Keynote Speaker/Startup Advisor
Jeff

"I don't invest in individuals, I invest in businesses."

- Jeff Wallace

Jeff outlines what he looks for in a start-up

Talk Takeaways

Jeff Wallace sat down with Jeffery Potvin to share his journey from his Wall Street career into becoming a passionate early stage investor. Discover the interesting concept behind the greyhound bus syndrome and the difference between an MVP (Minimum Viable Product) and MVT (Minimum Viable Traction). Understand the various risks an early stage entrepreneur needs to mitigate and learn how to draw in more strategic investors that would not only bring in the capital but the other support needed to back your business.

About

Jeff is a long-time Bay Area resident who works with global startup ecosystems, including governments, corporations & startup accelerators/entrepreneurs, to help catalyze startup environments & create a bridge to Silicon Valley. He is an Adjunct Instructor at UC Berkeley and is co-founder of Silicon Valley in Your Pocket, a global virtual startup accelerator, serving 100s of companies across 23+ countries. He is co-founder & former President of Batchery, an incubator for seed stage startups. He is an active angel investor with equity positions in 150+ companies and an active advisor & investor at Berkeley SkyDeck. He is an Executive Board Member for the Rutgers Business School Road to Silicon Valley Program (RSVP). Previously, he worked at Cognizant & Brillio as founder & Global Head for Mobility & UX practices. He is a frequent keynote speaker at global tech & startup events. He holds a BA in Economics/Finance from Rutgers College & an MBA from UC Berkeley.

The full #OPNAskAnAngel talk

Jeffery:
Well it kind of sets us up for a great conversation. I feel like we’ve already started so we’re just going to keep it rolling but thank you very much Jeff for having and joining us today. I’m always excited to meet another investor and learn a lot from you and today I think we’re going to get that for sure. So why don’t we start off   by maybe giving us a little bit more about yourself, your background, where you’ve come from, where you’re at and then we’ll jump further into the chats that we’re already having.

Jeff:
That sounds great. So first off thank you for having me on, I always enjoy meeting new people like yourself, exactly the same sentiment. My background, so I’m originally from the East Coast of the States and I grew up in New Jersey, I worked in Manhattan on Wall Street after my undergraduate college degree which was in finance. So I was more of a numbers quantitative guy, economics and finance. And then I decided after a few years doing that that I wanted to come out and get an MBA, and I thought let me I grew up on the East Coast, and went to school in the east coast, let me try the west coast. So I thought i’d do a two-year stint out here, I did my MBA at Berkeley and 100% expectations of returning upon graduation to the east coast, and to my family, and my career and that was 30 years ago this year. So I did not go back. (Inaudible) I kind of yeah (inaudible) exactly quickest 30 years. I kind of fell in love with the well first and foremost, the weather is wonderful here in California. I’m a spring and fall kind of guy on the East Coast and that’s kind of 12 months of the year out here but even more importantly the business environment around entrepreneurialism and the energy of the startup ecosystem was very attractive to me, the innovation ecosystem I should say back then. I started my career in management consulting after graduate school, working mostly with large corporate fortune 250, fortune 500, type com clients. And then about I don’t know just shy of five years into that career I heard someone say,  “those who can – do, those who cannot consult.” And I was a consultant. And so I thought well maybe I should not be doing this, maybe I should go put my entrepreneurial aspirations to test and I had studied entrepreneurial, entrepreneurship strategy and technology in my MBA program so in 95 I launched into a serial entrepreneurial journey which carried me through 2011 when my last entrepreneurial venture was building enterprise mobility solutions for large corporations and my business, colleague business partner and I just had different views of the world. He had come out of the large enterprise space as a very prominent executive and we just had different perspectives I should say and so I was fascinated by the mobile enterprise space or the enterprise mobile space but I knew I wanted to do something different than what I was doing in my startup and I got recruited back out of being a startup guy into the corporate world and I worked for a large company called Cognizant, ironically the largest company that i’d ever, to this day have worked for. They have close to a quarter of a million employees. And I was hired in to start and manage the global enterprise mobility practice so it felt very entrepreneurial and it was nice to have resources. But after just shy of two years after almost two years I decided I like to say they reminded me why I like working with startups and less bureaucratic organizations and I jump back out of that environment and I am now the co-founder of a couple of startup accelerators and my objective was to start something and build something that was there for entrepreneurs in a way that I wished existed when I was in my entrepreneurial journey and so that’s what i’ve been doing. I run one of the entrepreneurial or one of the startup accelerators, excuse me that i’m the co-founder of the one here on my background Silicon Valley in your pocket, it’s a virtual startup accelerator for global founders and then the other one is locally based here I was a co-founder with many business partners locally based here in the Berkeley Area and we’ve had, we’re on our 11th cohort in the local one and silicon valley in your pocket runs a rolling cohort. So we don’t actually have traditional start and stop times for cohorts, it’s a rolling cohort. We’ve had over 100 companies come through that one from over 23 countries and we have a partnership with UC Berkeley they actually have a Spanish-language version of Silicon Valley in your pocket and they launch that across latin America right at the beginning of the COVID crisis. So they we’ve had one full cohort go through and we’ll see where it goes from here
once we reach the postcode world.

Jeffery:
Wow that’s amazing and it sounds like a very well designed career and it’s
brought you back to entrepreneurship each time so that’s a great, a great story.

Jeff:
I do keep finding my center. I keep finding my center in entrepreneurialism so..

Jeffery:
Oh that’s good. I think it’s the hustle. It’s figuring out how you fit into the hustle and just keep it real and moving it forward so that’s amazing.

