Keep Your Eye on (All The) Balls

Straight to you from Denver, Colorado, this is Precursa: The Startup Journey. We share the ins and outs of building a tech startup from inception to launch to revenue and beyond. If you’ve ever wondered what building a startup from scratch really looks like, you’re in the right place. With full transparency and honesty, we reveal it all about Precursa on our ride from idea to exit: the wins, the lessons learned, and the unexpected twists and turns.

Hello everybody. Welcome back. This is Precursa: The Startup Journey. So today I want to dive in a little bit, so there’s kind of two parts of what I want to talk about today. So the first part is the reality of building a startup is keeping a lot of balls in the air all at once. Okay. So I want to talk about that. I want to talk about what does that mean in Precursa, what might that mean for your startup, how does that, you know, how, how might that look for you and you can kind of compare to what we’re doing. And then the other piece I want to talk about is the pitch deck, the proforma, and how all that comes together in your conversations with investors and when you’re presenting and actually pitching live. So, first of all, let’s start with this week, we did a bunch of, we did a working session with our developers to kind of talk through, you know, we have this educational piece of our platform, right? This e-learning piece where you’re using videos and audio and worksheets and transcriptions, and to learn about the different sections so that you understand, what’s the goal of the next piece that we’re going to give you some action on, and then you’re going to take the actions. So we give you exercises, and those exercises are in all different kinds of formats. You know, some of them are like, here’s a big text box, you know, journal this, or put in all of your information. Or some of them are, you know, add a line for each competitor. You know, some of them are like the blue sky is a couple of different formats. You can do it in a sticky format, you know, like sticky notes on a whiteboard with different colors, or you can do like a mind map, right? So because each phase and each step in each phase in each module, you know, each step in each module in each phase is different, is really different, we have to build the platform in such a way that it’s flexible enough to pull in exactly the information that we need to pull in in order to be able to give you good feedback and good insight. Right. That means though that the platform isn’t going to be generic, right. So we have to do some deep dive architecture to think about how do we build something where every step along the way might be a little bit different, you know, in, especially as it comes to the exercise. So we did, we did some, um, thinking through that, you know, and along with that, all of that content has to get created, right? And so I went through and built out a lucid chart, you know, wireframe or, or flowchart, whatever you want to call it, that kind of outlines what videos go at what place, you know, which phase are they in, what module are they in? And we started to define what are some extra credit pieces that we could put on, you know, we call them extra credit pieces because our architect did, I thought that was kind of funny, but extra videos, extra credit type things where, you know, we give you the overview and we’re trying to do it in five minutes or less so that you can keep moving at whatever pace makes sense for you. So you can get to the good stuff, right, which is implementing what we’re teaching you and doing the how. But there may be areas where you’re like, I want, I want to know more about that. Like I want to understand the how a little bit more deeply, or I want more examples. And so extra credit videos, give us a way of giving you that, that additional content, but not forcing you to go through it, if you’re like, you know what I got, I got this, I’ve done a marketing strategy before I understand what that means, right? So we have to create a system that gives us the flexibility to make changes, to add things later, to figure out places, you know, we’re, we’re, we’re always looking at the data to figure out where do people stop and why do they stop there? Like how far do they get? And there’s, you know, a definite drop off, you know, here somewhere in the  middle of phase three, why is that? What’s that content? Is it too overwhelming? Do we need to break it out into a couple more steps? Is the exercise too difficult or the how isn’t clear? So we have to give ourselves enough flexibility that we can continue to evolve the actual process to make sure that people are getting value out of it. Right?

