Guy Reams (00:00.11)
the first episode of the Founders Journey podcast. Today we hear a great story of two immigrants to the United States who found each other at a fundraising event. We get to hear about the excitement, risk, and the reward of a strong relationship between an entrepreneur and the person that gave them his first check. I'm Guy Reams. I'm a former technology executive. I sold my own company and then went to work for two national solution providers, Datalink and Insight. I am now heavily involved in the startup community in San Diego, California.
My goal in starting this podcast was to have real conversations with founders and their early stage investors to help demystify the fundraising process. Throughout the interviews, I will stop guests and have them clarify what they mean by certain terms and phrases frequently used in the early stages. Today, we get to hear from Sirhat Pala, who is currently the president of New Fund Venture Group, the world's largest angel investor network with over 350 expert members who invest professionally with an active annual fund.
Sirhat is also general partner of Cross Ocean Ventures, where he champions the expansion of high -growth seed stage technology companies with European origins into the U .S. market before Series A. He offers invaluable capital, strategic advice, and network connections. Today, our other guest will be Alex Lurchman, who is the CEO and founder of Corral Data. Alex co -founded and grew Ready Set Rocket into a leading data and digital transformation agency,
for the world's most iconic brands, including the NBA, Sweetgreen, Michael Kors, JP Morgan Chase, and Blackstone. He is currently an adjunct professor and leads data and AI curriculum development at NYU and Barack College. His latest startup, Corral Data, helps any organization securely and accurately use AI to democratize data and become data -driven overnight. Today's episode is a conversation between these two great individuals. I hope you enjoy it.
Welcome. Today we have an investor and a founder on our call. We have Sirhat Pala, who is the general partner for his own firm called Cross Ocean Fund. And he's also recently just became the president of New Fund. So welcome, Sirhat. Great to be here, Scott. We also have our founder and CEO of Corral Data. That's Alex Lurchman. So welcome, Alex. Appreciate it. Thank you for having me. Today, what we're here to talk about is the journey, Alex, the journey from you as a founder.
Guy Reams (02:27.726)
in your attempts to start companies, to be an entrepreneur, to raise money for your dream and to get your company going using early seed investment funds. That's our intent here is to talk to that journey. And we've, and Sir Hot's been, I think Sir Hot's been with you on that journey, I'm assuming, right? From the beginning, literally first check. So the goal here is to have a conversation that's pretty casual. We want to help people understand that raising money from...
early seed or pre -seed stage money is not that hard. Angel investors are not rabid sharks. We're actually very nice people. So that's our goal is to hear about your journey. So we'll start with you, Sirhat. Why don't you just give a brief rundown of what's exciting and passionate to you. And then we'll turn it over to Alex and Alex give us a brief introduction to yourself. Sounds good. Do you want me to tell you about what is passionate about me meeting Alex and investing?
We'll get into that. Tell us about you first. What goes on in your life? What makes you tick? I am a very unlikely founder, former founder. You know, I never thought that entrepreneurship would be my cup of tea. I grew up in Turkey and coming from a very humble, you know, civil servant family, to me, people with businesses and seem to be doing well.
I always looked at them with a little bit suspicion regarding what they had done to be where they are. And I thought that, you know, there wasn't too many good ways to be successful in life in an entrepreneurial way. So I chose working for the corporates, the big, working for the guy, you know. But then when I came to US for my masters and I found myself,
in the early days of internet, in a more entrepreneurial ecosystem. I just joined the company that raised some funding and started to not so good going down, not being able to raise funding. And I became the cheapest guy that helped the CEO extend the runway as much as possible by taking over all the...
Guy Reams (04:51.214)
all the things that were left from people that either left or had to leave. And I loved it. And I loved the journey with it. That one year was my introduction to be a, you know, to get back behind the curtain scene of Foundership. And I loved it. And, you know, that's what I did for 20 plus years. And when with the last exit,
I thought that I did enough founding and working hard and sleepless and stressed. I said, maybe I can now find founders to work with and help them. So that's what I, but that's what ticks me now. I love working with founders. Alex, tell us about yourself. So I think my story is actually that immigrant sort of way that Serhat was talking about. That's, I mean, that's my story. I grew up in Ukraine and, uh,
my family immigrated to the United States. My parents both have PhDs, but then when they came to the United States, they were, you know, like washing dishes and working in restaurants. And eventually my parents built up a small little catering company. And I sort of saw that entrepreneurial hustle that they had. And that was essentially responsible for like,
that drive that I had, I was just like, okay, that's how, that's an opportunity. So even in college, I was like the first thing, the first chance I had, I built a booking agency for bands. I mean, that was literally the first real entrepreneurial thing that I did. And, you know, after college, I got a corporate job. I was at JP Moore. I was at Prudential Securities and then I was at JP Morgan. And, but still, I still had that drive that during business school,
I started a little restaurant and then I didn't know what I was doing by the way. But you know, like we're always, we're all learning. And then post, during business school, I went, it was, I was sort of seeing not the dot com era, but this e -commerce era explode and everybody was like building an e -commerce business and.
Guy Reams (07:14.222)
At that time I was actually JP Morgan and I really wanted to do something entrepreneurial. I was an entrepreneurship major at business school. But nobody would hire me in e -comm. No real brand would hire me. So I got a job at an underwear company selling underwear online because who else is going to give somebody that doesn't have any experience in e -commerce a job?
But I was getting an MBA, so like, it at least sounded like I could add some value, maybe. So I quit my six -figure job at JP Morgan to go get an internship at an underwear company selling underwear line, and that business massively took off, and I went from being an intern to a director of e -commerce. And then I left accidentally, but it really worked out.
I left right before Amazon destroyed their business model. So I left at a really good time and started my own digital agency. Because that was the next thing that you would do. So this is 15 years ago. I started my own digital agency, co -founded a digital agency. And at that time, my competition was big media holding companies and small like
developers building flash websites and we were just using data to make smart decisions, right? And this was unheard of at that time, right? So during the course of that career, built that agency pretty aggressively, had clients from NBA, Michael Kors, JP Morgan, BlackRock, Blackstone. I mean, you name it, going in and doing digital transformation for all of these massive brands.
The agency is still around, still doing really well, but three years ago, it has an amazing leadership team, but three years ago, I was like, well, what's next for me? Right? It's like you scale a business and then just like this product thing looks really, really cool. And VC money is really easy to get. This is like, this is 2020, VC money was really easy to get. So.
Guy Reams (09:31.726)
Of course, what do I do? I'm like, yes, I am going to, I'm going to productize what I used to do as a service. How hard could that be? And I don't need any VC money, but I'll, but I'll talk to some VCs. I'll sort of figure this out. So I decided to productize what I used to do as a service and went through a program at NYU called EFL. And that's how Sir Hot and I met when I was trying to figure out, well,
I don't actually have any experience in a product, in sort of building a product or SaaS company. The business model I'm very familiar with is you charge your clients a dollar and you pay your employees less than a dollar and you make money on the difference. This whole business model of like charging your clients a dollar and then it costing you a dollar fifty to make the product just didn't really compute with me.
So I think I needed a little bit of help with that. And I think NYU's EFL program and mentors like Sir Hat were really helpful in that journey. And that's how Sir Hat and I actually met. Wow. That's pretty interesting. What was the name of the program at NYU? What was it called? EFL. EFL. I think it's an acronym for Endless Frontier Labs, which is a... Endless Frontier Labs. Yes.
How often do you think young people coming out of college get exposed to investment circles via one of those type of things at a college? Is that pretty common at NYU Alex? I don't even remember how I found out about the program, but I don't even remember how I found out about the program. I don't think they were available. I got my any and being. Maybe things have changed, so I don't. I don't think to know. I know.