Jeff:
Yeah

Jeffery:
So you touched on a couple of things and the one that kind of really stood out for me the most outside of obviously all these great accomplishments you have and I’d love to dive into a bit more about how you structured and you went through being a co-founder. Because I think that there’s a big shift in the when investors go in there’s a group of investors that only like to invest in co-founded companies, and then there’s others that just say you know what I like a great idea in a business and we’ve kind of mixed in both in our investments. But it’s fascinating how much I’m really starting to see there’s a bigger win, we’ll edit this out —  but there’s a bigger win with the co-founders side. That there’s really a lot more gun power being brought to the war and I’m curious as to what made you think of doing it this way and what your feelings and outcomes were during that process.

Jeff:
Yeah, you know for me it’s even something I speak to in the curriculum if you will of silicon valley in your pocket around forming your entity. I often have one slide I think the title is something like going solo is a no-no, something like that. Meaning being a solopreneur is not going to fly very smoothly with investors. You can have the greatest idea but if you’re a solopreneur or a single, no co-founders — investors have a very difficult time and I myself agree with this attitude of investors. I have a very difficult time investing in an individual because I’m investing in a business and in a concept and if I don’t see a natural succession plan there’s an issue and I call it the greyhound bus syndrome. Forgive my analogy, some people laugh when I use this analogy but it is part of my curriculum, I even put it in my curriculum, but I call it the greyhound bus syndrome. You know if I’m meeting with a solopreneur we’re having coffee at a coffee shop and they pitch me on their idea, and I like it, and I invest and then we leave the coffee shop and they step off the curb and the greyhound bus runs them over and kills them my investment’s gone because I didn’t have a business, they didn’t have a business they had an idea that they as an individual were running with. And there isn’t a succession plan or nobody to as I would say carry the torch of the business forward. And so I think having co-founders for a variety of reasons that being an important one succession plan and someone to carry the torch but also I just believe nobody knows everything and you need a diversity of experiences, knowledge, etc in a team in order to make a business go forward and I promote that not just in founding teams or co-founding teams but even in advisory boards. I promote aggressively, I promote diversity in those elements of a business board, board members, specifically I do advisory boards. I don’t recommend most startups have a board, an external board, until their investors start coming in. But I absolutely promote diversity of the team and that means it can’t be a single individual.

Jeffery:
And then and how do you guys find it that working relationship is there a way to define it build some KPIs off of it to keep you both fueled and driven forward. I  think when you’re a solopreneur, you kind of build a team around you and then you start to delegate off but it’s going to be different when you’re bringing two people in, they come in at the same level so or potentially coming in at the same level how do you find that that works? You just — a lot of businesses do the CTO, and then the CEO, is that kind of the same style that you go towards or you look at more of you know what I can find someone in the tech space, I want someone in sales and marketing so that’s where they’re gonna fit, i’m gonna fit here, what’s the balance?

Jeff:
I’m glad you went back and said potentially equal. And I emphasize that because I always say a co-founder does —  here’s what it doesn’t mean we’ll come to what it does mean in a moment. What it doesn’t mean is someone who started the business at the exact same time as you, it doesn’t mean they are equal in terms of responsibility or in terms of equity ownership that does not define a co-founder. I mean those things could be, but they are not mandated so to say they’re not necessary that having the word or the title co-founder doesn’t mean you’re an equal. And so I often will say if you’re a business side person, you know bring a technical and I say that because the assumption is we’re talking about technical technology-enabled businesses and so have a tech person because at some point your intellectual property will probably revolve around some element of tech so I would say if you’re a business person have a tech co-founder, if you’re a tech co-founder get a business person. Try to balance that out and then to me the business side would handle the sales, the marketing, the go to market strategy, the tech side of course would handle the development of the solution whatever the widget is, a lot of client implementation, integrations if there are things like that. So to me that’s generally the high level on how I would approach it. But I really think I had one founder come to me, I really liked him, I liked his idea he was a solopreneur I said to him exactly that I liked him, I liked his idea I said but I’m not going to invest and he said why I said because you need a co-founder, if you don’t have a co-founder who’s a balance to you. I don’t have a business I’m investing in. I don’t invest in individuals, I invest in businesses. And so he came back to me, he had brought a co-founder who he had identified and brought in, it was a colleague of his.
And the two of them came up from Latin America, they were in Central America, we met and I subsequently invested in their business because I believed he understood the message, he took the coaching. Unfortunately that venture didn’t succeed for other reasons but he understood where I was going with that comment and balanced himself out with people who could help, i’ll just say manage or administer other aspects of the business while he tended to the areas he was stronger.

Jeffery:
No I think that’s fantastic and i’ve had a few instances where kind of coaching through and someone will always say I’m looking for a co-founder CTO, and I’m like yeah you know I’m not sure you really need a co-founder CTO. I think what you’re looking for is a really good developer that can actually speak two people. What you’re looking for is somebody that can drive another area of your business but find someone that can actually drive sales, drive growth, because you can have a great CTO, but they’re not in there selling and they’re going to get their heads in the weeds, and then you’re just having another person that is building a great product and you’re not out there making money and that’s the tough balance.

Jeff:
I agree, I agree. The one thing I will say is a big push that I try, to the extent that it’s always possible, its different, but as much as it’s possible I try to encourage strong channel partnerships from a sales and marketing perspective. I often say someone’s already dealing with the clients you’re trying to reach, figure out how to structure a relationship with that group, put another arrow in their quiver, that they can they’re probably already an approved vendor. if it’s a larger organization and like a procurement department manages those things so don’t try to break down every new path or beat down every new path that to get to these clients, if someone you know is already working with that same client base try to forge a partnership, a channel partnership where they can market your business. Obviously that’ll cost some points of the margin that’s okay in my view because you don’t have the overhead of a large sales team and you don’t have the time it often will take to forge those direct relationships to the end buyer, the end clients.