05:10

So in just those two things, I haven’t talked about the content strategy and making sure that we’re getting blog posts every week, making sure that the podcast is getting edited and released every week, making sure like the advertising strategy and the landing pages for the. I mean, I haven’t talked about any of that. What I just talked about, those are two enormous pieces that contribute to the success of Precursa. And we have to keep our eyes on all of the balls that we have in the air. Right? So I’m explaining this because what I want you to understand, your journey as a startup founder is a unique one because you, and I know we’ve talked about this before, but I wanted to dive into it a little bit, cause I’m just, I’m experiencing it myself this week, right? You will learn, you will have to teach yourself. You’ll have to get really disciplined about learning the ability to keep the strategy, keep the vision, keep the big picture alive and well in your brain. Right? You have to hold that vision, but you also have to make sure that all of the individual pieces are getting executed on and you’re not dropping any balls, right? I mean, now this is why, at some point you want to be able to hand pieces off to people who you can trust, to a part of your team, or maybe they’re co-founders or, you know, we, we can get into building your team in another episode, but for a little while, sometimes it’s longer, and it’s probably always going to be longer than you think, as everything is in building a new venture. But for a while, you are going to be the one, keeping your eye on everything is development moving forward, is any, you know, stuff that goes on top of development. So like for us, that’s content, that’s the actual curriculum for the initial MVP phases of the platform, plus all of the data that we want to collect. And what does that look like? And giving, uh, giving our developers and our architects enough direction that they can actually pull all those pieces together. It’s also making sure that all of our content strategy and our marketing strategy and our advertising strategy, that all of that is working together. That our social media is getting regular updates, right? It’s also fundraising. And one of the things I think I’ve said is a large portion of your job as the founder, as the CEO of a company, is you’re the one that, that investors want to hear from you are steering the ship, you are driving the thing. And they want to know because investing is all about relationships. They want to know, can you handle it? Are you trustworthy? Do you have the skills and the talents and the abilities and or do we need to supplement you to get you those skills and talents and abilities. Now, some types of investors, they just want to be able to give you money and they don’t want to be advisors. They don’t want to be involved in the day-to-day. They don’t want to be on a board. They don’t want a board seat. And that may or may not be good for you, depending on if you really need some help or really need some advising and or mentoring in particular areas. Sometimes your investors can be those people. And sometimes they’re really great, right? We would love to get an investor here in our friends and family round, who has some experience with direct to consumer. Now we’ve put a lot of emphasis on our, our, uh, strategic partner strategy. That’s funny strategic partner strategy. Uh, we’re putting a lot of emphasis on that because Paige and I are very good at B2B development and strategic partnerships are about B2B, like getting other businesses who do direct-to-consumer who have the ear of your audience already to promote you, you know, or to endorse you or, or be affiliated with you or whatever that is. You know, so Paige and I are really good at that. What we want to know is we have to have a direct-to-consumer strategy. I mean, we’re, we’re doing advertising, you know, social media ads on Facebook, a Google AdWords ads, but there may be other strategies that we should pursue. And someone who has more experience with direct to consumer will be able to tell us what those things might be and help us understand how to do that. Right? So we’d love if that was one of our investors. If it’s not, however, we’re going to find a mentor, we’re going to find someone to put on our team. We’re going to find someone who will be that person and who will help us understand those edges. Right? So I know last week we talked about this a little bit. We’ve talked about it a few different times but as I am, and I know this comes back to fundraising, but that’s because all of the other details in your company are going to seem infinitely easy compared to fundraising. And the reality is, as you grow as a CEO and a founder, eventually the majority of what you’re doing is public, you know, I’m gonna say public relations, but investor relations and fundraising, and being the face of the company. Eventually you’re going to hand off all of those duties and responsibilities to a sales and business development team, to a marketing team, to your advertising team, to your content team, to your curriculum development team, to your platform developers, you know, your, your software developers, your mobile app developers.