UC San Diego, they claim to know, I know like Sir Hatcher affiliate, they probably do a good job as well. They have a big entrepreneurship track too, right? And they probably do a good job as well, right? Yes, San Diego State University has a good program. The NYU, the program at NYU, it's a great program designed not for
Guy Reams (11:41.806)
You're like, you don't have to be associated as a founder with NYU to be a part of that program. You apply, you're very selective. But it's a program run by the business school, by DPAC, and it is supposed to give access to their MBA students a chance to work with founders. So it's a program that is completely free and non -divisive for founders, which I love. And in...
also exposes their business school MBA students to founders and the process. So I think it's a win -win for both the founders and the students that take part of it because they really get a chance to, over the course of the nine months that the program runs, they get a chance to work with founders like Alex and see some, you know, a good chunk of that window of progress or not so far.
not progress in that time window. Seems like that's an unlikely. Many people don't think of a university in their area as being a source for getting the type of education instruction and becoming an entrepreneur, but they're definitely there. I mean, that's definitely something that people should look at, even if they're not a student. I agree. I mean, I still love to mentor at that program because for two reasons, by being non dilutive and free.
for the founders, not only they create value, but they also have the option to let some of the founders that don't follow and show accountability and progress throughout that nine month period, they can just tell them, you know what, you know, we should be focusing on some other founders that are doing it. And that way they are able to discontinue some of these organizations that, some of these founders and startups.
So there are a bunch of programs like that around. NYU is one a great example of it, but I know in San Diego, we have San Diego State, UCSD, and some other, and UST that provides some form of program like that. Yeah. And in New York City, I was going to say that, well, two things. One is the intern that we had from NYU is amazing.
Guy Reams (14:07.15)
And I kept in touch with he actually reached out. We posted a job he reached out. So we're talking right now. So like there is sort of like the level of quality of and maybe for full transparency, I'm a former faculty member at NYU. So like, but I've also had a chance to teach at Columbia. So I'll plug their program, which is Alma works and at Baruch College and they have a field center. So all three of these schools that I've been affiliated with have all done a great job in entrepreneurship. And I think.
I think there are opportunities. There are opportunities, non dilutive opportunities for founders that are willing to put in the time and sort of look into the process. Obviously nothing gets handed to you, right? So you do have to apply. You do have to sort of like go through the process, but I think that's sort of a little bit of the preparation for angel investing. And then later on for venture investing, it's just like you have to put on the show every time. So Alex, what do you mean by non dilutive?
investing. What did you mean by that when you said that? So a typical program like that is not taking any equity at all for being a part of that program. So there are a lot of accelerators incubator programs. And the way that those programs work is that they'll give you, let's say, they'll give you access to their mentors. They'll give you access to sort of pitch prep. They'll give you maybe a small, they'll give you a small amount of money, maybe let's say like,
$100 ,000, but in exchange for that, they'll, let's say ask for 8%. Right. And so there's a ton of programs like that out there and I'm not knocking them. I think there's those are great programs too. It just depends on sort of what you need at that time. For us, we didn't need, obviously had to bring the privilege of running a successful business. I did not, I didn't need that initial sort of like a bit of cash.
And if you're if you're a founder that does a lot of these programs that are maybe diluted, but they also give you a little bit of cash are not a bad option as well as well. So in that case, you were able to go to NYU and they were able to give you some initial assistance working on your pitch, working on your business model. And they didn't take a percentage of your business. This was something that you were able to get a benefit from without having to give away part of it. Exactly.
Guy Reams (16:29.934)
And the other thing that you're getting out of this, yes, you're getting mentorship, but you're also getting access to investors, right? It's, it's a deal flow for, for investors as well. And that's how you met Sirhat, I'm assuming. You came forward to this program. They helped you with your pitch. They got you ready to go, gave you some initial money to get started. And then you get to pay that in front of investors and Sirhat's one of them. Yeah. And then they give me mentorship on how to pitch to them. And then I turned around and I give them the pitch.
I was like, how is that? That's perfect. All right, great. Well, we are now officially raising. Tell me about the learning curve for you. When you first did, when you first showed up and they're like, we're going to help you with your pitch and all this. What was the learning curve for you like in those initial stages? Was that overwhelming or was it where they were? I mean, walk us through that. I think, I think there is sort of a level of skepticism that I probably brought to the table as, you know, like, okay.
I've built a business before that's successful. Like, thank you for the feedback. And it's always, well, like, how do you actually, how do you actually turn that off? Because these people have, have done this professionally, but also the experience that I might've had is not really relevant or like maybe partially relevant to building a SaaS business. Right. And I think, I think just being open minded about the feedback.
And I think like Sir Hatt to this day is giving, uh, gives me a lot of feedback on one specific area of the business. And I have to learn to be like, sir, I swear I'm hearing you. I'm you're right. I'm getting there. I absolutely swear. And then the beginning, I think it was just like, how do I like get past sort of like some of that. And then the learning curve, I think we're the biggest learning curve is learning about fundraising. Cause they don't teach you that at school. They don't teach you how to look at a term sheet. They're like,
You don't learn this in business school. You don't learn how to look at a term sheet or business school. You don't look at sort of liquidation preferences or dilute like any of the stuff that is sort of coming out later or or even how to like construct the pitch. And when you were working with this, these people helping you at NYU, they helped you understand concepts like the term sheet and what liquidation they were. They able to walk you through that? Yeah, I think it's sort of.
Guy Reams (18:52.238)
It's a process. It's not like, hey, here's the class on this. It's more like you're on a journey and you just have access to people. It's call a friend at any time. And that call a friend is not just sort of like access to NYU faculty around that, but also access to people like Sir Hod to be like, hey, I'm, I'm really sort of struggling with this situation or I'm struggling with like, I mean, the things that.
you're dealing with are everything from pricing model of your own business. How do you lock down your first customer? How do you even do your first contract with your first customer? Like any of that stuff all the way to, okay, now we're getting some serious looks from investors. How do we create a level of FOMA? So like we could actually close because sort of at the end of the day, everyone's interested, but no one's writing that first check.
Do you remember what the first pitch was like your first pitch that you remember that day? Yes, I did. The first pitch I've ever made for the business was before we even started the program, you have to pitch sort of to get into the program and you pitch it the way they look at it as as though their investors, while they might not be putting in their own capital, their NYU is putting in the time, right? And they don't have to look good. They don't want to put up a bunch of program. They don't want to have a bunch of companies in front of.
in front of their investors, right? So what they're essentially, so I remember that pitch was like, I think we did okay. And, uh, but then you're like, okay, I don't remember what percentage make it, but it's like tiny, tiny percent. That's like in the, in the few percent that make it through. I'm just like, oh my God, this is amazing. And then the, for the pitch after that is, uh, sort of the, I think it's like demo day style pitch where you're.
essentially pitching to a massive group. And you do this a few times. And during that process, you're essentially getting feedback afterwards. We're like, and I remember the first time we pitched someone, it might've been Sirhat that told me afterwards, just like, I don't think they understood your pitch. I don't think they understood your product. And it's very humbling to be like, okay, let's start over. Sirhat, what was,
Guy Reams (21:18.702)
When you first heard Alex pitch his first company and you were in the audience, what were your impressions? What was going through your head as he was up there presenting? I was thinking, I don't think they understand what he's talking about, but there's something there. I might be the guy that actually told them that, that, you know, it was good, but I don't think most people understood what you meant. Um, like the idea, um, so I, you know, like, um, I.
I liked the idea of what he was trying to build, partially because from a previous business, some of the pains that he was talking about was very real to me and I lived through it. I solved the pain and the problem myself. It took me more work and resources than I originally dedicated to. So I...
I felt close to the pain that he was describing and I understood the magnitude of the opportunity. So that's what I was thinking. And I felt like I know I could help Alex in what he's trying to do. I'm fascinated by the fact that both of you are immigrants to the United States and both of you had this thirst for entrepreneurship that came out of coming to this country.
both of you had to like reset. And when you're here, it's like a reset, right? Here you are, Alex, at one of the premier universities in the United States, and you're meeting a fellow immigrant and he's the one that latches onto your investment. That's just fascinating, isn't it? Maybe it takes one immigrant to understand another one. I mean, there's people that have talked about the quote unquote American spirit, which is the idea that you can come over from the other world and come to this new world and make something happen.
You talked about that your parents came here and they had to start all over and that created a hunger in you. I'm interested in that. It seems like there's an element there that it really takes to be an entrepreneur. It's that, is that passion to create something or how would you phrase that? I can say that like as immigrants, there are two factors that play into it in my view. One is being a different lens.
