the investment’s done, convertible notes and safe. You know, all of these things are equally valid depending on what the investor feels good with because our valuation methodology is so well accepted by 80 percent of the angels in the states, and gradually being learned in our Canadian counterparts now. We can do a price round but now, price rounds, if they’re legitimate is where angels are more comfortable with now because I’ve been burnt with safe and convertible notes very badly, and because the very nature of doing them leads the company to some behavior problems that you don’t want. So just a sec there.. and so the only thing I can say is that I prefer to do a price round because that means everyone’s on the same page as far as getting the benefits going forward. If you start to do something on the side then you start to get another group that’s looking at shorter term. This or this or that, and it starts to conflict with the company, and then they don’t work out as well. Like if you look at the success rate. The success rate for my model is about 95%, where the safe model is less than 11% so you know people run into problems with the safe and how it’s organized, right? So..
JP: No, that makes sense and I will heartily agree with that. Do you take board seats?
DP: Yeah, I’m often asked to take on the Chairman of the board because when they bring on investors they want to set up a governance and a fiduciary management structure that’s right or not, and I’ve sat on so many boards. I’m able to come in and get that done plus as a board chair, I can help the board be effective like the board has to deal with strategic components of the company. So I end up helping the CEO task the board to do work for the CEO. and CEO is a big job. It’s 200% of their time: 100% on trying to keep the company going the right way, the other 100% is making sure there’s enough money in the bank and in the future and you know that.
DP: And having a Chairman who can work with you on that, you talk to Cindy. She really likes it.
JP: No, it makes a difference. It does help drive the business for sure. I love it. Okay, the last question before we get into some quick personal questions. We’re almost done, just one story that we’re looking for is, I like to hear that a story where you know you’ve got a startup that maybe was going through some pivot issues, had some problems, and she was able to turn the business around, and now it’s a hockey stick and they’re growing like crazy. Do you have any kind of war stories of the one that comes to mind that you really couldn’t believe they were able to turn it around and they just did a phenomenal job making it happen, and you’ve been highly impressed by the team and the founders?
DP: You mean when I was external or when I was in the company itself?
JP: Well, either one anytime just anything that’s happened that really came to mind that really will help startups realize what it takes to be an entrepreneur and the grit that goes into the whole thing.
JP: And sometimes it can be a fail. It doesn’t have to be a glorified story. It could be one that they just didn’t work out but they learned a lot, and they went on, and created a second company that’s been even better. Who knows. just some sort of story that gives you a real pleasure to be that you’re a part of.
DP: Well, here’s one story and I’m sure I’ve got three or four more. About 15- about 20 years ago, I was asked to come over and look at a company called Isis and I looked at the company and it had a back back-end technology basis and secure messaging and the company was competing against Microsoft on an email client. So I took a look at the company and I saw what was happening, and they had a vice president sales marketing. He was who was very wedded to this email client thing. And they were eight hundred thousand dollars in the hole and their ownership group was thinking of pulling the plug. I came back with a report saying that they needed to pivot out of the email game into something that was growing in the marketplace called bill presentment, electronic presentment and the banks were all looking into it. And it turned out to be a much better match to their back-end engines and security that their staff had it, if they made one merger with a company in London, England that handled some of the, what I would call the directory issues. So that you know, you would know who and how and be able to called LDAP. I won’t get into it though. The board bought into it and they brought me on board as the CEO and I sat down with a group and I said, “Well we’re gonna just scale out of this business and scale into this business and we’re gonna bring on a new sales force.” Well the guy who was vice president sales marketing, he did not like me. I was the devil. I don’t like being the devil but I mean anyways he ended up kind of working against me and we had to let him go which was tough to do. Does that happen? Sometimes it does. Sometimes you’ve got to let somebody that’s not on the same page with you go. Does it hurt to do it? Yeah but it’s got to happen after the pivot we started to get the opposite impact in the market. People were buying and we went from literally zero up to about eight or nine million in 12 Months. And we caught the eye of a distributor called TSA and they looked at what we had and said, “Oh, it’s too good for our competitors,” and they said, “We want to buy.” So this is a company $800, 000 in the hole 18 months ago is now being purchased for 75 million Canadian. And that’s how it all ended everyone got great returns. Oh, there was a little funny note. When I was taking the company up you know I said to all the people in the company, they could buy shares at 20 cents a share. So I had all these people jumped on board and bought the company at 20 cents and share including that vice president sales marketing. Which was funny but he had heard that I’ve been successful and he said, “Oh why and not?” So he put 50 grand in at that point. Well when it went up to 3.72, he retired. So he was in the end. He was quite happy but none of the technical people in Edmonton put money into it because they all said, “Oh you know, I’d rather just make money and I don’t think these shares ever.” And no, look Canadian companies they don’t have share appreciations like the US firms do. They don’t have this big appreciation. It’s just not happening. Well it did happen and when it did happen and everything was announced. Everyone of those technical peoples in my office say, “How come I don’t have a share of this? How come? I- oh god, I could have been a millionaire,” and I went, “There you go and wasn’t I saying that.” I said, “Oh well, we just thought you were blowing out your nose and-”
JP: Risk too much risk. They couldn’t balance the risk.
DP: So –
JP: It happens. It happens.
DP: It does. And it’s one of the biggest lessons that we face in Canada is, we don’t have the same entrepreneurial you know, yes I’ll take a risk factor with with our employees or any of our stakeholders. When was the last time you ever talked to a supplier that was willing to take a risk? So how do you build a successful company in a country that’s slightly or very risk verse? And that makes it more difficult for us. You know, I, yes it’s true I’ve had to move many companies reluctantly out of the alberta environment because it’s even more difficult here, and they flowered, flourished in california and places in the states. So what can we do to reverse that? Well, we just got to talk about like talk more about your success Stories, JP. About- talk about get the guys on, “Oh, I made a ton of money here. Gosh what are you doing sitting there at a point one percent return? Come on, join us here! Go to the moon! Land on mars.”
