Name: AMA Fundraising Best Practices
Uploaded: 2026-01-06T21:16:05.358Z
Duration: 1 h 12 s
Description: AMA Fundraising Best Practices

Transcript for "AMA Fundraising Best Practices": Hello, thank you so much for joining us today. Really excited for this session. First time I've done a format like this on an AMA for fundraising. John Luck's hopping on in one minute here, so I'm just going to get things rolling. But we've got a ton of pre seeded questions. Many of you, if you recall, we asked if there's anything you wanna ask ahead of time, so we can have a lot of questions ready to go for today. Many of you asked some really good questions we're gonna be sure to cover. But also, we've got just a short framework that John and I are going to talk through from the operating side where I sit, from the investor side where he sits. And so, let me go ahead and get that started without further ado. Right. So quick background on me. Early part of my career was actually on the investment banking side. So did a lot of buy side, sell side, fundraising and saw it on the operator side, but also on the investor side, all the way through like series E and beyond. Back then series Es were a little smaller than they are today. And then most recently, of course, on the operating side where I originally worked with John Locke at Invoice2Go. And that was, we went out and raised our D, dollars 100,000,000 Series D. Ultimately decided to actually not go through with that and sell, but can talk to the operating side through the later stages. And then here at Campfire. So did Y Combinator and can always talk through the Y Combinator experience. And then our seed round with Foundation Capital at Y Combinator Demo Day is when we raised from them. And then most recently, what we just announced, our $35,000,000 Series A led by John Locke, who's now with me. And quick side note, if you're not familiar with Campfire AI, the quick story of us is we are the modern ERP for startups, midsize and enterprise companies. So folks are scaling super fast, like Replit on the platform, one of best growing ad companies ever, all the way over to Apex Space, a rocket ship company. So whether you're very high growth AI or sending people into space, you're probably a good fit for Campfire AI. But of course, everybody in between. So lots of mid sized tech companies is our core, but we also have nonprofits, professional services firms as well. So with that, I will hand it over to John Log to give a quick intro. Yeah, hey John, hey everybody. Thanks for being a part of this this morning. I'm John Locke, I've been at Excel for almost seventeen years. I'm a partner in our Bay Area office. And yeah, I'm really excited to be here and chat with everybody. This is the second time that John Glasgow and I worked together as John said. So we've had an awesome time working on two projects together and we're a couple of weeks into working on Campfire AI and having a really great time with it so far. So I'm looking forward to this. Thanks for having me, John. Yeah, of course. And one question for you, I think some people think of VC funds as homogenous. Do you want to talk a little bit about like, there's like an early stage team and then where you sit on the growth stage? Because then some folks would be like, hey, someone today was like, really want to intro to John Locke, and they're raising like a seed round. And so I was like, you might want to make sure we're finding the right investor, the right stage and even like sector focus as well. Anything you want to acknowledge when you get an intro to someone that you really want them to kind of help you help themselves? Yeah, I'm totally up for chatting with anybody that's on the Zoom and wants to meet Excel. So just I'm jlockexcel, just shoot me an email. We are set up at Excel as a multi stage global fund. So we have three early stage funds, we have one here in The US, we have one in Europe and we have one in India that are doing seed and series A investments. So businesses that are just getting going. And I'd be happy to talk to anybody about that. And then we have a later stage fund that's a couple billion dollars that works with companies that are typically a little bit further along in their journey and writes checks from call it 25,000,000 on the low end all the way up to a couple 100,000,000 in some cases. So that's the way that we are set up here. And as John mentioned, we do tend to have some people at Excel that are focused more on specific categories than others. So if it's something that if it's the next APAC space, then I'll route you to the person here that has spent more time in that area than I have. But I'm up for beating anybody that is either getting something going or has a business that's a little bit further along. Awesome. Well, let's dive in. Got one or two slides we're gonna hit, and then I got a bunch of pre seeded questions as noted. But feel free to ask questions in the chat. We'll continue to cover for as long as we have time. And we're going to be as candid as possible. A lot of webinars will give the delicate answer. We're to try and be super honest here. So, can be the most impactful for attendees. So, from the company lens, from the operator side, I'll kick it off here. Here's a couple notes that I put together. And I'll also talk through our series A, most recent and relevant in this current market, but also just more broadly in fundraising I've done. I think a lot of folks will ask why now? And for us, there was certainly some questions around the incumbents, if you're from NetSuite or Sage Intacct, they've been around for twenty five years. Why not five years ago? Why not ten years ago? Why is now the time? And so really having some sort of catalyst. And of course, one obvious one that companies are using is AI. We've seen Cursor and Lovable and others really rapidly displace incumbents because there's been a tectonic shift in the market. And there's like it's almost like everybody started like, everyone was on horses forever. Now, like, all the car companies started on the same day. It's like a level playing