Guy Reams (23:44.174)
because your experiences are different. So when you come to a new environment, by nature, you're able to see things with different colors. So that is one. And I would call that an advantage because growing up as a born American, you don't get that experience. So it's harder for you to see that. And then the second factor is the necessity.
You have to look deeper, you have to be more observant because even though we live in a so -called equal society, the opportunities are not equal. And as immigrants, we have to work harder, show better results and look deeper to be able to make a new life for ourselves. Similar to Alex's parents, you know,
I mean, I grew up in Turkey. I went to a great school in Turkey. When I graduated, finding a job was never even an issue. I found myself a great job. And when I came to the US for my MBA to San Diego State, and I'm graduating, all of a sudden, not to the extent of PhD, working in a restaurant to make their life, not to that extent, but I...
had to be starting and resetting myself. I couldn't find the jobs that I could find. In fact, I'm pretty sure if I went to school and graduated, it was much easier to find a job for myself. I wouldn't have looked deeper into maybe starting and taking a chance. So I feel very fortunate that I had that reset experience.
Alex, you mentioned humility a couple of times, the humbling experience. It seems to me that when I've heard founders come forward and ask for money from an investment channel, it always seems like the ones that have that ounce of humility are the ones most likely to get funded. I wonder if it's because there's a perception that they're more teachable and that they'll actually listen. Is that your impression? I mean, it seems like humility is a strength when it comes to investment. I think it's just the fact that like you're possibly more...
Guy Reams (26:09.838)
Yes, maybe you're sort of like, to your point, like a little bit more open -minded, right? Like you are not taking things for granted. You can sort of like work ethic isn't questioned, right? Like it's, I think it's one of those things that like, there's probably as a data person, there's probably some level of correlation between all of the things that I just sort of like shrunk together.
Right. And I think a lot of times like, look, we're human beings. We're just trying to use heuristics to make, to make incredibly hard decisions. And, uh, in a few seconds. Right. So I think sort of at the end of the day, uh, if I was sort of in Sir Hot Shoes, like the things that I would be looking for is just, I don't have enough data to see if this company is going to be successful or not. So my only data points are how is this person across from me? Like.
How are they coming across? Is there something there? Because I think early stage investing is so hard. You just really don't have any data points. I would not want to be in Sir Hot Shoes. There's a business model, but those business models, they get pivoted so often. So you're not backing a... Yes, you're backing a business idea, but you're also essentially backing a founding team.
backing the founder. So I think, I think it's really, really hard. So there's an interesting play going on here that I want to dive into. Alex, from your perspective, you're worried about not being able to provide enough information to convince somebody this is a viable opportunity. And you're sitting there, why would somebody take the risk on something that's so early stage? I cannot give them any guarantees. That's an interesting observation. Sirhat, why would somebody at your level, when you met Alex, be willing to put money towards or
or even your time, not only your money, but probably your time, I'm assuming. So why would you be willing to do that on something that's just so undefined in such early stage? That's a deep question. Now that you're saying why, right? Are you sure? What were you thinking? Because you know, you're joking inside. I know what I'm thinking.
Guy Reams (28:32.75)
Because as early investors, and there is a reason why I think they call investors like us angel investors, because it almost feels like charity at the beginning until it's not. I think somebody from Newfound said that in one of those meetings and it stuck with me because you have to put your...
I mean, you have to put your ROI return on investment muscle somewhere else. And then you have to see the possibilities. And then once you see the possibilities, there is that belief in even if there is a small percentage of chance that this thing.
can work out and this founder is able to pull it, then the upside would be so big that all the nine other times of the 10 that it fails, that one should make up for that, you know, all the other failures. So it's a, it's a wishful optimistic thinking that is not scientific and it's not very data driven. It is,
almost having the faith, seeing how some founders are able to build great companies that are able to return so much shareholder value that you believe you can catch that one small chance. So in this case, when Alex presented,
and you heard him for the first time. It wasn't necessarily, you weren't looking for him to absolve you of all risk. You had already known because you were in that room that you were going to be accepting risk of any investment you did. Rather, you were looking for his vision on what was possible to see if you would get excited enough to take the risk, right? Yeah, one of the, and I do see this a lot with many founders. I know Alex and I, we never had a chance to talk about this, but.
Guy Reams (30:59.086)
Many founders that I interact, they feel like when they talk to early stage investors, that they have to talk about why this is not risky, why this is de -risked. And they try to convince you that, oh, there's no risk in this, there's no risk in this, you don't have to worry about this. Where in fact, as early investors, we take almost a little bit,
Like that's a turn off when you feel like, okay, if there's no risk here, there's no risk here, there's no risk here and there's this much potential, what am I missing? Why are we even having this conversation? The issue is not about de -risking, it's about identifying the risk and formulating some sort of potential return.
that opportunity and now pricing it out and say okay if there is five percent chance that this thing could be this does that make that 95 percent failure worthwhile and it is as early investors that is the calculation that we have and we have to do it and we sometimes make mistakes not because we do not
see the risk, but sometimes in fact, we make that mistake because we see the risk, but we don't calculate the upside right enough. So that even when we succeed, we fail. So Alex, you gave your first presentation. You met Sirhat. Walk us through what was next for you. How hard was the work once you got some initial interest from people like Sirhat? What was next for you in your journey? I think it was just how do you actually close, right? So I think it's like, okay, so we have.
a bunch of people that have displayed a bit of interest, right? And the way that obviously, you know, I think it's almost like a dance. I think they sort of like, no one teaches you how to have this dance, right? It's how do you get people to say, hey, if we actually are able to get to X amount in the race, can I, like what you're trying to do is you're trying to get people to stop circle people, right? You're trying to say,
Guy Reams (33:26.094)
Hey, I think it looks like I have half a million or a million, whatever that number is that you're raising. I think I have this amount from the people that I've spoken to. Right. And I think the way that you typically need to do this is you're essentially trying to make sure everyone feels like, okay, this is moving forward in the right direction. Right. So being able to say like, Hey, in the beginning, it's almost like, Hey, I think based on the conversations that I've had, that we'll probably have about five.
10 people that are interested in investing or 5 to 10 funds or whatever it is, we think we're going to be able to get to this number and close by this date. And this is sort of like how we're thinking of pricing it. Right. And you're almost getting a little bit of that feedback early on, right. Versus just sort of, but at some point you have to move from feedback to say, Hey, it looks like we're going to be able to close within a month. Can I count? Can I count on you?
for this investment and then how much would you be able to put in? And just putting people on the spot at that point and saying, and I'll get back to you once we have all the numbers tallied up to see what we have space for. Right. And then once you sort of get a little bit of that commitment, right. Let's say you're probably, let's say 50 % of the way there, then I think things get a lot easier, right. When you're raising half a million dollars and you have 250 ,000.
say, hey, we have half of our raises already committed, right? You can say soft committed, but half of our raises already committed. Do you want to get in on this? We're going to try to close in the next two weeks. And then you're sort of like, the last 100 ,000 is almost, like, it gets incrementally easy. I'll tell you, our last round that we did, we were three times over subscribed.
And the first check of that round was, I don't think that round was that hard, but it was still going, it was still, who's going to, you have to break the dam, right? Who's going to say, okay, yes, no problem. But by the time you're sort of like reaching the end of that round, people are just like, hey, no, I really want to get in on this. And I remember Sir Hatt and I were having this conversation that he was saying.
Guy Reams (35:54.382)
No, no, no, you have to take new fund. You have to take money from a few new fund investors. It's important that you do this. I'm like, sir, hot. I am beyond overcommitter. He's like, no, no, no, Alex, you don't understand. You have to do this. And so you're at that point, you're almost figuring out who do you say no to, right? And we have to say no a lot, right? A lot more than you said, yes. But at the beginning, it's sort of it's vice versa. Almost everyone's saying no to you.
So as more people join, the more confidence it gives the other investors is what it sounds like. Yes, but it's also the more confidence it gives the founder, right? Because they don't need that check. They're sort of at that point, a lot of it is trying to understand where there was going to be additional strategic value from that additional incremental check, right? So I want to, I want to just pause real quick because every time somebody mentions a terminology that might be unfamiliar to people, I want to bring it out.