JP: You’re right. It’s the US brings a lot of capitalistic mentality and when it comes down to money, if you’re not following it then it becomes a lot harder for business to grow and for yourself to grow and that becomes risk. And you’ve got to evaluate risk and reward. And we know the risk side because we work in early stage pre-seed, seed ground companies and that’s there’s a lot of risk there.
JP: But at the end of the day, it’s: you balance out the risk and reward so it’s always worth it in the end especially when you’re doing it as a way to give back and help a community grow versus just looking at it from a money and financial aspect of it. So amazing. But just before we jump into the we- finish up, I want to ask three personal questions and then we’re good. So question number one what is your favorite sports team?
DP: You know, I’d have to say the Montreal Canadiens but I’m so close to saying the Edmonton Oilers, too. I mean those two, I love. I was born up on hockey in the forum there where I often got the cheap seat right behind the big pole. Concrete pole. But you know if I was there and I could poke my head around and see Jean Balavelle marching down the middle of the ice like a friggin bull and then put that puck in the, oh, and Yvonne Cognay, the Rocket Richard. I mean it just goes on and on there’s, oh the Jacques Claw, I mean there’s where your spirit grows when you see the beauty there and of course, the others had some pretty good people too.
JP: Yeah they’ve had a few talented skilled players.
DP: Oh I’d say-
JP: I had a little bit of a Don Cherry talk there with you there. I think you’ve been watching Don Cherry speak for a while. He was- he’s an icon in the space and it sounds like he’s a Canadian boy. He likes the Canadian team. So it’s good.
JP: Second question, two parts: favorite movie and what character would you play in the movie?
DP: Gosh, you’re asking me something that is very hard but I- the- my favorite movies are the ones where Celine Dion plays the music. She’s the singer and I think you know what movies those are but you know the Titanic is something that just was ripping on the emotion side. You know, I- science fiction stuff and all that stuff but the Titanic was a absolutely ripping movie from the emotion and details of class, and coming to grips with that. It was amazing.
JP: And what character would you play on on that movie or in that movie?
DP: Well, since I can’t play the woman, I probably played our the fellow who went through it..
DP: Dicaprio. Although I’m a much heavier DiCaprio but that’s probably what I do. Isn’t that funny?
JP: No, that’s awesome. No, I asked the question because you learn a lot about someone’s character by understanding the type of movie that they feel represents them and the diversity they go through but how the character actually wins or loses, and how you feel you place in with that character. So he was a hustler, he was a driver, and survivor. So, it speaks a lot to the personality of someone and I just my way of finding out someone learning more about someone is taking the data side of it and trying to match it up. So..
DP: It’s good. That’s a nice combination of both sides of the world: the emotional side and the fact-based side. It’s nice.
JP: Yep, that’s brilliant.
DP: That’s going to carry you far, Jeff.
JP: Well, I hope so. We’ll see. Well Don, we’re at the end of the show. It’s been phenomenal. I think we’ve learned a lot. I really got to understand a lot more about your program, and how you guys work and operate. And I got to learn a lot more about yourself and I appreciate all your time, and all the things you’ve done in your career in helping early stage companies, and the successes that you brought them. And it’s amazing what you’re doing and I’m glad that we were able to finally get on to a- on the episode today, and the way we like to end our show is, we like to give you the last word. So I leave that up to you for anything you want to share with the startups, the investors. Any advice. I leave it to you but thank you again Don for coming on today. It’s been a pleasure.
DP: What my last word- my last word is kind of like a prayer and you know, I’m not asking you to be religious or anything. But it’s I’ve called to action to all those Leaders in our ecosystem today on both the venture and investment side to realize that we’ve run through a real tough period in the last year and a half. But that period does not diminish our ability to achieve great things and it is to that that we can improve and mobilize a better way to launch new companies to deal with the issues of climate change. For example, we don’t necessarily have to shut things down, we can build engines that will reverse the problem. So you know like we create a lot of problems in the ocean with plastic. Well, there’s a couple of companies I’m looking at now that are going to go scoop that stuff up and I love it. We have ways to put filters on all the rivers so it doesn’t get full up again and I love that. So I love the proactive ways we can make a difference to put our Earth back to where you can go to a river and swim in it, and know that the ocean’s not killing our fish.
JP: Well done. Well said. Thank you very much for that and I hope the when we get this out and blast it out that some of these leaders will be able to hear some of those messages. But at the end of the day the world is changing and hopefully we can steer it in a way that it changes for the the better, and it’s not about capital, it’s not about money. It’s about bringing people mental health and safety and being able to cohabitate all together and grow and live in a great world as one. So thank you.
DP: And remember when I made that call to action, I was looking at you.
JP: Well, we’ll keep hustling as we do Don. We will keep pushing and building as we can.
DP: I’m going to help you JP, I am.
JP: I love it. Thank you again, Don for your time today.
Awesome, amazing conversation with a pioneer in investing, building companies, building a new company that focuses on changing the way things work, phenomenal! Love it! You know being able to sell a company take something from bankruptcy, raise funds, and then build a program around just how you can valuate your company and get people interested in it. All great things. It was a pleasure getting to speak with Don and learn more about how he thinks in the way that they’re looking at things and how they’re working with us pretty closely. So I’m a big fan. Thank you don and everybody have a fantastic day, and I think there was one thing that I wanted to bring up and that was: Find a mentor, work with the mentors, learn from the mentors, they’re going to help you succeed.