field from an AI perspective. And we had, like, on prem to cloud. There was a big shift. Salesforce capitalized on that. We had mobile, invoice to go. We were actually featured in Apple's first iPhone launch. You can send an invoice from the iPhone. IPhone. And so, really capitalized on the shift to mobile and doing a contract to being able to send an invoice from the person's house. So, think of what is your why now? And also, terms of preparing for it, this is very round specific. So, at SEED, we had no data room. Candidly had five kind of rudimentary slides. Y Combinator is actually very opinionated. The simpler the materials, better. Actually, almost like the uglier the slides, the better. And so their template was just like, what is the one thing you want to cover on this slide? Just have one kind of almost bumper sticker. And that's the key takeaway. And then choosing the right partner. So, you truly are getting married to this person. So, John Locke and I worked together, seeing how amazing he was at Invoice2Go. But a lot of folks say, don't spend time with investors until you're really ready to raise. I think there's some truth to that. But you don't want to necessarily go for the love at first sight. We're going to get married the day we meet because John Locke is my new boss. Formally, he's on the board. And as we add more people to the board, obviously you have more bosses. And so this is a really long term partnership. You really want to make sure you're aligned on vision and strategy. And so choosing the right partner, back channeling on them, whether there's formal references they send you. And then in terms of real conviction, I think investors, yes, it's a sales pitch. So you really want to show your best light and tell the best story you can. But at the same time, just being super candid. And so, I was very candid with John about here's where we're doing well, here's where we have some blind spots. Because also, it's like you hire a coach or go to therapy or something. If you're not honest you know, in those sessions, then they really can't help you. And so it's the same from an investor. Mean, John's worked some amazing companies and saw CrowdStrike kind of from the early days and all the way through, like, you know, being coachable, going in, sharing, like, here's where we're at. And even pre signing the deal, kind of working through some challenges together is a good war game, almost like a little case study that you can like, here's how we're going to work together. If it's someone you've never worked with before. And John and I did some of that. And I think that was really helpful for us going in knowing, let's do some dating just to keep that analogy going. I think there's a lot of parallels there. But that's a quick summary on the company lens and on the operating side. I'll pause there. I know we've got some questions in the chat. John, anything you recommend on the operating side? I've got one more slide I wanted to talk through. But before we get into your view, we've got a whole slide for you that will cover anything on this side. No, I think there's actually a lot of parallels between the operating side and the investing side. So maybe hit any questions that you want, John, and then I can talk about some of the investing stuff, which I think has a lot of parallels to what you just said. Okay, great. One that whether it was an invoice to go when we were raising our d or the series a just did, I think thinking through Stuart Butterfield at Slack did a good job at saying like, you know, and others say this, but I famous remember him saying it, which is like, he already had, I think, some ridiculous amount of he had like forty years of runway or something. And he went and raised another round. And his view there was raise when you don't need to. And so I think there is a bit of when your bank's against the wall, whether it's your growth isn't where it needs to be, or whether it's you're low on runway, there is a bit of an adverse selection of the folks that don't need it are often in the best position to raise. I think one, as a former banker, I'll just candidly admit, I don't recommend hiring a banker, just someone on the operating side, unless it's a very later stage round, very financial heavy due diligence, probably working with growth equity or PE funds. If it's the Excels of the world looking at the deal, I would just nix that. If it's like a Blackstone secondary or just something that's just a very different profile of deal with heavy, heavy financial structure, then there's probably going to be a lot of value. But if you don't feel comfortable raising without a bank, like maybe have an advisor, having a current investor that's fundraised before step in, or someone on your team, like a finance leader on the team, I highly recommend that. Just have them behind the scenes, behind you as the founder and as the management team. When we went out and raised our I got the term sheets for our Series D at Invoice2Go, the deal team was myself doing corporate partnerships. Given my background, I really led that process. Our CFO and then our CEO. And the three of us, plus some support from the board, really helped us think through the right folks to go out to, how to manage discussions, what we wanted to share pre. At that stage, you start to do more NDAs, where at our current stage, at Series A, you don't do NDAs. Helping us think through when to share what under what level of secrecy and confidentiality. And I'm trying to think of anything else on here I didn't hit. But product vision and roadmap, I'll cover a little bit on the next slide. So with that, let me hit one that I was thinking through the differences between our A and going out and raising D. And this is one spectrum that I think through and I put seed and IPO to show the full end to end of the private markets. But when we were raising our seed from foundation or even getting into Y Combinator, was very much around Y Combinator was very candid of your idea is almost irrelevant because the odds of you pivoting at that stage are so high that actually