Jeffery:
i love it. Which is really find that funnel, find something that’s going to really make you stand out. Work that funnel make it the best focus, focus, focus and help it drive home some wins.

Jeff:
Absolutely.

Jeffery:
one of the one of the things that I really liked about our previous discussion and we talked a bit about this and you talk about it in your keynote that I watched which I thought was fantastic and there was only one comment I had is that I think when somebody while you were just getting started someone interjected and asked you a question, I’m like what are you doing it’s a keynote how can you do this and I’m like oh yeah it’s digital you can do anything you want…

Jeff:
It was set up that way for them to ask at that time so okay in fairness to them and if I recall correctly that individual asked a question that I asked their patients because I thought their question was coming up in the slide or three something like that. Yeah so I recall that but it was in fairness to that individual it was set up where they could ask at any time, I always have the sense that if i’m presenting something and someone has a question they’re probably not the only someone so let’s clear it up because there’s probably a lot of people who simply aren’t asking even though they probably have the same question.

Jeffery:
No it was brilliant and it worked out quite well because you did hit it home and it kind of falls in line with the co-founder scenario is that you’ve built out this attractiveness quotient. And how you really pitch or your AQ how you pitch to investors and I kind of the reason why I really like this part about the co-founder piece is because it fits so well into your attractiveness quotient. So maybe we can dive into that a little bit more and you can give us an example of where this has come from and then where you see these elements really benefiting a startup.

Jeff:
Yeah I mean specifically to your question on the co-founder I talk about the as part of the attractiveness quotient what makes a business higher or more attractive to investors. One of the things I emphasize in that that keynote is having the right team, and I put right in air quotes and then I define what is the right team. And it is this diversity of skill sets experiences etc but having the right team it’s one of1the top three reasons companies fail. When you look at crunch bases great research on the 20 reasons startups fail not having the right team is right up there in the top three. And no having no market is the first one that’s the most incredible one where there’s just not really a market it’s a great idea with it’s a solution looking for a problem that’s kind of the gist of the first reason. And then running out of money, money is always an issue but those can be mitigated if you have the right team. I actually believe the reasons number one and two can get completely mitigated if you have the right team so even though it’s not considered the number one reason, I think it is one of the most important ones because if you don’t have the right team, if you have the right team they’ll figure out the market doesn’t exist or that we need to manage our money differently and so I feel like those first two reasons will go away or certainly be mitigated. So to me having that right team is just if you don’t have the right team at the outset it’s going to be difficult I think to to make the kind of forward progress that you need to as a business. It’s hard doing startups I did a lot of them, i’ve had some spectacular failures in my day either I didn’t have the right team, we made some mistakes, timing was against us, I mean there’s all sorts of reasons some of which were unfortunately completely within our control others were not. And that’s life right, sometimes things will happen that are not in your control and you just have to manage them and so to me the right team is really almost the most important one. I think it’ll manage the rest of it better than it could be managed otherwise if you don’t have it.

Jeffery:
And I wholeheartedly support that because they think that while you’re building out that MVP or you’re going to market there’s a lot of things that obstacles that get in your way and sometimes you get the blinders on the passion is too strong and you’re not actually seeing that these obstacles are in the way and you’re burning time, you’re burning money, and you’re not pivoting or you’re not changing your outlook. And I think having a great team even if it’s one two three people behind you they’re going to see these things as well and somebody’s going to put their hand up as long as you didn’t hire everybody as being a passive team member. That you’ve got some aggression there and some aggressive hustlers that they’re gonna put their hand up and and you know they’re gonna fight back and I think that those are the things that help make and break your team. And i’ve even started looking at team a lot stronger than i’ve have in the past only because sometimes I think yeah these are great people but how baked in are they really on to this, are they going to be here for at least two years, or are they going to be in and out in six months and you’re going to be struggling trying to get this to work because you didn’t raise that next round fast enough etc etc. So there’s so many different elements that come into that wholeheartedly to make that a good a good model.

Jeff:
Two points, I’ll extend your comment and I agree completely with you but two points I’ll extend. One is I don’t think of the team as just the co-founders and the employees, I think of it as the advisors who are also surrounding you and I will tell you as an advisor to a handful of companies, I tell every kind of team that I’m an advisor to consider me a team member. Don’t look at me as you only get to call me you know once every quarter with a one-hour meeting and an update, call me when you need something, call me when you want to have a sounding board discussion. I get involved in very operational level issues with a lot of the companies that I’m an advisor to simply because I i bring a different voice. I’m not saying I’m right, but I bring a different perspective and a different set of experience than the other team members.  I don’t consider myself anything different than the other team members but I think it extends the team of hopefully smart people which i’d like to at least try to include myself to bounce these ideas off of you know figuring if it’s a pricing strategy, a go to market strategy a business model, whatever it may be having more smart voices to bounce that off of is got to result in a better outcome in my view. And so I try to just keep my hand up in the air as a volunteer to be one of those sounding board voices the other thing I was going to say I had a second point I was going to make to your your comment. It’s floated out so i’ll come back to it if it comes back to me.

Jeffery:
Awesome. Well either way that I i like the idea of being a sounding board and bringing the advisors in but utilizing everybody on that team. And I wrote it down just because i’m gonna make sure that now I’m bringing you into the supporter’s fund OPN side of things.

Jeff:
sure

Jeffery:
You’re going to be a sounding board because you volunteered…

Jeff:
Yeah. My point, my point came back to me. You made a comment about passive team members

Jeffery:
yes…
oh we lost your audio.