So you mentioned the phrase oversubscribed. Can you describe what that means from a founder perspective? Yeah. So let's say your intention is to raise for easy math, a million dollars. And, uh, once you get to $1 .1 million, you're oversubscribed. So that doesn't mean that you're not going to take that additional a hundred thousand, but that means at that point, it's more than you were planning on taking. And so.
If you're especially raising super early on, every dollar you take more than you were planning on taking could be very painful dilution because you were planning on taking it at sort of, let's say, planning on taking a raise at a $6 million valuation for easy math. Well, if you're taking a million dollars at a $6 million or at least $5 million.
that's easier, man. If you were taking a million dollars at five million dollar valuation, well, okay, I'm giving up 20 % of my company. It is what it is. But now let's say all of a sudden, you're now taking $2 million. Well, I don't know, in a five million dollar valuation, well, you just gave up 40 % of your company, you just can't do that. So early on, you would have priced your round differently.
Guy Reams (38:14.318)
So that's why it's, yes, you can go, you can go a little bit above, but once you start really being oversubscribed, you really want to make sure that every dollar you're taking really is necessary. This is an interesting concept. We should probably talk a little bit through this idea of setting the price for your round. So when you go out to raise money, Alex, how did you know?
how much money to ask for? What was your learning process to figure that out the first time you asked? How did you know how much money to ask for is, I guess is the question. What did you go through to get to that point? I mean, I don't think I've learned. I'm still learning on the job, but I think a lot of it is modeling, right? You're modeling your scenarios, right? There's sort of like this best case scenario. Everything goes right. That never happens.
Uh, and then there's sort of the worst case scenario and then they're sort of like in the middle, right? And the way that you think about this is in the, um, you're sort of like thinking about this in the form of like timing or like cadence, right? Of these things. So if, uh, if you need to raise, uh, if you need to, let's say if you need $3 million, uh, to be able to get three X, cause essentially you want to.
triple every year, right? And last year was amazing for us and we went seven X, right? But that never ever happens, right? That was sort of like, typically like if you can do three X every year, right? That would be great. And so how much do you need to raise to three X, right? Especially early on, right? And that's how I would find was sort of like restarting this. That's the typical advice that I would give to.
Uh, to my younger self is just like, what do you need to raise to three X? And then what do you need to raise to make sure you have two years of runway? Right? So those are the two sort of like. The two things like, and obviously there's more that goes into it and I'm oversimplifying it, but those are the kinds of things that I was at least looking for. It's like, how much do we need to raise to do that? And then you're, you have to make sure that you have to make sure that the.
Guy Reams (40:27.79)
you're also planning for things going wrong in that process, right? And that's how I would be thinking about it. And then anything over that is again, being oversubscribed. I'm sure Sir Hatt has a perspective as an investor of how much he would want somebody to raise to make sure that the company doesn't run out of capital too. In the investment world, we use this word all the time called valuation. But when I heard you talking,
You explained this in a different way. It's really, you're setting the price for the company and how much investment you raise, it would be the percentage of the business that you're giving them control over, right? So you're effectively saying when you did your first raise, you were valuing the business at what was it? Six million? You said, I can't remember, but you raised it a certain valuation. And so if you give away a certain amount,
You just simply take the top and divide by the bottom. And that's the percentage of the business that that investment group now owns. It's actually really simple. Why do we make it so complicated? So hot, we have to use all these fancy words. You made it sound simple, but it's, I don't think it is simple just because of. Yeah. Just because of the fact that, you know, we do not have a Zilla for, for, you know, you know, there are organizations like pitch book and crash base and so forth that.
have some market valuation indicator databases, but at the end of today, the best valuation is having just enough people that wanna invest in you that is more than what you would want to take in so that you can.
get to choose the investors that can create value for your company. Because we keep talking about smart money. And I know some founders that I talked when we are especially having a drink, they think that that's actually funny because money is money. But in fact, as investors, we like to think that there is something as smart money where you would want to get investors on your side that...
Guy Reams (42:44.014)
is going to be more than the check size that they write to you. And more importantly, they will be the people that will carry you to the next investors that you will have in the 18 to 24 months later when you're raising another round. And that is actually the name of the game. The investors, the series B investors are brought to you more likely by your series A investors and seed brings you to series A and so on and so forth.
So you want to come up with this magic valuation number that will help you get more investors that want to put in money to you that you are willing to take in so that you get to choose. And it's not that angry in my own. So Alex, you're really asking two questions, really, it sounds like. You're asking the question, how much money do I need to grow my business to the next level?
And number two, what percentage of ownership am I willing to give away? And that's where I start to come up with that valuation number. And now it's a, now it's a negotiation at that point. Are the investors willing to value you that high for the percentage that they're going to get for the money they're giving you? That's what it sounds like we're talking about. Yeah. And I think that there's also sort of like some benchmarks, right? And so if you are trying to raise, let's say, depending on sort of the stage that you're raising at, right. You're also dealing with.
an investor that wants to have a certain amount of control, right? So we're talking about, okay, I'm raising $2 million. The reality is like at every round, you're sort of giving up, let's say like 15 or 20 % of that level of control. So you could sort of back, you could sort of back into what the valuation of your company is. And obviously there's some complete runaway valuations out there, right? And so I think, but like for all...
for all intents and purposes. That's how I've been at least high. I've always thought about this. It's like, okay, we are raising X amount based on that level of raisin based on the fact that in this round, they would probably want to be able to take 15 % of the company. What is the valuation look like? Right. And then you could sort of maybe everything else is sort of negotiated on the margins. Right. Now, sir, had there are
Guy Reams (45:04.942)
Like you said, there are benchmarks and there are some things that evaluate early stage valuation. But in reality, when somebody like Alex is bringing a brand new idea to a group like you or there really is no value in the business yet. Really? Is there, it's just an idea at that point. So how do you value an idea? Especially at the very, very early stages. I mean, there are, you know,
the idea that indicates somewhat the potential, but there are so many question marks, there are so many assumptions that needs to be validated. So there's really no clarity, no visibility for an investor. There's an amount of money that is needed and that amount of money needed is determined by what needs to be built.
what can be achieved in the next 18 months or so with that money so that there will be less assumptions, more validations, more clarity that you can use to come up with a better, you know, more clear valuation that you can defend. So, who the founder is, their track record,
And what Alex was talking about, like that kind of dance, you know, like, you want enough people so that then you can actually start asking for the, you know, the checks because nobody wants to be the first. And that's why it was early stages as investors, we are really looking at each other.
Guy Reams (46:56.43)
Who else is on this deal? Because we all want to trust it. We are giving the right decision about that company, but it's great to have some other respect, you know, people that you respect on the same deal because that gives you a little bit more assurance. And if you end up making a mistake, at least you feel like I wasn't the only one that made that mistake. There were some other smart people that made the same mistake as I did.
So that's what makes it so complicated, even though you're right. There's so many assumptions, there's no clarity. How can we even put a number on that? What an intimidating thing though. Think about it, Alex. You're coming in front of a group of people that you don't know, and you're asking them to value the ideas in your head at $5 million, to use your example, right? That's interesting. I mean,
Think about that. Like when you were a kid, like when I was a kid, I would have no vision in my mind that I could go to somebody and tell me that the idea in my head is worth $5 million. I mean, that's right. Just the idea alone is worth $5 million. And if you give me money, I will convert my idea to something valuable enough to pay you back.
Are you saying you almost need to be a sociopath to be able to do that? Maybe, maybe, maybe we're onto something. I think that, yes, that is such a crazy leap of faith for investors to take into a founder with an idea. And obviously the sort of talk, listening to Sir, how to talk about sort of like, how do you do risk it? I think one of the things that.
Obviously, as like sitting on the other side of it, like I was like, well, if I was an investor, what would I be looking for? And I would, I would think it's can this person actually, though they have experience executing on ideas, do they have, do they have the ability to actually hire people? Right? Like, can they build a good team? Right. Because I think, idea is nothing unless you can execute on it and they're not executing on this alone.