it's like, is this a phenomenal team? And do we think they can do something amazing? We ended up not pivoting at all. So same idea we applied the Y Combinator with. But most, not most, many folks in the batch did. And so, it's really a team bet. And even at seed, there's still a lot of wandering because seed is typically defined as you've not found PMF and PMF being product market fit. And so, there's still a lot of pivoting, even micro pivots within a category. Then when you're in the later stage, Series D, Series E, team and vision are still important, but the financial metrics are really what matter. And so, when we were out getting the term sheets for the Series D, there was a huge focus on our customer cohort data. And candidly, that was one that caught me a little off guard. Was my first time going out and raising a Series D. And we were sending them these large data sets of customer data, posts NDA and everything under confidentiality. And they were coming back to us with this amazing cohort waterfall data of like, Oh, it looks like customers that have been with you for more than a year have an extremely low churn, but you have a big drop off before a year. And so there was actually a lot of insights they were sharing back to us. And there probably was an opportunity for us to actually come in with, before we sent the data, why don't we fish out a bit more of what they're going to do with the data? And then we can actually tell our own story on that cohort waterfall as opposed to them drawing their own conclusions. And we end getting through it. The financial metrics and then the other because what that ultimately leads to is when you're raising $100,000,000 a dollar in, what does it get you out? So, you put $1 in a top of funnel, does it get you $2 or does it get you 80¢? And that was really what they were driving towards, is the actual underlying unit economics of our business. Because if you're going to put in $100,000,000 does it get you again $200,000,000 or does it get you $80,000,000 back? And so I think there's the metrics of your business and really understanding and then allowing you to tell that story as the rounds go. The diligence gets quite a bit more intense the later you are on the alphabet for fundraising. So I would say the later the round, the more it looks like an acquisition from the level of diligence involved. There's really, really deep diligence in the later stages. The diligence questions are obviously different than M and A. There's less around like escrows and their material adverse events. And some of the items you're negotiating over are different, but the depth is certainly there. So, C, like I said, we had none. At A, we had light. At D, we had pretty heavy into the business. Underpinning all of this is, if you are going out to raise venture, Paul Graham spoke to my YC batch and was like, you just need to convince investors, there's a 1% chance you're going to get to a billion in revenue. And that was really profound for me because that's the truth. If you think about the expected value of that outcome there, you need to be able to deliver the entire fund back for venture fund. Otherwise, the power law math, as they call it, really starts to break down. And so, I think that's a key thing here. You don't need to start. A lot of founders say, Hey, I'm starting out in this tiny market. And I say, that's fine. But you need to be able to step into a much larger market and credibly speak to how you're going to do so. One of my friends in private equity, they invested in a business that's a CRM for RV homes. And this CRM company had like 60% of the market and they dominated. And candidly, there wasn't a real step into a bigger market there. But that was because it was a private equity deal, high cash flow business. On the venture side, that's typically going to be a nonstarter. And so, you really need to take that Paul Graham mindset, put that hat on, and how are you going to build something massive? And so there's sort of rudimentary framework. This is how I think depending on round size. So I've been talking a lot. John, anything you wanna add here? No, maybe I'll just hit some of the things that we look for from an investor standpoint. Because I think it goes very much in line with some of the things that you talked about. Right. So I think the first thing is, and John mentioned this, but at the end of the day, our business is about being meaningful owners and companies that can really matter. That's the power law dynamic that John talked about. So we get most excited about working with founders and companies that can change the world, do something that's really important, can disrupt the cybersecurity market, can change how businesses collaborate, in Stock's case, can change how we interact with music and artists in Spotify's case. Those are the things that get us most excited. And I think John's right that we don't necessarily need to invest in things at the start that have a perfect market size calculation that happens to be really big. We do invest in things where a founder has a really strong viewpoint that yes, maybe the whole world thinks that this market is not necessarily huge at the moment, but if you see it a little bit differently like the founder does, it could be really big and important over time. So it doesn't have to be perfectly quantitative, but it does need to get a room really excited about the potential of something. So I think if the RV CRM business came into Excel, we probably would have a hard time seeing the long term potential to build something big and meaningful. Maybe I'm shortsighted. So I think that piece is really important to us. Venture is not the only route for fundraising for businesses. Like you could be building a business that is better suited by raising debt or friends and family round or doing private equity. But I think if you're gonna be engaging with a venture firm, even in its later stages, there has to be some energy around the business being able to be really important and valuable over time. So that's sort of big thing one. And then I think big