Jeff:
Oh there we go, are we back? Yeah. Okay one of the things I encourage the employees to do very early on and it’s often something as co-founders that just kind of it slips just because they’re focused on the business things I actually encourage them to put their employment agreements in place very quickly and to put a vesting schedule on themselves I say for two reasons. I say you want to raise investment that’s going to be part of the due diligence so you may as well get it done now, because you don’t want to scramble when you have an investor waiting for your due diligence stuff and now you’re scrambling to reach out to your attorney to get these employment agreements done. So just get them done now. And I typically will involve the recommended approach is a four-year vest with a one-year clip, so you know nobody’s leaving within a year and if they do they don’t take equity so that’s fine if they don’t work out. They don’t take anything and I i recommend that because i’ve had to negotiate on behalf now it’s happened only twice fortunately and I hope it doesn’t happen anymore. But i’ve had to negotiate with founding team members who remained to negotiate down a founding team member who left and took 35 percent of the equity with them. Well no investor is going to invest 65 cents on the dollar. Yeah I put a dollar in 35 goes to that guy, who is that guy, who is that lady? They’re not — are they here, they’re on the cap table they have 35, and then they go oh no they were my co-founder but they’re gone yeah but they own 35. So I put a buck in only 65 cents goes to the business, 35 cents is owned by them not doing it. So I always try to make sure those things get sorted out very quickly in the founding teams. and that way again it comes up in due diligence so I kind of use that as my lever to get them to act otherwise they’ll kind of leave that on the back burner but I always say you have to be link ready. Link ready means an investor says I’m interested you send them a link to your due diligence online deal room. Because if you wait delay with that scenario, delay is the death note. So you may as well just get everything in a deal room have all your agreements in a folder your business plans, your partnership agreements, incorporation documents, just put it all in one centralized location and then just copy the link in copy their email you’re done let them look to their heart’s content but don’t start scrambling when that question comes in says send me more info.

Jeffery:
I love it. Yeah we do that with all of our skip the line events. We make sure that they have a full dd now we only got 65 full because if we had them do everything we do in due diligence, then we would need to be booking these things out four months in advance. (Inaudible) work done sure try to get as much of the good stuff that the investors require and then they can work on the other elements but I agree well hardly that that is it’s very important to the business and to the investor.

Jeff:
That’s one of the elements of our silicon valley in your pocket program is every company will finish with a essentially completed deal room.

Jeffery:
I love it. I love it. So now that you’ve kind of got some great basis points here for really helping the startups focus on co-founders, focus on their business, what are some of the things that you talk about that you feel really leverage that startup to make them more impressive to an investor? Outside of obviously having their deal room ready which is great, but hey maybe I don’t have the best idea or maybe I don’t have the best structure set up, what things can I do to make myself more attractive so people like yourself are going to jump all over me.

Jeff:
I think a lot of these things are generic because I deal with companies across different kind of industries and most of the mostly pre-series A, seed stage, or pre-seed so the stage is more the common thing for me but the thing that’s going to make it most attractive beyond like the things you’ve touched on the right team. Again I do believe the right team will figure out all those net you know, they’ll be able to navigate the challenging waters of just the startup world.
But if you have the right team, obviously I want to see a good market size, I want to see a growing market that’s relatively large already but growing. I often say a large market that’s shrinking doesn’t necessarily give me a lot of confidence so I look for large markets that solve a real problem. I have to somewhat be able to relate to the problem, I don’t have to understand it intimately because I don’t have that broad base of a knowledge and that depth but I have to be able to understand the problem and so to me one of the things that really differentiates companies early on is just the way they communicate the problem. Because a lot of companies talk in as I would like to just as i’d like to describe it they talk in concepts and statistics just as an example, simple example, they’ll say depression is really a big thing, teen suicide’s big, and we’re going to create an app that allows you know kids to deal with those kinds of negative feelings. And so they’ll talk about the statistics of how many kids you know may go down that path, how many kids are taking antidepressant drugs, or how many kids commit suicide, and those are you know obviously things people can relate to. The problem is statistics and concepts don’t stick in our brains what sticks in our brains as human beings is stories and people. And so I often say there when people will walk me through their deck initially I’ll often say something like well you’re missing Gary, or you’re missing Julia, and they’ll say well what’s Gary who’s Gary or Julia and then I’ll describe them in characteristics like five six little verbal bullet points that describe who they are but in in such a way that it’s highlighting the problem that the next page, the solution that they’re bringing is actually going to solve that problem. And I always tell people if as an investor you don’t have me in the first 30 seconds of your story of your presentation you won’t have me for the rest. You have to hook me, it’s like catching a fish you got to set the hook and then reel it in. If you don’t have me, you’re not going to get me later. It’s not like on slide seven I’ll start paying attention if I didn’t like the first six slides so I feel like when you tell that story of a person, the objective is by the bottom of
that first slide where I’m introducing Gary, I’m introducing Julia, I have to be nodding my head saying I am that person, I know that person, I totally understand and relate to that person if I’m saying anything that’s close to any of those statements you’ve got me. And now I want to know what are you going to do to solve the problem that person’s experiencing because I so relate to it. So the instance for example of this depression and suicide mobile app, we introduced the the founder happened to be a Persian gentleman and we introduced a young Persian teen, who was born in Minnesota, he’s 15 years old and he’s born in America his parents happen to be immigrants from Azerbaijan and they’re of muslim faith and because of all the muslim rhetoric that’s on tv the kids in school are picking on him and bullying him He’s anxious about his own safety and that of his mom and his dad and his siblings, and he just doesn’t know where to go with this. He’s a 15 year old boy so he wants to be strong and manly and so he’s just in a bind, he doesn’t know where to turn and where to get help. And then the next page says here’s this great app he can he can get support anonymously. And that just that flow changes everything in my representation as or my interest level I should say as an investor. When I can relate to the kid, and I’m thinking wow kids are jerks, and they’re picking on this poor kid and I feel for him and then you tell me what you’re going to do to solve that problem and then you’re going to show me how big of a business it is how you’re going to get everyone to be aware of the app you built, there’s no building and they will come
and you walk through all the other elements that you and I look at every day in businesses they  go to market strategy, the business model etc you never have to bring that individual back up but at least you set the hook in the very beginning, the one thing this gentleman did do, he had been struggling raising capital, was he introduced the child the young boy in the beginning and then on his thank you slide at the very end all he said was please help me help the camerons of the world. And it just brought that emotion right back where everybody in the audience was sitting there going yeah why are school kids at that age such jerks to each other. What can I do to help you, help those kids because I can relate. I have a kid that’s in school at that age and I wouldn’t want them being bullied. Like you bring that emotion in and that relatability changes absolutely everything in terms of the reception you’re going to get to your pitch. So very very long-winded answer and I apologize and appreciate your patience in letting me get it out, but it’s how I really think companies can differentiate themselves is tell the story in a way that’s going to sink in.