Guy Reams (49:12.91)
They have actually, do they have actual experience hiring people? Do they have experience actually selling through to their ICP? Right? Do they have actual experience building, like, it's not just building a product. It's actually them selling it through, right? Do they have any of that experience and do they have any relationships with sort of potential early, early companies, right? So those are probably like the four things that I would.
sort of like, again, I'm not in an investor's shoes and I think it's a really hard place. You know, I'm trying to sort of empathize on that. So it's not that I'm also trying to be risked, but I always like sort of want to want to at least understand where an investor is coming from to make sure that at least like the way that we're presenting this doesn't, again, doesn't de -risk it, but sort of like gives them.
all of the signals that are necessary to make a smart and involved decision. In your conversation, you mentioned ICP. I think you meant customer profile, right? Is that what you're referring to? Yes. So why is that? Why is it? Why is it? Why did that call to your attention? What's so important about that from your perspective? I think that if you have an idea that, uh,
that requires sort of selling your product to somebody that you've never sold to before, that you've never experienced their pain. I think investors should be very skeptical of your, do you really understand that problem? Because if you don't understand that ideal customer and you have no sort of experience with that, I think, well, it might be a really great idea, but can you really even connect with them? Do you understand their -
Paypoint, can you actually even have design partners or sort of like your early sales traction with that type of customer? You just say, I'm going to go and disrupt banking without any banking experience. Or I, like, it's like me saying, I'm going to disrupt architecture and how architecture is done because I think we can bring AI to architecture. And it's like, I don't have any credibility to talk about this. So.
Guy Reams (51:30.798)
I think it's also like figuring out as it's like, is this a space that you really truly understand? So you could, again, you risk it a little bit for your investors. So Sir, how it looks like from what Alex has taken us down, the investor is not necessarily taking a risk on the money or the idea. What they're really taking a risk on is the person they're giving the money to.
Can that person execute? Can that person deliver to the customers? They say they can. Perhaps you can give us your thoughts on that. What are you looking for when you first hear from this brand new entrepreneur or trying to raise money? What is it you're looking for in that person? It all boils down to the team and the people, because I mean, at the end of the day, what is it? What is the business? Business is a leader or group of leaders with a vision and idea.
that have some resources and a process or a workflow to create that. Money is the resource part comes into play. But out of all those four elements, you know, resources, idea, people, and the processes, the most important one is the people because it's the people that can come up with the ideas, processes, and resources.
But the other three cannot do that. And that's why everything ends up going down to the founding team and how they execute and how they think and how they give their decisions. Because many of the great companies we know, they have all started as something else. I think I read some place that almost
If you take up the utility and the banks of the Fortune 500, 90 % of the Fortune 500 right now does something that initially that was not their idea as a business. It's the people that make sure that that idea came out of that process. That's why as investors, we could give different names, but as we are analyzing the opportunities, as long as the...
Guy Reams (53:56.398)
the idea or the intentions of that founding team is big enough and you believe that they have what it takes to be able to come up with it and they're able to raise funding or find resources to be able to have enough time to figure this out, then there is going to be a business and that's what at the end of the day we're looking for and...
Like the program, the EFL program or some other accelerator programs out there gives investors like us a chance to interact with the founders a little longer early on to see how they break down problems, how much they care about the problem that they're trying to figure out because that's very important. I mean, my one of my personal.
major turnoffs as an investor is to find, to come up with some great teams that have a solution that they look for a problem to fix. Because you know that, even if they could do it, it's gonna take a whole lot of time to find a solution that you really want the founding team to care about that problem. Because they will have to work on it a long, long time.
Both of you mentioned this, but I just picked this up. Both of you said the same thing. You both said you have to really understand the problem. Like if you're raising money from people, you need to understand the problem that you're trying to address. And care. You know, they're not always the same, you know, that there are great founders out there that understands the problem, but they just don't care enough to keep at it.
So Alex, you raise the money, you get some people to start committing to checks that you've got their commitment. They've agreed. I'm going to write you a check. And you finally get to the point where you have a lot of people writing you checks and you're now oversubscribed. So you finally decide to cut it off. I'm done. My fundraising is over. It's time for you to describe the moment, the time to describe the process of you actually getting the checks for the first time.
Guy Reams (56:18.862)
Walk us through that. Cause a lot of people haven't experienced that. So I thought it'd be fun to listen to that from your perspective. Well, I think if you're like most startups, uh, you don't celebrate the wins, right. And I think that that's sort of like a inherent flaw is just like, are we sigh? Uh, whether it's, um, the, whether it's sort of like having, when you see like you have over seven figures in the bank, like just like saying like, Oh my God, like there's like,
like first million dollars in the bank, you're like, oh wow, that's great. But you don't even process it. You've already spent that money. You might have not spent it physically yet, but mentally, you know how every, if you know what you're doing, you already know how every single dollar of that money is allocated. Before that money comes in, you already have people that you've hired.
and your payroll for that money is hitting as that money is coming in. And maybe you have a 48 hour window between that money hitting and the people that are starting. Because it's not just capital, it's also time, right? And so like, yes, like you, I wish.
In business that I celebrate, not just the corral data, but even before this, like that, I would take more time to celebrate the wins, right? But yes, you, the moment that happens, it's great. You're going to cover the payroll for people you've hired before this money even came in or the PR agency you hired to sort of make sure that everyone knows about this win and to make sure that you're positioning this to you.
perspective customers, right? And I think that that's how, that's how we're always operating is in this like rush, right? And I think it is important to take a step back and appreciate that for a second. But I am guilty of not even, in that moment that that happened, it was just like business as usual, like what's next? And I mean, even when we signed our first,
Guy Reams (58:32.43)
massive enterprise client that's like we signed like a Fortune 50 company. Right. And I don't think I even stepped back to celebrate that. The next thing was making sure that we can beat the timeline that we told them. And what do we need to do to make sure that we hit that? You made promises for that money. Right. I actually probably remember that moment.
as clearly as Alex, like because I, you know, like with the first round, finalized and I had to remind Alex to like, you know, just take a moment to appreciate the success because he was already thinking about the next round. And because I guess apparently he already spent that money mentally and he was looking for the next one and.
As I'm sure you have been in the same position too, one of the things we need to do as engineering masters and advisors and mentors is to remind founders to take a moment, take a little breath and not only feel good about it, but also communicate that success to their core team so that they get the chance to appreciate it too.
This is really an amazing world. If you think about it, this world that we're talking about, this early stage investment world, I don't think there's a lot of people that really understand. I mean, Alex, you say it's harder now to raise private investment, but honestly, is it really that hard? I mean, everybody, since I've been a young man, everybody used to always tell me five years ago, it was easier to raise money. They've been saying that for 30 years. Now everybody always says yesterday, it was easier to raise money.
I mean, I think I see the barriers. You have to convince people to write you a check based on your ideas and your ability to execute. They have to really believe that you have the problem figured out and that you can solve it for a particular customer. I think that's what we've established here. But once you know that, or once you're confident in there, it sounds like there's. Sounds like there's lots of possibility to raise money and get that first check in your bank. I think I'm only going based on obviously like.
Guy Reams (01:00:58.51)
Cause as we're getting bigger, sort of like what we're asking for is bigger, right? But also, I'm just going based on sort of like looking at the numbers from Carta where I believe it's investments and early stage are down by something like a third, right? And so obviously I'm not in that we're past that world, but I could sort of, I'm just imagining that it's probably a little bit harder and also seeing.
the softening of valuations, right? Where we are raising on that next level. It's just like seeing the runaway valuation. So that we're in 2020, there are some companies that are still able to do that, but for the most part, like those multiples are gone. By the way, you mentioned Carta. Do you use Carta quite often? That's how we raised the first time around and then we switched on to a different platform. But I mean,
At the end of the day, I mean, all of these cap table management platforms are great help founders so they don't have to use spreadsheets to keep everything. It's an easy way to put all the data together so you don't have to do it all manually. Exactly. And just like manage all of your investors. And when you say valuations are.
not as big, people are not willing to value the company so high. They want to reduce their risk effectively. Yeah. Like I think the fraughtiness of like, um, like obviously we're not in a zero interest rate environment, right? Like just start there. So there's, uh, and we are competing with, uh, for, uh, for this race, we're competing with the public markets, right? Like you.
can instead of investing into a private company, you can invest into Nvidia stock, right? Like, I mean, there is sort of a world where public markets are, are competing with it, with a private company investments. Right. So I think we have to be very, I think as, as founders, we just need to be very cognizant of that. Yeah. You definitely have to produce more value to the investor than what they could get through a standard, you know,
Guy Reams (01:03:16.302)
through a public market or through some other means. I mean, then it's just why are we doing this, right? Yes, exactly. So you get your check. Now you mentioned both Serhat mentioned series A, series B, blah, blah, blah. And you mentioned my next round. So let's talk that through. Did you always enter in this knowing that you would have to raise one round and then raise another round again?