thing two, and it's not necessarily in this order, think these things go hand in hand is just quality of the team that and it's really sort of quality of team from founder all the way through to anybody that we meet during the process. People that we feel like are uniquely suited to their business. I mean, the fact that John grew up within finance orgs and really lived the pain himself of how bad NetSuite and SAP were. And I can remember talking to him at Invoice2Go about how much he hated this stuff. And so like when you talk to him about this area, he's just like really comes alive. And that is an element that we really look for in the types of people that we work with. We really care a lot about who founders are able to recruit at the beginning. And Campfire doesn't have a ton of people yet, but everybody that I've met through the process is super impressed by and I think that that's an early signal around, how special something can be or the types of people that are joining early on and they're taking risk in their life and their career to join something that is really early. So that really matters. And then I think as John said, we also really wanna try to get to know founders in the process before we invest. John and I had a little bit of a unique dynamic here because we worked together before. So we've lived through a lot of different business decisions and ups and downs together. So we sort of knew what it was like, But for a founder that we're meeting for the first time, we really wanna do get a sense of who that person is. And I would much rather in that process get the data not be perfect or the founder not have perfect answers to all questions because we know that every single instance, even the businesses that have been great returns for Excel over time, everything goes through highs and lows. And we really wanna get a sense for the types of people that we're working with and trust that those founders are gonna be able to navigate situations with integrity and clear decision making and all those kinds of things. So I'm always actually a little bit cautious when like the data and the decks and everything are too perfect because life isn't that way. So I think finding ways in a fundraising process to really get to know each other and even talk through some things like, hey, if this thing went wrong or this didn't happen, or I tried this and it didn't really work. Those are really valuable conversations for a potential investor in the process because they help get to know you. And I think to John's point, that's part of the reason why it's been super rare for us historically to ever do any investments where there's a banker involved because that banker typically gate keeps and prevents that relationship from really forming. So it'd be super rare for us if there was a banker involved to do an early stage or early growth stage investment. And then John has on here, product references are super, super important. I would say most of the later stage investor universe is having for market reasons to go a little bit earlier in their investments, at least in terms of the types of companies that we work with. If you looked at our sixteen or seventeen years of growth investing at Excel, the average size of the business at investment for our growth funds is getting smaller and smaller by the year. And there are reasons for that that we can talk about, but we're all going a little bit earlier. And so when we go earlier, there's less financial metrics for us to hang our hat on than what we were able to do historically. So it becomes more much more about market and team quality. And then this third point around product and the best way that we can get a sense for the product along with playing around with it. And to one of the questions already, we are trying to use it at Excel. We have some complicated accounting dynamics, but we are trying to move everything on the campfire at the moment. But talking to references, we weigh incredibly highly. So we probably talk to 15 or 20 businesses that have used Campfire or tried Campfire and that's a really important ingredient to us making a decision on something. And it was obviously very rare in this case to have people say that they love their ERP, which I'm not sure has happened in a long time. So that was a huge positive to us as it relates to this particular investment. Awesome. Well, let's hop into some of the questions. I know we've got tons coming. Tons were preceded, so we're gonna try and quickly hit those first, and then feel free to keep them coming in. And we'll just we'll just take through them together. A few are less related to to fundraising dynamics, So we're we may hit those at the end, but we're gonna try and generally stay on topic. And non fundraising ones, I'm happy to follow-up offline. How do you know it's the right time to raise? What are the internal signals? For us at Campfire AI, we were really at an inflection point in the business. So, our growth was very much accelerating. It had been 10x in the last ten months on our ARR. And we had added our first AE and the curve got even steeper. And so, market is super deep. Every mid sized company has accounting software. So, saw a huge end market to go after, but did feel a bit constrained on accelerating even further with the capital that we had as a seed stage business. We'd only raised $3,500,000 I think the other dynamic there is we were rapidly getting pulled up market into the upper mid market, lower enterprise. And a lot of our perspective and current customers were saying like, hey, this is mission critical software for our business. We do wanna see more financial viability in the business. And so, I think the Series A has gone a long way for us. So, I think those two points were really the reason. John, anything you want to add of when should someone go out for? Whether it's a D or an A or anything else? Any advice you have? Yeah, I'm looking at some of these questions. I think there's the offensive way to do it as John said, which is you heard that the early stages of an inflection. And that's a great time to talk