Jeffery:
The underlying thing is that if you build the right narrative people can feel part of the story and they’re going to want to help you action out that end result

Jeff:
Well you can present the business concept and support it with a lot of statistics or you can present a story about a person that I can relate to. Ultimately the statistics and concept don’t come out of the deck, they just get overlaid if you will with a story and a person that I can
kind of latch on to as an investor because concepts and stats go out of my head. If you’re one of 10 presenters at night I can guarantee if you’re anywhere not in the last one or two I am not going to remember all your statistics but I am going to remember Cameron that kid was being bullied by a bunch of other 15 year old jerks in school. And I feel bad for that kid. And that’s the way you differentiate you tell a story that’s going to stay in my head and separate yourself from the pack. We all hear too many pitches, the problem isn’t deal flow shortage. That is not the challenge investors deal with, the one is finding the ones that make sense, are relatable and that you want from an emotional perspective and financial perspective to get behind and support.

Jeffery:
Yeah. No that’s perfect. It kind of reminds me and i’m trying to remember the name and I think it’s probably what it is but when I worked in Loblaws back in my I.T days, we had a management meeting and we built this presentation to really show how e-commerce was going to change the way online worked at Loblaws back in 2005. I think it was and we did the presentation and it was based off of I’m pretty sure this is it mobile would quote me but her name was Karen and we made it all about Karen. And it was her life journey of what she was going to be able to do now online and also in store. So how do we take that in store, make it online, and then bring her back in store, and what were the things that she was going to purchase and what was she going to buy and then it started to cascade into every division and group in there you know that’s where they came up with joe clothing they did all these great things. The journey of that one person that made you feel like wow you’re right I see where she’s going, I see what she’s doing and that’s why she’s gonna buy makeup and perfume at a grocery store, that’s why she’s gonna get her kids clothes, i’m on, I love this, I’m gonna follow that journey.

Jeff:
They can all relate to Karen. And that’s where that persona, the whole concept of the persona is so incredibly important. The other really big thing that I think a lot of companies don’t focus on, you brought up the term a little while ago the acronym MVP. I am approached by lots of teams and they’re always so enthusiastic about saying oh and we built our MVP. And I normally ask a question first. I normally, I want to throw them onto their heels a little bit and say, I say something along the lines of that’s cute but I really don’t care. And they’ll be like what do you mean like we have our MVP we’re really excited. And I ask one question is anybody deriving the benefits you tell them they’ll get from your your product by using your MVP, and normally the answer is no at that stage normally sometimes it’s yes. And I say then it’s not about building the product because MVP just tells me as a prospective investor, you can build something. What it doesn’t tell me is that the thing you built is actually delivering, it’s the vehicle for delivering benefits to somebody. That is what I call MVT, minimum viable traction. Traction to me is defined as your thing is delivering the benefits that you say it can deliver so that somebody is either realizing them or at least has clear visibility to realizing them. And that’s fine to me especially early stage, if you just show them that it’s capable of delivering those benefits that is sufficient to me for traction. You don’t have to have the whole thing done and you know soup to nuts it just has to be. Somebody has to either see that wow this will deliver the benefits we or you’re telling me I’ll get or it’s actually delivering me a subset of those benefits in its current stage and I’m excited by that. That is way more important to me. So I really want people to talk to me much more about traction than building. Building something is easy, delivering value through that something is much more challenging.

Jeffery:
I won’t be able to hold this one back but MVT I am going to use that.

Jeff:
Yeah, feel free. It’s not um exclusively mine so I gained no royalties out of the deal.

Jeffery:
Oh that’s too bad because this is gold. I love it —

Jeff:
There’s a wonderful book by a colleague in the industry named Bruce Cleveland and it is on traction, it’s called the Traction Gap. Bruce used to work with my ex-wife actually and I maintained I had gotten in touch with him as an investor. He ran a venture firm for a while, I don’t think he’s doing that anymore but at that time I had this whole concept of traction being the most important things. And in our meeting together he shared he was surprised that we were coming to him to talk about traction, my business partner and I,  and he said I’m actually writing a book on traction. And we started talking about some of the principles and I don’t know where if he brought it up, if we brought up, I don’t know where the term came from, I’m going to give him credit because I think that’s probably closer to accurate, and he mentioned this notion of minimum viable traction. And I just absolutely loved it. It encapsulated everything that I have been preaching to the startups that I work with.

Jeffery:
Well, it’s carrying through across the border to Canada now. So that’s me.

Jeff:
There you go.

Jeffery:
No, I love it. Well we’re, man I think we said this the other day we could probably talk for hours about so many different elements —

Jeff:
I agree.