10:35

If you are someone who’s like, well, but the whole reason I got into this is because I love to write code. You need a business co-founder. You are not going to; through our launch, I am writing code just as much. Well, not as much as, as my other guys, but I am writing code, right? Because we need all hands on deck. We don’t have a lot of budget to be hiring a bunch of people to do that. So I can step in nights and weekends, and, you know, days when I have a couple hour hole in my schedule, right, and do that work. That is not a long-term strategy though. And so if, if my goal was to build myself a company where I get to be working on software I want to work on, I would have to bring in someone else to actually be CEO of my company. I can’t be CEO of my company and writing code. So I want you to understand if you’re someone who, who started this thing because you’re a technical person, you may need to be the technical co-founder in your company and be the CTO, or be the CIO, or, you know, whatever technical title you, you, you know, want to take. You can’t be the CEO and write code. So the reason it always ends up back around fundraising is because your job as a startup founder eventually, and in the beginning, in addition to all the other stuff you have to do to get you to get yourself off the ground is investor relations, fundraising, strategic partnerships. And ultimately you are the originating source of a lot of the business development stuff, right? So don’t be intimidated by that. You know, Rome wasn’t built in a day. And, and the reason that I say it always takes longer than you think it’s going to is because it’s not just about all the pieces getting built and all the things, all the things getting done that takes longer than you think, although that does, but it also takes longer than you think it’s going to for you to keep transforming yourself into the human, who can take on the next level of responsibility. And that’s okay. You know, it, we, we are not, we are creatures of personality, we’re creatures of habit. We know ourselves a particular way. And sometimes it takes creating new habits, building new muscles around who you say you are, who you, who you think of yourself as, in order to get to the place where you can take the next step and, and grow that, grow the business a little bit more. And one of the struggles that we always have with, you know, especially venture capital, and then a lot of times PE investors, private equity investors, is that they want growth fast. Like they want it so fast. I mean, the only way to get a 10 X return in five years is some seriously fast growth. And I mean, you’re literally growing 10 X in five years. You’d have to be growing double every year in order to hit that at a baseline. Right? And that’s actually not great statistical math, but it illustrates the point, right? You have to double your business every year for five years in actually you have to quadruple your business every year for five years in order to get to a 10 X. So, because a double would only be a one X well, but it actually does work out, okay. I’m not going to get into the math, but the point being that’s fast growth and organizations, aren’t really designed for fast growth. Sometimes fast growth can crush a company, can break it, but more often than not what actually gets crushed or broken with too much fast growth is the person leading the organization. And so I’m, I’m saying that because you have to be really intentional about who you take money from, what your purpose in taking that money is, and preparing yourself for the realities of what that money is going to mean in terms of outward pressure on you and the business.

14:38

Okay. So we’ve talked a little bit about keeping all the balls in the air, right? And it, you know, we are at a place where the platform is probably somewhere between 70 and 80% done, but the reality about software is the last 10% takes 90% of the time. And the reason why that’s true is because that last 10% is when you figure out all of the edge cases that you didn’t think about. It’s when you figure out, oh, if a user does X, Y, Z, instead of U, V X, Y, Z, like they skipped something, things get a little weird and we didn’t really anticipate that. So do we stop them from being able to do, like all of the edge cases and all of these pieces that you can only start to imagine and envision, and really see the edges of when you’re looking at the thing when it’s done, start to become really apparent, and this is why agile methodology became, so you’ll hear that a lot as a founder. If you, if you’re not a technical person, you may not hear it as much, but you will hear it. And the whole, the whole mentality behind agile development has to do with being able to pivot quickly, get something out there so that users can start interacting with it. You know, in our case users, are QA and, and our stakeholders and things like that. Right? Cause we’re not live, but whoever your users are can start using it quickly so that you can find those edges faster so you don’t over architect something that then takes a lot of time to tease apart and then rearchitect to solve the problem that, you know, you didn’t realize was going to occur because you weren’t thinking about that when you were designing it, right? So it’s being able to build something more quickly, get feedback on it more quickly and adjust and pivot to the feedback more quickly, right? In waterfall method, you were trying to think of every possible thing you could from the beginning, so that when you put something out, it was a hundred percent bug free, which by the way is impossible. And it’s a, it’s an unrealistic way of building software. The reality is there’s, there’s a happy middle ground, which is let’s get enough definition that we can actually build something that provides value, but let’s try and do it in such a way that it’s not over architected, it’s fairly simple, it’s fairly straight forward. And that way the complexity comes as we define the edge cases and as we figure out that we’ve hit on it, and this piece is fairly solid. Then we, then we can, you know, solidify that, you know, in, in more of a formalized process, right? So keeping your eye on all of these different things is one half of your job. And the other half is raising money, understanding how to talk about what you’re doing, which brings us to the second piece of what I want to talk about today, which is related to building your pitch deck, building your proforma, putting all of the pieces together from market analysis and, uh, competitive analysis and understanding how much can you reasonably expect to get of the available market that’s out there. How are you really defining the available market that’s out there? Do you have that right? Putting all of that together and being able to tell the story, and then tell all the details, the nitty gritties, to potential investors, right? So the first thing that you have to do is you have to understand your market. Understanding your market means not only understanding your users, which we’ve talked a lot about user validation and understanding your user personas and understanding how they perceive the problem. But it’s also then understanding how many of those types of users are there in the world. How many of those types of users are there in your initial target niche or your initial target area? Right. So for example, for Precursa, uh, entrepreneur.com estimates, there are about 550,000 new entrepreneurs every month in the United States alone. Okay. That’s a huge number. So this encompasses people who are starting brick and mortar businesses, like, you know, retail shops or restaurants, or, you know, brick and mortar where people are coming to a place where you have a business, right? So that’s included in there, new tech startups are included in there. New startups that are like, so much of this now is encompassed in tech, which is like the really crazy thing. But it used to be like different types of companies that wouldn’t necessarily have like a brick and mortar, but like, like insurance companies and things like that. Right. But all of those different kinds of businesses that are, that are getting started every month in this country are included in that 550,000. So for us, and remember, that’s the number that are incorporating or setting up a particular structure, a named business with, you know, with a record with the government somewhere, whether that’s an EIN number or, you know, registering yourself with the secretary of state where you live or whatever that is. So 550,000 people start a new business or become an entrepreneur every month in the United States. So we have to do a say, okay, how much of that is really our target audience, which for our MVP, we’re niching down to anyone who has an idea that includes a tech element, whether that’s a SaaS or a mobile app or an IoT device, you know, an internet of things, an internet connected device. How many of that, of those people who are in that number, which, you know, represents the entire available market, are our niche. Now here’s the thing that’s more difficult to find out.