Did you always have that in your head or did you not understand that when you first got into?
I, yeah, I don't think I, I think I was always looking at like 18 to 24 balance, right? Cause you're, yes, you want to like, oh, theoretically on paper, you will model it out that you will need to do another race, right? And I think we're sort of in the fortunate situation that if we didn't raise another dollar, we would not go out of business. We would be still be cashflow positive. So I think we are in a fortunate situation right now where.
We are raising because we are raising to scale the company versus raising to survive. I think that that's by complete hustle, but hustle luck and everything else kismet, right? Like it just worked out that way. And that's like a really good situation to be. But I think, I think like as a, you're most of the time, I, at least from my perspective, it was just like survival, right? Early on. If you don't get this check, you don't have a business.
Exactly. I mean, it's really not simple. Do you worry about dilution or complications with diluting your ownership of the business as you raise more money from different. We Sir, I use the phrase series a series B, but we're really referring to is just the next round of funding. No matter what letter we call it, it's just the next round of funding. So Alex, what are your worries about that? Or if any, I mean, obviously if you're putting in so much.
Guy Reams (01:05:13.966)
like of your life and your energy into something, right? At the end of the day, you don't want to like, when everything is said and done, you want to be able to one have something to show for it and then have a bit of control, right? And then the other thing is going into series A, making sure that you have 50 % of the company by that point, right? And obviously there's, you know, series A investors can like,
They can do things to sort of get you there, but that's not guaranteed, right? So anything you can do to make sure at a minimum, when you're going into Series A, you at least have 50 % of the company. I think that's sort of like, at least the golden rule that I've always learned. Again, it could be wrong, but, and that's how I'm thinking about dilution. It's not even like, it's not like about greed of how much of the company you have. It's do you have enough of the company?
for you to be invested still as a founder in continuing to grow and scale the company. And if you don't have enough, right, you're also potentially putting your future investors into a situation where do they really believe that you're going to work as hard as if you have more of that company. So you're saying you just to clarify, pre -seed early stage investment.
or angel investment, you're collecting money from those types of people, those types of organizations. And they're probably writing you a lot smaller check sizes, right? The check size is much smaller. You're using those people's early investments to get the business going. And then at some point, you go to what you're calling a series A from some venture capital fund. And you're hoping by that point that you will at least still retain.
50 % plus of the business.
Guy Reams (01:07:09.294)
Exactly. That's interesting advice. Serhat, do you agree with that? Is that the way you would view that or anything you would add? I think it's one of those unwritten rules of the game. More in the US than other places, I would say, is that to be able to raise a good series A from reputable, good VC firms,
it is a good practice to have at least 50 % of the shares still dedicated to founders or the employee pool in total. And if not, that is the case, then you might be demanded by those future VCs to make that happen by recapping at the most likely at the expense of early remasters so that there will be enough.
uh, you know, equity left for the, for the, for the team, uh, to be able to raise money because. So you're really doing yourself a disservice if you allow yourself to lose too much control of the business before you get to a major round of funding like series a, because you, you might have to, you might have to put more money back into the business in order to pay off some early investors to make more room. Yeah. If there, there is a, there, there, there.
Again, not a rule, but the general practice is, you know, as you're raising angel, like pre -seed, very early stage funding, you want to dedicate about 15 % or less of your equity to be diluted. And then from that pre -minimum viable product, MVP stage or prototype stage to the series A, that big
we see money coming in, what we can call seed or some versions of seed, you really don't want to dilute in total anywhere from 20 to 25%. So by the time you sit down with the series A, you have 50 plus percent left. Oftentimes the series A would mean another 20 % dilution and then every other possible series B, C, D might be in another eight to 15%.
Guy Reams (01:09:33.678)
But most companies, let's keep in mind, are acquired somewhere between Series A and Series C. Very few companies end up raising CVE and then go IPO. Most of the companies are acquired by the time they're at the Series B stage, if not earlier. Alex, how early in your process here were you thinking about...
what the exit would be for your company. Sir, I was just talking about the exit. Is that an early thought or does that come later or does it change? What's been the evolution of that in your mind? I think the only time I actually ever think about it is when an investor asks me about it. And so then you have to really think on your feet. They're just like, well, I suppose that this is sort of the scenario, but in reality, like I think it's all it's one of those things where.
I understand why it's important for investors to understand, but I can't, this is not something that I, nobody has a luxury of sitting around and pontificating about your sort of like exit. So the only times I ever think about it, the exit is when I get put on the spot in a two hour due diligence process where somebody grills me on the exit or.
We did have sort of like two preliminary conversations with potential acquirers. And I was just sort of like more curious than anything else. And so I entertained both of those conversations. One, I entertained a little bit longer than the first one, but still, just so I could also be prepared to have that conversation with investors. The reality is, we don't think about, like, I don't think any founders really think about this.
They're just busy running their business. You're thinking more of what it's going to take to get that next customer, get that next release out. You're not necessarily thinking about, you know, getting a big payday. But to be fair, as investors, we're asking that question, not really expecting an exact answer. It's just one of those litmus test -like questions just to get the understanding of the mindset of the founder, because the...
Guy Reams (01:11:59.982)
when you're dealing with such a big potential rate of failure, you want potential success to have a very high multiplier. You don't have a number of that multiplier in your mind, but you do not want to put one and expect to get back three because you know your chance of success in your investment is less than 30%, 20%. So we just want to make sure that as soon as there is a...
you know, seven, I'm sorry, eight, nine digit number, a founder will not go about and say, okay, now I'm going, this is enough for me, which is very reasonable to do for a lot of founders. But as investors, we want to at least understand the mindset of the founder with that question. When I, when I asked that question, what I'm expecting the founder to say, if I'm making a, like a, let's say I'm making a hundred thousand dollar investment.
I would be expecting the founder to say, I'm looking to exit at a hundred million dollar valuation in three years. Now that's totally impossible probably, but that's the kind of thing I want to hear. That's what I'm hoping to hear. Now, whether I hear it or not, I don't know, but you know, that's kind of what you just want to know that they have ambition. Like they, they're, they're, they're, you know what I mean? There's, there's an ambition there. That's, that's kind of, but as a founder, the way that I always think about it, it's like, I know what you want to hear.
But like, why are we playing this game? Like, I wasn't born yesterday. I know what answer you want to hear. Do you want to just make sure that I know that I know the answer that you want to hear and say it back to you? And so like, yeah, I think it's a very funny. But to be like, like you are, you weren't born yesterday, but there might be some founders out there that were born not too long ago because I have had.
responses where somebody is raising with a valuation of $10 million. And when you start debating 30, 40 million, just by the nature of their response or the things they don't say, you're thinking, oh, that might be the case. That's possible for him to think like that. And, you know, that you want to, you know, you want to put that into your calculation at least because you get some other.
Guy Reams (01:14:23.79)
So advice to founders, say a hundred million dollars if you're raising a $10 million valuation. Not even. Yeah. Always take whatever, whatever the valuation is today and multiply it by 12. That would be my advice. If whatever, whatever it is, take it and multiply it by two. This is like, you know, like magicians. You're not supposed to, you know, give out those numbers, right? That was a code of conduct among investors.
I'm sorry, I might violate the sacred trust. Oh, that's hilarious.