Jeffery:
Startup world so this is brilliant. But we are gonna move even though there’s so much other stuff that I wanted to ask you actually, what i’m gonna ask anyways because 10 times didn’t matter. You talk a lot about risk and what are those risk factors and one of the things that i’ve been talking about for years is that I need to de-risk my business, to ensure that investors will have a way in with ease. So just like a customer will walk through your beautiful UX and get that output so that MVT is perfect, there’s also the same side on when it comes to the risk side of helping this the investor just want in right away. Is there any outside of the team and things like that you talk about this in your video, is there a couple things just quickly that you want to touch on that really make a difference in helping a startup value risk?

Jeff:
Yeah I think startup founders need to understand that investors, yes they take risks they’re early stage investors so by definition they’re taking risk by investing in early stage companies where they are the most risky. At the same exact time their objective is to mitigate that risk as much as they can, and so their concerns are certainly going to be around a variety of risk factors. One being execution risk. Is this team, hopefully you have the right team, is this team capable of executing this idea. I like the idea, I think it’s warranted, I think there’s an opportunity somewhere in the world for this idea the question is the team that’s in front of me and at the helm of this opportunity capable of executing the risk and so you have to do everything you can to demonstrate you know whether through prior experience or maybe some unique subject matter expertise that you have something whatever it is possible that you can do to mitigate and mitigate their concerns that you have the ability to execute and to demonstrate that you have the ability to execute. In addition, the biggest one that I see happening with startups is they’ll approach a group of investors and they’ll say for example we need a million and a hal dollars to take this to the next level and if I don’t know this group a million and a half at least in seed and pre-seed, the stage I generally play in.  That’s a lot of money, it’s a lot of money in any context but it’s not a lot of money to a billion dollar hedge fund But it’s a lot of money in my in the world I’m operating in. And so I’ll often say so what happens if you don’t raise a million and a half, they say well that’s what we need to get to the next level I say what show me what we’re going to get for all the million and a half you got a million and a half today what are you gonna get over the next say 18 to 24 months, and they’ll draw out you know seven eight nine milestones of some sort and i’ll say so suppose I can only give you 20 of that what are you going to do in the next 90 days? And it’s a way of beginning the journey of saying I’ll give you a little bit if you prove that you can execute and deliver on the things you say you can deliver if you say you’re going to get these three milestones in the next 90 or 100 or so days. I’ll give you 20 of your ask but I want to see that you’re going to execute and achieve those milestones because now I’m only risking 20 or 300 000 in my example as opposed to here’s a million five I hope it works out well. And if if you’re a smart entrepreneur you say you know what we understand your concerns about execution risk so just give us 20, let us knock out this subset of milestones, and if we do agree with us now that you’ll give us another tranche of money. and so this kind of staged or stair step is the approach I call it a tranched style of investing.  But I think if you approach investors as the entrepreneur that way you’re demonstrating just in the fact of saying it that way we understand where you’re at and we’re talking to you on your terms not our terms. That’s a very powerful way of approaching investors. so I think that’s a big one as we said market risk is the number one reason companies fail so do everything in your power to show that there’s a real market that’s why this whole lean methodology of interviewing a hundred prospects, getting real information that there’s really a problem and you’ve spoken to the market, the target market representatives you’ve got that information, you’ve got some validating metrics around price points and how painful this you know challenge you’re trying to solve for is and then that also helps you focus on strategic investors versus what I just call capital investors. Capital investors to me are like somebody walking up to a roulette table and placing a dollar chip on 10 numbers. They don’t care which of the 10 numbers come up, they just want one of their numbers to hit so that it covers their other losers. Strategic investors actually care about your business, your success and they want to see you succeed because somehow it positively impacts their own business, and so I would say focus on that set even though it’s a much smaller pool of investors you’ll have a much higher probability of success with those and it’ll also again say something when you’re talking to an investor about why you want them in. It’s not just about money it’s value, beyond the money, value beyond the capitals I call it. So I think showing investors those kinds of things really helps mitigate their risks, various risk profiles of the market of the investment itself of execution etc and I think those are really important ways to highlight those things. And the very last one I would say is the defensibility risk you know they have to make sure that your ip is truly defensible and that someone’s not going to copy it in a month. And your advantage or competitive advantage is going to be gone. So show them that you understand the needs to defend whatever your intellectual property is and I say that not to imply intellectual property means patent, it could be a patent, it could just be a bunch of other things but that somehow whatever it is you’re creating is defensible.

Jeffery:
I love it. Those are three valuable points on how to de-risk your business and get investors more interested in you quicker. Jeff that was awesome. We’re now kind of at that stage in our event right now, or our show, that we got to jump into the rapid-fire questions.

Jeff:
Fire away

Jeffery:
As much as I would love to keep going down this journey of making the best pitch. I think we’ve got a lot of valuable insight there but for the startup, for these questions we’re going to do real quick so i’ll ask and then you throw your best point and then we’ll do a quick

Jeff:
I’ll do quick answers on these I promise

Jeffery:
Okay, I love it. All right, what got you started in early stage investing?

Jeff:
Wanting to support people like myself. I was an early stage entrepreneur for a long time and I wanted to when I reached the financial circumstances where I could I immediately said I’m going to support people just like me, like I wish more people did when I was there.

Jeffery:
Love it. What’s your favorite part of startup investing?

Jeff:
Meeting these amazingly innovative, creative, and very capable people many times. I was going to say young people. Many times they are young but they don’t have to be, I work with some you know older, more mature entrepreneurs, but just meeting these amazing creative and innovative people that come up with ideas that on my best day I could never come up with and having value that I can bring to them that helps take those ideas forward.

Jeffery:
Perfect. How many companies or dollars do you invest per year?

Jeff:
Per year is interesting I have about, I have holdings in about 150 or so companies right now. Some of that comes through my accelerator some of that comes through direct investment so I would say probably maybe about half a dozen to ten individual investments I’ll make in a given year. Generally between 25 and 50k initial investment and I’ll go in further if I see progress.