20:37

A lot of those people are wanting to build an app or wanting to build a SAS or wanting to build an e-commerce site or something like that. Right. But a lot of people who would be for Precursa are only at the idea phase, which is long before they’ve ever registered a business. So it’s more difficult to pinpoint from that particular number alone, how many people are really available to us. So then what we do is we say, okay, how many active tech startups are there at any given point in the US. Generally on average, there are 170 to 180,000 active tech startups in the United States at any given time. And that number really hasn’t changed too much over, you know, since like 2016 through now, which is 2021, right. It’s really been fairly consistent because the turnover rate for startups, tech startups is very, very high. We’ve talked about the statistic, you know, VC backed startups. Some of the statistics say one in nine or one out of 10 are successful, so nine out of 10 fail, 90% fail. We’ve heard even from investors we’ve been talking to, you know, as part of this process, we’ve heard even more than that. So one in 12 or one in 15 is the rate that some, some VCs are seeing. So a lot of them are failing and falling out just as much as new ones are being born. Right? So somewhere in the neighborhood of 170 to 180,000 active tech startups. Again, those are startups that are registered businesses that are actively doing things that, that come up in someone’s radar for a, I forget where that statistic came from actually, that might’ve been Startup Biz. I can’t remember, but in order for that to be measured by, you know, and put out as a statistic, there has to be some activity going on. So again, that still doesn’t tell us how many entrepreneurs, how many future entrepreneurs are out there coming up with ideas right now. And they would be right for the Precursa process to get them to a place where they know what kind of business they’re actually starting and incorporating all their documents, which is, you know, one of the very last pieces that we talk about in the idea validation step that we’re putting out for MVP. So essentially what we’re doing is we’re saying, okay, according to all these statistics and, and knowing that once we release the very next pieces of curriculum we’ll be putting out, we’ll be also serving startups that already exist, that are through the idea phase, and now they’re into revenue, and they’re trying to figure out customer satisfaction and keeping, you know, customer retention and growing their, their organization and scaling, you know, uh, replicating what they’re doing. Right. We know that eventually we’re going to tap into that market. So, so, so basically what we said was, okay, let’s just assume that of the existing startup market, let’s say that there’s an additional 30% on top of that 170 to 180,000. So let’s say there’s another 50,000 businesses or, or people out there who want to be entrepreneurs who are actively thinking about an idea, and they’re the ones that are Googling, now what do I do? Right. And, and they haven’t started a business. They don’t show up in this statistic anywhere else. So that gives us, let’s go on the low end 220,000 active people in any given year in the United States who are potentially, who are right for what we’re building in Precursa. Well, obviously we’re not going to get a hundred percent of that market. We’re certainly not going to do it right away. So for the purposes of our market research and for developing our available market, we say, okay, two thirds of those people either don’t want our help or don’t think they need it. Okay, fine. So that leaves us with about 70,000 people, roughly in that available market who probably want what we’re doing and who need it. Right? So that 70,000 active in any given time in the United States. Now, if we want to hit, usually on average, if you can, if you can penetrate somewhere in, in a market like this, if you can do five to 10% penetration within your first five years, that’s a really good metric to try and hit. Now in our market, we can do that because they’re there, although there are a lot of incubators and accelerators and masterminds, and a lot of people are trying to help early stage entrepreneurs solve some of these problems, they are doing it in a way that’s very, one-on-one. You have to apply to their masterminds, or you have to apply to their incubator. We are giving you something that gives you not only the roadmap. So what next, what now, now what, you know, we’re answering that question every step of the way for you, but we’re also giving you action actionable steps that you can take, and insight and feedback on the action that you’re taking so that we are able to do this on a scale that is much larger than anything you, you will see in an incubator or a mastermind or whatever, right? Like 10,000 people at one time could be on the platform, getting value, participating in the live events to get their questions answered, but getting value with only the roadmap and the learning content and putting in your data and getting that feedback and getting the score.