Guy Reams (01:15:11.886)
A lot, but like the sort of like the product of all, but the idea is the same, right? Like we're solving the same problem, but we learned sort of along the way. I think when we started, we brought on, and I think this is like a lot of companies, they brought on sort of like anybody that would be willing to give them a dollar, right? So it's like your early customers are whoever you can sell to, right? Like, and I think being opportunistic, I think is absolutely fine, but also.
being opportunistic also leads you to, because you want to share growth, obviously, leads you to taking on customers that maybe are not your ideal customers, maybe the features that they want and what they want in the product is different than like your, so I think a lot of it is just finding the balance between, you know, sort of this like, like listen to your customers always and,
But if you listen to like, but you don't want to, you still want to have some conviction, right? And I think that that's sort of like a really, like, uh, it's a really, really sort of delicate balance. And I think we, we've sort of been, I guess, zigzagging a little bit in this process to really nail down, not just sort of like how our product, uh,
Uh, the problem is the same, but how our product delivers on it and what features we're building and how people are interacting with it and sort of learning along the way, but still having our conviction. And, uh, like, uh, what we're doing is when we started the company, what we're rebuilding was like a complete data stack, like a modern data stack and all in one modern data stack. Right. And I think, um, sort of what has evolved is our interpretation of a.
How does somebody interact with this modern data stack? Like what are their expectations of it, right? And I think once you go from having three or four or five to a few dozen customers, then you have a lot more variability in their use cases. And then you could start to really understand, are you building the right things? You could really pivot based on a lot of numbers versus being sort of like pivoting based on one or two customers that...
Guy Reams (01:17:35.662)
somebody might call like their design partners, right? So yes, we have to pivot a lot. We are still pivoting every single day because if you're not, somebody's going to eat your lunch, right? I think what our customers are looking for, they want something that is incredibly turnkey. And in the beginning, to me, the biggest opportunity I saw was like, well, we're going to provide a solution that modern enterprises can just plug into.
And then what we also realized along the way is that they want to just plug into it and for this to work out of the box. But they also want a ton of like, they want to feel like you're going to give them the support when you need them, right? And so now our enterprise customers, they are requesting that they have 10 hours a week of human support. They might only use 15 minutes of that support, right?
But they want to sort of like feel that. And I think like the zigzag on this one was in the beginning, it's very much mechanical Turk where you use automation. Like the automation is really humans doing the integrations and making it work. And now as you have more customers, they don't want to be, you're almost pretending that that automation is human based. Right. And I think like that's.
The big learning for me too is like, yes, in the beginning it's all about like, how do you sort of like create this like really shiny, amazing thing that everybody wants? And then eventually it's, you're pivoting into like, oh, this thing works incredibly well, but I want to make sure that there's human support because you're dealing with larger enterprises that want that, whether they use it or not, doesn't really matter. So there is a lot of pivoting along the way. I used to think when I was younger that, that,
this discussion you're having about faking it, automating it later. And then also the discussion you're having about customization gets worse as the customer gets bigger. I used to think that big companies had that figured out. But when I went into a large enterprise and I worked for a big solution provider, I realized the bigger the company, the bigger that problem is. It doesn't get better. It gets worse.
Guy Reams (01:19:58.542)
Cause cause the larger customer you're playing to the more opportunity for customization or more demand on customization that you get. So how do you battling between those two is not, not an easy science because you want to cookie cutter thing because your costs are based on that. Your production is based on that. Your process is based on that and adding new features just to appease or get a new customer is, is a delicate dance indeed. I think that's a really hard one. I think that at least what we've discovered.
is that customization doesn't make or break your sale ever. Does this actually solve problems? And can you generate an aha moment the moment they start using the platform? If they want some level of customization, additional features, you're prioritizing those the way that you... We have never lost a customer because we were missing a feature.
It's I think. I don't think that that's how it works. You're either solving a core problem or you're not right. And maybe somebody comes back. Somebody says like, well, when you have fine grain permission controls on the group level like or just like yes, absolutely. Let me build you a feature that everybody absolutely struggles with because somebody in your enterprise IT wants to pick at this. I think that that's.
that's sort of a cop out for why somebody wouldn't buy the product. And I'll give you another really amazing example. We were doing, we were selling through to a major Fortune 50 company that ended up becoming a customer. And when we were selling through to them, we jumped on the call. And one of the things that they were really, they had this question about like, well, so if something changes in our data, how will, like, do you provide anomaly detection to make sure that you really know about that?
You really know about this, that you're staying on top of this and all of this stuff. And my question was like, are you guys doing that right now? Can you sort of like walk me through how you guys are doing this right now? It's like, no, but theoretically we know that this is possible. So I think a lot of times we just have to remember to like take that step back and like really understand are they doing this because they're putting up sort of walls or is this a real concern?
Guy Reams (01:22:27.47)
And not building a feature just. Just because somebody said like jump. Yeah, I think it's a it's a process of building value. Like Corral data is building a value proposition to your customer. And as you said. There is a core problem that you're solving and that is where your value is centered. I've always found that if a customer is asking for a feature because they're trying to overcome an objection by somebody, I always.
say, sure, it's going to cost this much. And then usually what they say is, OK, well, we'll think about that if we want you to do that. But we'll go ahead and buy the core product.
Sure, I'll add ACL level security on every object, but it's going to cost about $2 .5 million because that's how much it would take for me to develop that. So I'll add that to your contract. No problem. Sure. Yeah. I think our approach is similar, but maybe slightly less audacious where we try to...
Well, until I think until we get to a hundred customers, I think we, uh, we can't afford that one. But, uh, I think our approach is always like, well, who is this going to serve? How many people, how many of our customers will actually get value out of this? Right. And I think that's been our approach. I think most people actually understand that they're just trying to appease any, uh, negative voices in their organization to get a purchase through. Right. So they're just, they're just doing their job to try to build.
Consolidation, which is actually is probably a good sign that customers are doing that because that means they want your product. They're just trying to figure out how to pass all the various objections through. So Alex, do you find yourself being the chief salesperson and chief as the founder? Or how did that go? I mean, you're the chief everything, right? I mean, you're a chief motivator, chief salesperson, chief marketer, chief negotiator. I find that.
Guy Reams (01:24:32.59)
when you, especially early on, you have to be the chief salesperson. I think founder led sales are not just founder. They're not just sort of a generating sales. Like you're understanding, you're understanding your market. You're understanding your ICP incredibly well. You're understanding what problems you're solving. You're understanding how to prioritize your product backlog. I think you're understanding sort of like, um, the,
your talent acquisition challenges, like where, who do we need to hire next? Are we going to be able to like, I mean, I, I think founders giving up control of sales super early on. I'm personally, I'm not, I'm not a fan of that because you just start to get too far away from the customer. And at the end of the day, like, I mean, that's yes, like we're, we have one mission, which is to serve our customers, right? We can complicate it, but that's really it.
No, that's good advice. I think it's, it's very important not to, not to expect a salesperson who doesn't have your passion and vision for the problem to suddenly become the answer to solve it, to not having to do that anymore. Um, you, so Sir, had it mentioned smart money, which I think I'd like to just go back to for a second. So when you first got your checks and you brought on your investments, how valuable was.
the people that invested in you outside of the money they gave you. I think it really depends on the investor, right? Like some investors like Sir, hot is literally text message basis of like, I remember like, uh, got a two, I think there was like a 200 page, uh, contract that I got from a big corporation. And I'm like, what do I do with this? Like there's like some questions that you're just saying.
They're almost like rhetorical questions that you just want to like as somebody that you can commiserate with. And sometimes it's like, they're not trying to get us into a major real estate company in Europe right now. Like, so there's sort of like different levels of like smart money that you're getting, right? Like our value that you're getting beyond the check. And I think, I don't think sort of like in the beginning, it's like whoever's going to write me a check.
Guy Reams (01:26:50.446)
Smart money, dumb money doesn't really matter, but like eventually, once you're sort of towards the end of the round, every dollar needs to be smarter and smarter. Meaning the people that are coming on board, the people that are going to be part of your business, either from an investment or as an employee needs to be adding a ton of value to you. Yeah, absolutely. I think also like the relationship isn't just for like, I mean, it's a long, it's a long -term relationship, right? So.