to investors because I think investors want to through the process of getting to know you, we're simple people. Like to be positively surprised along the way. So getting a weekly or biweekly or monthly update of like, hey, we told you we were gonna be at X, but we're actually at Y and Y is better than X is really great. So I think especially in this day and age where there's a lot of capital that's interested in projects that have strong growth dynamics to them. I would always on the side of going a little bit earlier. And then there's a question about when truly is your backup against the wall? That's a tough question. I do think if you're worried about running out of cash and I've been in a number of situations where I've lived through that. I think it also it be used to start earlier. Because I think if you're starting and you only have a couple months left of cash, then you start to get into situations where the investor just feels like they might be catching a falling knife versus doing something that has a lot of potential to it. So I would say the earlier the better, especially in a market like this. Maybe if the market really changes and we move back into a world of being more conservative, then you'd wanna wait to show more financial progress. But I think in this market, my advice would be the earlier the better. And they don't have to always be formal conversations that kick things off. They can be a, hey, let's get together for a coffee or a dinner or something and start to build relationships that way. Greg, my take. Yeah. And then we've got a few in a row for you, John. So one, this one is specifically about series A, but you can answer series C or anything you want. What do investors want to see in a financial model or projections? I a financial think model, we really just really wanna make sure that we understand how the business works and what the real drivers of the business are. And we also wanna make sure that the team has their arms really around the important drivers of the business. You'd be surprised at how many teams that we meet where when you actually get into the model, it's sort of clear that there's real differing views around the table around what the key drivers are. So we wanna see like some consistency to that. And then I think going forward, and this is again speaking as a more venture and growth person versus a private equity person. But we're always pretty skeptical about forecasts that are out too far in the distance. We wanna be able to see that something can be big and important, but we don't really wanna debate decimal points on two or three years from now because we just know the world changes so much. So I think the most important thing on the forecast perspective would be, can you tell a compelling story around what the next six to twelve months are gonna look like? And can you build the waterfall from where the business is now to where it's gonna be at the end of this year and where you think it might be over the next twelve months. And when you have that discussion with the potential investor on the waterfall, how compelling is it? How much of that end of year or next twelve months forecast it comes from your existing customers? How much does it come from new? If it comes from new, what does your pipeline look like? So I think making sure you're really tight on the key drivers of the business today, and then having a really credible case for what the next six to twelve months look like with a waterfall that gets you from here to there is ideal. Love it. Thank you for sharing that. How do you quickly grab a VC's attention during a pitch? You sit through pitches all day. Any words of wisdom? I think just coming back to the market, people, product. I think telling a market story that investors can really grab onto. Keep in mind that most investors that you're gonna meet are hearing a lot of different kinds of pitches throughout the day. So it could be a day where you're hearing a pitch about space and a new way to transcribe doctor's notes and ERP. That could be like in the morning. And so I think it is really important that you get that elevator pitch down at least the first couple of minutes to grab somebody on why they should care. In John's case, it's like, hey, I wanna redo how finance teams around the world engage with their software. It's like, okay, that's pretty cool. So I think that initial start and then showing why you're the person or the people that are best suited of anyone on the planet to go tackle that problem are the key things. And then you can get into specific product and finance and all that kind of stuff too. I do see a lot of people get a little overly bogged down in details around like acronyms in their market or specific dynamics that I or we probably have no idea what they are. So I think the more that you can start generally with getting somebody excited about why you really could matter right now, and then you get into details from there is a good way to do it. Yeah, that's good call out. I did in our raise and going back to the seed round, because I met with a lot more folks than demo day, your first three to five minutes of the meeting, you've got to capture attention to John's point. So, I think that's the most important piece of advice. And so, I was doing pitch practice for our series A and someone was like that I intentionally found someone that I highly recommend finding someone that knows nothing about your business, but is an investor because then they're gonna kinda like, it's a cold start. And they were like, your deck is just super boring. So I redid the entire deck and really told customer stories. And the first slide ended up being this amazing, to John's point, this amazing transformation we had done for this global company with hundreds of millions in ARR, how they've really transformed by moving from the old way of doing things to the Campfire AI way. And that first slide, people were just like, well, they're really onto something here. And then you earn the right and their attention to get to the next slide to John's point, then why are you