 26:08

So we’re able to do this on a scale that all of the other pieces don’t really have at this point. So our competitors are really limited to things like Coursera, where they have courses and they have quizzes, but they can’t give you any feedback on your particular idea and the viability of it. Startups.com, which has tens of thousands of videos. I mean, they’ve got so many great experts and so much great content. You sort of have to sort through that and figure out well, what’s relevant to me. And, and again, it still doesn’t give you that feedback on your particular idea and how it compares to others in the platform and then others in the startup community. Right? So because we, those are our competitive advantages and our different differentiators from our tar, from our true competitors in the space. So for us getting five to 10% of the market over five years is not unreasonable. So for us targeting what, what let’s see 10% would be set. So 3,500 to 7,000 users active in the platform within five years, that would be our goal. So now we have some real numbers to work with, right. Now we also, because we did our competitive analysis and we understand who our competitors are and how they play in our space, we can start to understand how do we price ourselves. So startups.com at the time of, at the time of this taping is like $30 a month, 29 in $19 or $29 or something like that a month, we have more strategic feedback and insight and more hands-on right. So part of our initial launch is going to be an integrated Slack group where you know, different, you know, you you’re, you’re organized into communities based on where are you now with your idea, what’s your score? What, who are the people who are closest to you with that? And, but you can also tap into other pieces of the community, right? So there’s all these different Slack channels that you can tap into, integrated right into the right into the platform or in your, you can add it to your Slack interface, however you use that, so you can keep up on it. Right? And one of those is directly to me, right. Directly to a team of coaches trained by me who can answer strategic insight questions, right? And so a lot of times what we’re doing, what our plan is to curate that list of questions, bring those into live events that we’ll do once a week or a few times a month, maybe a  couple times a week, depending on, you know, sort of the responses that we’re getting, and answer those questions live for you in a way where everyone is getting value, because we’re, we’re not really focused on your particular situation other than to make sure that you get an answer that fits your situation, but other people learn from that as well. Right? So we are providing a lot more, I’m going to say group dynamic with being led by a qualified person who understands the ins and outs of what we’re teaching you, which in the beginning is me potentially, you know, Paige and Sarah as well on certain pieces, and eventually a larger team of coaches and people who I, who I will train in this process. Right? So to say that our price point should be similar to Startups.com, isn’t really a fit, right? So then you look at Coursera where there’s a lot of free courses on Coursera, right? But there’s also a lot of very high value courses that people will pay between 500 and a thousand dollars for that usually are somewhere between four weeks and maybe a semester long. Right? And so we said, okay, let’s say that someone wanted to go at their own pace, and let’s say that the average person engages with the idea validation process over the course of four to six months. And in a one-on-one setting, that’s worth 10 to $20,000. But if we can do it at scale, let’s say that if you, if you join for a year, we want you to be able to get it for a thousand dollars, right. $999 for the year. If we back that into a monthly, what we really want is we want people to sign up for a year, and then we realize the revenue over the course of the year, because we want people to stay engaged. And we know that it takes a little time to get the value and to get that muscle working of being in the platform, doing the content, gathering all of your information, talking to people, putting in your interviews, like going through the process. Right?