It's how do you, and you know, everything is great when everything is up and to the right. Right. And then when that isn't right. Or like you have a major customer fire you, or you have a, or you have your co -founder quit on you. I mean, how do you, how do you have that conversation with someone that you have not built a relationship with that is just the check that was just a check. Right. And I think just remembering that.
to check your you're getting into a relationship with someone right and so making sure that you really do like the people that you're getting into this relationship with. Help me understand this or had you give money to Alex for him to then bring you his problems all the time and this is something you enjoy doing. Yes, because.
As former founders, you have to explain, explain the mentality behind that. Because I don't think people, I don't think people really understand that the people like you and me are into this because we actually love this. Right. This is, this is fun for us. So explain that mentality. I mean, I, you know, when you become a founder for so long, especially if you're lucky or, you know, I get, I take it as lucky enough to fail more than a few times.
or missed opportunities terribly more than a couple of times. You feel very, you feel at home in this very chaotic, you know, unknown territories and things coming up all the time. I mean, that's, I think that's what makes a lot of people having a hard time being a founder because you want things to go well, you know, every single day.
Guy Reams (01:29:15.31)
But as founders, you get to learn that when you go to the office in the morning, it's not about if, it's about what is going to happen early that morning that you have to take care of and things are going to keep coming up. So you get addicted to this and this is kind of as investors or investors, our way of being close enough to that type of action, but not too close that I actually have to take care of it. It's so much easier for me to, you know,
You know, when I get one of those messages from Alex to give him a call and just, you know, maybe calm them down or maybe ask him a few questions. Um, and I, like in my case, I, it might sound cheesy, but I also feel almost the responsibility to do it because they said immigrant founder that, you know, started a company in the late nineties.
You know, I stumbled upon a couple really, really great ideas and started building companies. But I didn't, I think, try maybe hard enough to find investors that could, beyond writing a check, kind of guide me through some of the things that I should have done. And I did miss major opportunities just because I didn't have anybody.
you know, when you're an immigrant, your, you know, grandfather, your uncle doesn't know people to connect you with, to talk to. So I almost feel like, oh, today was a good day because I was able to say something to a founder that triggered an idea or made him a little less likely to make a mistake.
to fail or missing opportunity. And I, I, you know, I, that's, that's how I have a good day. Yeah. I mean, I have to say, this is not an immigrant thing. I think I was raised in a family that was not very wealthy. So we didn't have access to capital. The idea of asking somebody for money was not even in the realm of existence for me. To me, a hundred thousand dollars. When I was a young boy, a hundred thousand dollars a year job might as well been a billionaire.
Guy Reams (01:31:43.118)
So the idea of asking somebody for a $7 million check or whatever it was Alex you asked for would have been completely out of recognition for me. Right? So, so you're right. I made a lot of mistakes when I owned my first business. I capitalized it all myself by borrowing money. And I had no idea that I could even go ask people for money. And I probably had a business model that would have worked for that, but I hadn't even thought of it, right? Never even crossed my mind.
All right. Well, we're going to about wrap up. So Alex, tell us, I want to ask you a little bit about what's heading next for, for your company. Cause I think that would be cool to hear. But I'd also like to hear from you based on our conversation today. What advice would you give to early stage founders are looking to raise their first round? Wow. That's a, that's a big question. So I think, I think really like, obviously there was this book, nail it, then scale it. And I always sort of like took that advice as whatever. Right.
It's like, okay, of course you got to nail it. It's like, no. It's like, of course, right? But I think.
In like investor capital might seem free to you, but it's not. It's incredibly expensive. The least expensive money you could possibly make is from customers. Right. So I think like my, my advice is always how do you make sure that when you're taking, and for every dollar you're taking, you actually really need that money that you are not taking this money before you need it.
that you're not taking this money because you think it's free money, that you're actually, that you actually have a really good plan because this is going to be substantially more expensive than, uh, that's going to be substantially more expensive than you think it is. Right. And so you're giving up such a big portion of your company, uh, early on, right. And you're giving up less and less for, uh, your proportional, you're giving up.
Guy Reams (01:33:48.43)
a lot less later on. So how do you make sure that you put yourself in the best position possible? And I think being capital efficient super early on to make sure that every single dollar you have can get you as far as possible so you can get your valuation as high as possible because you have more proof points. And obviously less risk means higher valuation, right? Like sort of at the end of the day and the bigger opportunity.
That's, that's how I would sort of like think about it. Just like get customers as early as possible. I recently had a chance to talk to a founder that had eight employees and they have not had a single customer. And I was, I was very like, I was sort of like thinking about that. And I was just like, how do you know you're even building the right thing? Like, I don't get it. Right. So I think that's.
That's my number one, that's my number one advice and number two is just focus on a problem you know really, really well. Don't try to go after a problem that you stumbled upon that you congenitally sort of have been thinking about that you think is a good opportunity. Focus on problems you know incredibly well and also you know.
have a idea of where your first 10 customers are going to come from. Because if you don't, I think it's going to be really, really hard to get off the ground. So those are sort of like the three. And then what's next for Corral, I think. So what we've built today is we built a way for any business user to connect their data and then have actionable, insightful reporting out of the box so they can talk to all of their data and it works, it's secure.
It's accurate and it's sort of, well, what I think is just game changing for any business user that used to wait weeks or months for somebody to build them a report. And then even if somebody builds you a report, you would have to then try to figure it out in this report. And by that point, it would just be too late. And you're like, Oh, but I actually need this other stuff piped in there or it's missing this or whatever. You played the song and dance.
Guy Reams (01:36:13.166)
And I think we've solved that already, and I think we've solved that in a really simple, easy to use way. And I think what's next for us is.
Using all of this data that we're sitting on, how do we also then start to provide you actionable recommendations that you can take right within our platform, right? And that's the part that I'm really fascinated about, which is if we're already sitting on your data and we could give you recommendations and then we could see which recommendations you are actually taking within our platform. Eventually does do you trust our platform enough? Do you trust Corral data enough?
because we've been giving you really good recommendations on actions you can take right within that platform, that you would trust us on autopilot to start acting on those recommendations. And I think where the world is moving to is like reporting and business intelligence and all of this, this is like a temporary phenomenon, right? This is for the maybe like, say the next decade, right? Eventually the world is moving to, you have this data and you trust your platforms to make.
smart decisions based on this data. And we just want to get ahead of that because the world is going to move into that direction. So we are acutely focused on really solving for that. And yeah, so that's what I'm incredibly excited about. 80 % of our R &D is really focused around sort of moving the world into that direction. That's really fascinating that Corral data would move into the.
observability, the machine observability idea where other machines can use the data that you've corralled together as the observability point to make decisions. That's really fascinating. Thank you, Alex. Surhat, I'll leave the last words to you. Any parting advice for people that were exactly in Alex's situation when you first met him?
Guy Reams (01:38:14.734)
You know, Alex shared some really great, you know, great points there about, and knowing the problem and that being close to sales. I can maybe extrapolate that a little bit. I think as founders, especially if you have not done business before, it is tempting to start focusing on the big picture and the strategy.
and, you know, like the building of the machinery. Yet there are for a very long time, it's good to be as close to the areas that can create advantages for your business in an offensive side and also areas that can be problematic in a defensive side. Sales.
is a great offense, not only offense, but defense too. Like, you know where you have a customer service problem or how to automate the onboarding and things like that. But then don't underestimate leadership and culture, I would say, is a key point. Because when you're growing a business from two to three to four to five,
For a very long time, every single employee that you will be hiring, a core team member, is going to constitute a large portion of your team. And every person is going to be a chance for you to start building your culture or strengthening it. So I would say just like you want to be a part of the sales process.
and be the chief salesperson, you also want to be the chief people person. And as long as you can be involved with all the hiring decisions and don't underestimate the power of culture, because at the end of the day, good people have options and good people would like to be around other good people and work on problems that they also care and want to be a part of.
Guy Reams (01:40:40.622)
something that bigger than themselves. That is what I believe is a good human behavior. So don't underestimate the importance and urgency of building a culture is what I was and. All right. Well, with that, uh, appreciate your two's time. Thank you very much for talking to me. Thank you for listening to this episode of the founder's journey. You can follow us at founders journey .fm.
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