Jeffery:
Awesome. Any notable portfolio companies you’d like to share?

Jeff:
Don’t know where it’s going to go, but I am an investor in Berkeley’s Skydeck. Which is the Berkeley University Berkeley’s incubator and accelerator and they’re fund specifically and one of theirs that is  I didn’t personally make the investment but is lime the the kind of gig economy the scooter kind of the lime bike so that one is the first what I’ll call unicorn that I was even remotely a part of, very much an outsider to it so I don’t have any investments that have gone on to do anything close to that myself personally. I have had a couple of exits, small exits on my portfolio so i’ve been very proud of that. I’ve got a couple companies now that are raising eight-figure series A’s so I’m very proud of that, and i’ve had a couple that have gone out of business unfortunately so that would be the one that comes to mind is the fact that I even have
something to do with a unicorn investment.

Jeffery:
Very awesome. Well we have some companies for you too so we’ll share those later but all right next one. What verticals do you like to focus on or you’re agnostic?

Jeff:
Generally agnostic but I would say I lean into SAAS kind of business opportunities. I do have an inclination towards enterprise solutions as well so where larger enterprises can benefit from the widgets. I’m not a huge b2c guy, I have a couple in that realm but I generally focus more enterprise and SAAS kind of recurring business model opportunities.

Jeffery:
Okay do you have any preferred terms on investment that you like? Preferred shares or is it commons? is  it notes?

Jeff:
I generally do notes convertibles, i’m not a big proponent in fact of startups early stage pre-series a startup’s even using anything other than a note.  I think if you’re going in for a price round that stage of your business I think it’s, to me, it’s not the best approach to raising capital. So I i generally go in on convertible or safe notes.

Jeffery:
Timelines for investment

Jeff:
when you say timelines?

Jeffery:
One to three months the company they pitch you like it you work with them in three months

Jeff:
i mean there have been some i’ve done in a week if I really liked it and I jumped in. I don’t tend to be a, I don’t I’m not one of these folks that’s going to grill down or drill down deeply into the due diligence. I really spend time with the team I do more of a gut feel with the individuals i’d certainly look at those due diligence materials but I don’t, I don’t spend an excessive amount of time on that. it’s  much more about the idea, the team, etc, other people involved as well I like to see who else is engaged

Jeffery:
Okay, you lead rounds? Take board seats?

Jeff:
I don’t lead rounds, I’m definitely a smaller participant in the companies that i’ve engaged in. I do take advisory board seats. Again, I do not encourage my startups that I work with to even extend board seats to anybody until they get to kind of formalized venture you know or angel group investment guns. So I have board seats advisory board seats on a number of companies but that’s it not not formal board seats.

Jeffery:
Okay amazing. Well that hits up our speed round. So now we’ve got really like maybe a couple of quick questions for you. The one I always like to kind of better understand if you’ve got one of those exciting or even non-exciting probably more exciting always works — startup feels for a company that you thought wow these guys really did a great job I don’t know how she did it but she pulled the cat out of the bag, she worked this one, thought it was gonna fail and now they’re you know unicorn status like anything like that?

Jeff:
Well. So I have two that come to mind just hearing your question. One is and you said she is in your hypothetical and I actually have a female founder i’ve invested in two rounds of her business i’ve yet to meet her in person, we’ve known each other for four years, and I am one of her key advisors in her business. She created a ride hailing so just think uber or lyft or something of the sort business for people who travel with pets. A lot of times she was traveling with her pets and she’d call one of these Uber lift, they’d show up and they’d say hey you can’t get in my car with the pets, the dogs, and she got so frustrated she just said you know what screw it I’m going to start a business for this because she asked around lots of her colleagues who had pets were finding similar scenario. She relocated herself from the West Coast to New York City, launched the business, struck a partnership with a very large pet in one of the top two pet industry participants and what was really interesting when covid hit, she’s in manhattan right, so like Toronto, Manhattan shut down and uber and lyft lost about 90 percent between 85 and 90 percent of their business. She pivoted and went towards veterinary groups. And people needed their animals to go in for pet care and she dropped her business only dropped off about 20 percent and she did over 10 000 rides per month. Now, over 75 percent of the rides are animal only.

Jeffery:
Amazing

Jeff:
That’s an amazing pivot. I have nothing but great respect for the founder of this business, the second one is a company that has a hardware appliance, not something I normally lean into I’m not a big proponent personally on hardware investments. I get i’m using hardware to talk to you, so I get the value of hardware it’s just a harder business from an investor’s perspective. But this company made a device that removed an odor causing bacteria. So just think about your workout clothes that even though you wander them they still might contain odor bacteria and they still don’t smell spring fresh so to say. Well if that was their target, they were targeting kind of high-end clothing that’s hard to launder or dry clean or sports clothing et cetera, then covid hit and they pivoted into COVID and their device unbeknownst to them but now known to them it also kills the COVID 19 virus. And so they’ve taken a complete pivot away from the sports and hard to wash or launder clothing and they’re going right after the first responder markets and selling into hospitals and nursing homes etc where their device can allow for repurposing or reusing I should say ppe all of this protective personal protective equipment masks etc where unfortunately due to shortages people are having to reuse it and that’s causing a lot of concern and potentially transmitting you know from one room one patient’s room to another et cetera. And so they’ve pivoted now, they’re totally going after the COVID 19 virus cyto where things that kill viruses use case and it’s been a  really amazing turn, they’ve got some amazing partnerships going, i’ve actually jumped in operationally to help this company because I want to do something in the Covid world to feel useful and they have an opportunity and I’m lending if you will my skill sets and experiences to the operating team now so that was also a great pivot in a very difficult environment.