the one to go do that at scale? There's one about traction you're looking for at Series John, or even a C or D? I know traction is such a subjective, whether it's financial or it's an open source business and it's eyeballs if it's Facebook. But anything you want to note on the traction piece that anything worth calling out here? No, I think the only thing I'd call out is that we just, we again feel like we're in a market cycle where there is a lot of value to momentum. So I think we are at a point in time where it may be that firms like ours are willing to go earlier. So even our growth funds will invest in something that has a couple million in revenue at this point, but it's got to have a lot of momentum. And that probably means at that stage, a couple 100% plus growth, something that is really getting is touching a nerve. So I think that at least in this part of the investing cycle is probably the most important thing, John. Okay. One here is when should a founder or just really unique, I'd say this company more broadly, maybe you're a finance leader. When should you say no to more capital? Think this one Honestly, I think this one's hard. I think raising capital is like a gate to get to the next gate. And so, how much do you need to get to the next gate? And so, for us raising an A, what do we need to, with some cushion, get to B? Was really how I thought here. And so, you don't need, again, the cushion, if you don't need more than what you've raised or what, then probably a good time to rethink of what are we going to do with the Nth amount of additional capital? What does it actually do for us? Versus just going and raising it at the next gate. So, whether it's a series E and you're going for what's next or C to A, focus on what are you solving for? What's your intended outcome with the money? And do you have enough? It can be term dependent. So, investors typically have some ownership thresholds they're looking for. You're going to want to solve for both sides of the table. You're going to have to think about that on the round two. But that's my take. Yeah, I think the other thing I'd say John is like, I think it's really important that you try to mesh what you truly think is possible with the company that you're building and the way that you do fundraise, the way that you do fundraising. And what I mean by that is there are a lot of instances of businesses that don't raise venture, don't raise a lot of venture that have really successful outcomes for everybody around the table. In Glasgow and my case on Invoice2Go, we sold that business to bill.com for what John, like $625,000,000 or 600,000,000 or something like that. And Invoice2Go didn't raise that much money. I think in total of primary capital, John, you may know the details, but I think in primary capital, the business raised something like $25,000,000 And so if you looked at the table of ownership when we sold it, everybody was thrilled. It could because it didn't raise a whole lot. Founders were thrilled, team was thrilled, investors were thrilled. There are other cases in Excel's history where we've had an outcome at 500 or 600,000,000 or in that same range, but the business raised 500,000,000 of capital to get there and everybody's pissed. So I think it's really important to try to join up the way that you do fundraising with what you think, with the way that you wanna build a company. And there are certain businesses where it makes sense to raise a lot of capital because the market size there, the competitive dynamics are there, you want to move as quickly as possible. Uber was sort of famous for this and how many markets can you spin up before your competitors do? So there are certain instances where you wanna raise as much venture as possible, but that's not all businesses. So I do think it's important that you make the decision that's right for how you wanna build the company and what you think is possible. Cause it may be that your decision on that is different than what your friends that are starting businesses are. Certainly not one size fits all. Yeah. And from an investor standpoint, they have a portfolio. As a founder, you have a portfolio of one. And so I think just my take has been like, be a little conservative because you have one company in the portfolio as a founder. So just be super thoughtful of like, some founders I talked to try and get a little too cute of like, I'm going to raise just enough. And then six months I'm going to raise again at a higher valuation. Think you put a lot of risk. The macro environment is also here. You can have grown the business, but actually have a tougher time raising because maybe the macro environment or there's other maybe your actual market is being superseded by some other ones. Just be thoughtful. Should you aim for the highest valuation or choose a fair one that aligns to long term success? I think we saw we're kind of getting back into the heat of the market, 2020, 2021, some really high valuations. And my view is, don't go I mean, go for something that you feel is fair enough that can get you to the next round. Maybe it is the highest valuation, but maybe it's not. But raising I don't know, if you raise a Series A at 500,000,000 or something aggressive, then you've to think about Series B, how are we going to go ahead and clear that number? And you have a step function up and to the right on the valuation. And so, again, macro environment and heat of market and velocity and size of your business, I think you put a little more risk in getting there, would be my view as a founder. But obviously, you can run that game, and many do it quite well. John, what's your take on valuation? Well, I'm biased on this topic. The lowest possible. As we I think if you're going out to raise money and all of the investors that you're talking to are roughly in the same ballpark within call it 10% to 20% of each other. I do think it's really important and I realize this is self serving but to pick the investor that you think is going to be a really good partner of yours long term. Because in the grand scheme of things, if you're building something to to be a really big outcome, it doesn't make a huge difference. I'd also say I have lived through a number of instances where companies just maximize price and they brought on sort of two dynamics. One dynamic was maximize price for some investor that they weren't as excited about and then you're living with that investor for a long period of time. And that can be challenging, particularly if the market or the business changes for any reason. And then I think too, we have seen a lot of companies, especially coming out of COVID that rate that kind of optimized on price and then had to do something at a lower round price as their next round. And you can survive that, but it is really demoralizing for the team. It's really hard to keep your best people around if you have that dynamic. So I've had, again self serving, but I've had better success with our companies, even companies that raised from other firms after raising from us. Really provided everybody was relatively close at choosing the person that and firm that we thought was gonna be the best party for the long term versus just trying to get the very, very best price. Yeah, I'll put on a little different hat here. Then at adobeandbill.com, I was on the deal team looking at acquisitions there. And for folks that raise at a really high price in 2020 and 2021, the last money in didn't want to see a down round on exit. But we had trouble justifying an up round on the exit for some of those businesses. And so, I think there was a bit of a misalignment there of maybe the founder wanted to sell last money and was less excited because it had come in at a really high price. So, we ended up passing on those deals just because we weren't able to make the math work. Now, they had raised at a lower price last money, we might've been able to make it happen. So, just talking through the acquisition front, it does pin you in a little more that you got to go build a big business to clear that hurdle. How do you build trust during diligence? What are red flags on both sides? I'll just be quick, and John would love your thoughts. My mantra is answer things as fast as possible. Get them as much detail as you can so they can do their own work. Like I mentioned earlier, do their own cohort waterfall. Let them do their work. And whether it's good or bad, just let them do their work. And I think red flags on both sides would be from an operator side during diligence, the initial diligence list ends up being 10% and they're just dragging out into some massive list, or it's unclear of what's the value, or the diligence list is not appropriate for Sage of Round, then you want to think through, is this the right partner for you if this is how they think about your business? But that's all I got. John, anything you want to add to red flags during diligence, how to due diligence, best practices? No, I think going back to what we said earlier, it's really trust building exercise. So think it's always better to be upfront about any issues or anything that you're grappling with versus have the investors find it out. Because if the investors find out something that was slightly different than what was communicated in a meeting, then it's really tough to come back from that. I think it's better to just at all stages say, hey, these are the really good things and then here's the stuff that we're grappling with. I always actually really like that when I in a deck at the end is just the, hey, this is the stuff that we don't have perfectly answered yet. We have an hypothesis of how we're gonna solve it, but these things aren't perfectly buttoned up yet. And that goes a long way to building trust in a process. Yep, amazing. Looking through a few more. For John Locke, how do you screen inexperienced founders operators? This is a good one. Probably there's a lot of AI companies with young founders right now. Businesses are doing super well, super talented people. Their ability to scale or run beyond where they're at. Anything you want to note on the inexperienced operator founder? No, I think just like in anything, you just make up for it with energy and being super detailed on your business and why you're the best person to turn whatever project you're working into something special. Think it's some of our best stuff Facebook has been people that are just getting starting something for the first time really early. Alex at scale dropped out of school to do that project. So I think it's totally fine. Think you just make up for it with energy. I get that it's a little harder to potentially break in because you might not have as many warm intros. And so I think you've got to probably go a little bit further around. Either the business has to be so good out of the gates that makes up for it, or you have to probably reach out to more people than what you might otherwise, but we've all had to do versions of that. And I know we've got about ten minutes left. So how do you take the first step in meeting investors if you don't already have context? My view is find intros. But John, what works best for you? Yeah, think just taking the time to really write specific messages to people that like for instance, if let's say that Glasgow was getting Campfire going, I think trying to start and he hadn't run a company before. I think trying to find the people in the world that care about the future of ERP the most is a really good place to start. The nice thing about getting companies going today is there's just so much information out there on firms. And there are so many people that work in investments that and investing that have some particular domain expertise. So I think starting out with people that clearly have some experience or opinion on what you're doing and writing them a note that says, hey, look, I saw that you've done X. Here's my opinion on that world and this is why I'm building Y is a really good way to do it. I think general spamming is not great. So I would try to zero in on people that know something about what you're working on. And then from there, do your best to craft a message that the