Jeffery:
Amazing. Well those are awesome stories and thank you for sharing that. So now we’re going to do a little quick section on more personal things and I learned this actually through one of the startups you work with. I was listening to their podcast and I was like this is phenomenal, we’ve got to take some of this, we missed one at the beginning when I usually ask to give you a bit brief about yourself I do ask give me one thing about you that nobody would know soi throw that one out there and then I got these three little questions for you but one thing no one will know about Jeff Wallace?

Jeff:
Well some people may know it only because I share it occasionally, it’s just one of the more fascinating and enjoyable things that’s occurred for me during my journey as a business professional entrepreneur. I’ve had a chance, I  call it my fun fact when I do keynotes and it’s called the Steve’s. And i’ve had the amazing fortune to work with both Steve Jobs and Steve
Wozniak of Apple. Steve Jobs back when I had a startup and we partnered with apple in the late 90s and Steve Wozniak when I became a keynote speaker internationally and Steve and I have shared a stage on two occasions together. Once it was just Steve, myself and the other it was myself Steven the creator of Waze an Israeli entrepreneur by the name of Yuri Levine. So to be on stage with people like that I mean humbling doesn’t cover it I mean it’s just astounding and it’s definitely something that’s been a really really exciting part of my journey to be able to correspond and communicate with people like that i’m still occasionally in communication with Steve Wozniak, just on emails but that I kind of pinch myself that I’m in that realm

Jeffery:
So that’s amazing. I thought I thought you were going to go into dancing with the stars and that you guys are competing on stage or something.

Jeff:
So I think he would have actually done I think he performed better than I would have before.

Jeffery:
So well he did that yeah for sure. All right next one is your favorite movie

Jeff:
My Cousin Vinnie

Jeffery:
And what character would you play?

Jeff:
Oh Vinny, definitely Vinnie. I’m from Brooklyn, so I was born in Brooklyn, my whole family my mom dad and my siblings both of them and myself all born in Brooklyn. And so that movie just for whatever reason resonated a lot with me just the whole difference of New Yorkers down in the south, feeling what they were dealing with so that movie is one of my all-time favorites.  There’s one other win that’s almost equal, it’s a movie called the in-laws it’s a little bit old school but it’s with Alan Arkin and Peter Falk. Not the remake of it which was later that was terrible but the old original in-laws just a great laugh.

Jeffery:
Awesome. And the last one, your favorite sports team

Jeff:
Favorite sports team is probably the golden state warriors basketball. They have been an amazing, on an amazing run, not this past couple of seasons but several before that and they have, just they dominate the airwaves here in the bay area and they are just such a truly fun team to watch and i’ve had again good fortune to meet a couple of the players and that kind of endears you a little bit more to a team as well so.

Jeffery:
It’s brilliant I love it. Well Jeff I want to thank you very much for your time today. Very insightful as I always do I took lots of notes and a big fan I enjoyed all of the insights he provided. I had to change it up by offering some little personal stuff but at the end of the day I think it’s  all valuable, we’re going to share this out across our network, I believe that we’re probably it’ll go live I think sometime in December but we’ll let you know when it goes live. Just because we do one a week so we’ve gotta catch up we’ll see how it goes maybe we’ll do two weeks so we can get there faster but at the end of the day pure pleasure. And the last thing we like to do is you like to leave the last segment for you which is do you have anything you want to say to the investor community or to a startup any words of advice but we give you the last word so I thank you again for your time.

Jeff:
Well I want to thank you in response to that. Just for allowing me to come and share and talk I think you said it a couple times here I can talk with you know you and these topics all day long. I’m very very passionate about it and to come across others like yourself who are equally passionate about this space is always fun. So thank you for that. I guess if I had a parting thought for investors in today’s age I would say don’t hold back, I know a lot of investors are holding back that you made reference very early on to investors you know money flowing freely or money flowing relatively freely to startups and not to other companies but I’ll tell you, i’ve seen a lot of investors holding back, waiting to see maybe the results of the election or how the economy is going to fare I would say support innovators. We’re going to have to innovate our way out of the where we are and they need capital. I mean capital to me in a startup is like gasoline in a car. You can’t really go anywhere if you don’t have a little bit in there. So unless you have an electric car which I’m not going to go there. So I would say please continue supporting, every little bit helps, it’s almost like a telethon when you’re a startup founder you know 10 000 here, 25 000 there, you don’t have to you know throw all in on one but continue supporting the innovative startup ecosystem that’s what I would recommend.

Jeffery:
i love it. Well Jeff again, thank you for your time today. Very valuable um have a fantastic day I’m sure the weather’s doing okay there now in California, so get out there, enjoy your day, thank you. Again and we’ll keep you posted on when we’re ready to release but thanks again.

Jeff:
That sounds great Jeffrey. Thank you, I look forward to it and hopefully we’ll do it again sometime.

Jeffery:
Oh guaranteed you bet.  Wonderful take care for now you bet all the best, ciao.

Jeff:
Bye-bye.

Jeffery:
Okay well that was pretty awesome man. Like so much good information. I love the fact that he talked about being a sounding board for his investments, working with them, over 150 investments and that all became through accelerators and best personal investment all that great stuff, really doing a phenomenal job on that. Great background working through lots of different enterprise, worked in big business. I really like the the greyhound bus you know potential opportunity you need a co-founder because at the end of the day if something goes wrong on one side you need to fix it and correct it and nobody wants to go through that so always make sure that you’re building a great team that’s going to help you become investable. And he talked about so many of these great different elements to make your business awesome so I implore you guys to obviously read through this, listen lots of good content, what other things can I say that were really good you know the hundred customers strong IP, doing everything he can to get to that, and the number one thing was that MVT. Minimum Viable Traction, is it working, are you getting anything from this are investors going to see this MVP is great at the other day, you get your product out to market slim trim and right to the market but at the end of the day are you getting any traction thank you guys have a fantastic day.

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