person's gonna read and be like, Oh, cool, this is super interesting. Let's meet and engage. Yeah, it's a good call out. Investors these days, maybe always, I don't know, seem to be writing a lot of content on certain topics. You can tell what thesis they're looking to invest in. So, us, some of them were at seed stage, some of are writing a lot about ERPs and the finance stack. And so, that ended up being our seed investor at Foundation. And so to John's point, then you don't need to convince them as much about your category. But it's more of why you within the category. How do you evaluate equity versus debt capital and what you should be maximizing for with each? This is a big question, very stage dependent, very business dependent. But for us, we have zero debt capital. No plans on taking any on. I think later stage, I've done debt deals before, a profitable business that can stomach it or has very strong recurring revenue that you can borrow against. But it does objectively, academically, I should say, a cheaper form of capital, but also at the same time does inject some risk into the business. So I think just understand the risk reward spectrum of what you're getting into there. John, know you're on the equity side, but anything you want to acknowledge you see portfolio companies take on debt? I think that's right. I don't love getting into debt situations if you have a business that's a ways away from profitability. Because ultimately the lenders just, lenders for the most part care less about equity appreciation than they do about getting their capital back plus their interests. And so the easiest way for them to do that is to be in businesses that are making real money. And so I'm always a little I don't love being in real debt situations with businesses that are unprofitable. Yeah, and you start to run the business a little differently. You start to think more about the path to profitability, or if it's a term loan, you have to return the money, you start to think a bit. How do you balance the demand of building and maintaining strong growth with fundraising? This one's super hard, especially in the earlier stages when you don't have a team around you. So I was still one of the main account execs, and I was doing all of the demos for Campfire AI for prospective customers during our fundraise. And so it'd be be with like, John Locke and then like, go demo a prospect. And it's just like, I remember it was like Saturday night and some prospective investor asked for some diligence side. I mean, it was like 10PM. And I think I like I got them the item at like 1AM on a Saturday. The later stage, it's obviously still very intense, but you'll have more of a team, you have a finance department and you have strong financials in place and forecasts typically, where at A, you just have a little less off the shelf. So, my advice is you're just signing up for two jobs. I think if you've got a co founder, if you've got a finance team that can you can lean on, or if you've got a sales team, you can really lean on. I had some of that, but most wasn't in place. It's just more about putting in longer days was just the candid answer there. What is considered an exceptional reference? Company size, prominence, use case, loyalty, I guess is probably related to to to customer references or maybe founder references. But John, what's exceptional to you? Guess related to customer references. Yeah, customer references is probably the easiest, which is just somebody raves about the product and says that it's the best thing they've ever used. That's in that particular market. That's probably the easiest of those, John. Yeah, fair. How do you best structure your cap table for the long term? This is a good one. Think raise what you need. Don't over raise, as John said earlier. I investors, I found investors will help you do that. If the management team gets a little too lean on ownership, newer investors will start to help solve for that. Otherwise they don't really want to invest. So they'll do some refreshes to help get there. That's more of a business went sideways or had some ups and downs along the way. There's some larger versions of that. But I think everyone you read online in TechCrunch or people on LinkedIn talk about the perfect cap table and at IPO, they're analyzing everyone's, the founder's ownership. Oh, they only have 5%. Oh, they only have 20%. I think just getting to any outcome, getting to any form of liquidity This is a massive event. There's going be mistakes along the way. So, best structuring it, I think, sure, there's a perfect cap table out there, but I don't think anybody has one. So, just run your own race. Again, you have a portfolio of one as a management team, so operate that way. That's all I have. Mean, John, any advice you want to give on cap table structure? I think just make sure that you're aligned with your potential investors around how much equity you wanna give to the team and on an ongoing basis, just in terms of option pool, because there are different investors that feel very differently about that. And you don't wanna run into problems post investment on one is somebody who's super frugal on options and somebody is more aggressive on them. We always take this, we take the side of wanting to get the very, very best people we can to our businesses. And so our option pools tend to be a little bit larger. But I think it's important to make sure that you're aligned on that so you don't have your first board meeting and confrontation. That's a good call out. Yeah, and John and I aligned on that one, obviously pre signing and he makes a great point. Talk to you that upfront. Well, I know we're out of time. Just wanna thank you everyone for joining. So shoot me an email. I think John was kind enough to put his email in the chat. But thanks again. Hopefully this was helpful. Good luck on your raise. If have anything very specific, let me know. And we hope to hear from you. And if you're interested in modern ERP, go ahead and reach out. Katrina put some more information in the chat. Take care. Thanks everybody. See you.