30:45

And so we know that the true value is over a four to six month minimum period of time and longer if you’re in the community and you’re going, you know, you, you make your go-no-go decision and you say, yeah, I want to build this and you keep going through the curriculum, right? So we want to encourage people, so we give them a discount for signing up for an annual subscription, because that’s actually, what’s better for you as a founder in this process, we want you to understand and engage on a long-term basis. Some people just want the monthly option. That’s fine. It’s a little bit more expensive if you do it monthly, it’s $99 a month, which would actually translate to closer to $1,200 a year. Right? So I’m telling you all of this, first of all, because this is exactly the process that we’ve used to get to the place where we can actually put together a proforma that shows real revenue numbers. You know, we had to think about what’s the attrition rate, how often monthly users are going to cancel. And, um, you know, are going to turn over, are going to cancel at a much higher rate than annual subscribers because annual subscribers will want to get more value out of the platform because they’re paying for it. Right? Whereas monthly subscribers are going to be more like the more casual people. So in order to build an accurate model, we have to understand all of those pieces, not only about our particular market and our particular competitive landscape, but we also have to understand how do annual versus monthly subscriptions change your business model? Like how much more likely is someone to sign up for an annual subscription in your business model. And these are all things that we’re making guesses right now, very, very educated guesses. And we’re being very conservative about our guesses because we know that as soon as we start, as soon as we launch, and as soon as we get people in the platform, we’re going to learn more about their habits. Where do they fall off? How long does it take them to fall off? How long are they actively engaged in the process before they fall off? And we’re going to be looking at all of that to not only increase customer retention, but to better forecast based on new information and what we know. So the reality of the proforma for a startup is that it’s going to be wrong, right? Like you need to have a plan. And, but stuff never goes to plan. Paige said that in our founder session a couple of weeks ago, right, you need to have a plan and you need to know what you’re working towards, but nothing ever goes to plan. And that’s okay. The reason you have a plan and the reason that you as a CEO can keep the strategy and the vision while you’re doing the execution is because you know when to pivot how to pivot and how to do it effectively and how to make sure the execution still happening inside the pivot. So you have to understand the full proforma, realistic expenses, what you’re going to have to spend money on. You also have to understand the realistic market and where your customers are coming from and how many of them you can reasonably expect to get in order to put together your proforma. And I always say that the, all of the research and the proforma comes before you build the pitch deck because four or five slides of your pitch deck are going to be dedicated to what are you asking for, for money? How are you going to use that money? What are the terms of that money that you’re willing to offer? And what is your exit strategy, you know, and showing, you know, over your first five years, what is your expected revenue? What is your expected expense rate? What’s your EBITDA, what’s your gross profit margin. Like you need to understand all of those pieces before you can build a pitch deck. So what you’re going to see is there may be a way you’ve thought about going about this previous to hearing about Precursa and starting to listen to the podcast or be on the platform that made you think I need to build a pitch deck so I can go get some money. Without the background data and without understanding whether or not there’s a viable market in what you’re trying to do, and whether the numbers work and the ROI actually makes sense, you’re not going to be able to answer the questions from people who are going to be giving you money. Now, maybe someone’s like, Hey, I’m going to, you know, I talked about this a couple of times, but, uh, I’ve heard this story very, very rarely, but I have heard it a couple of times where people are like, yeah, I have a friend who just said, Hey, I’m going to give you some money, go figure out something to do, go, go build a startup or whatever, cause I said, I wanted to do that, but I didn’t know what to do. So you may have someone that like that in your life. That’s amazing. What I would say is don’t go spend that money until you’ve gone through this process, and you know, that you’re spending it on the right things because it’s easy to waste 500 grand, you’ll spend 500 grand in a blink and not even realize that you did it. And then you’ll be going back asking for more. And that’s a lot harder than taking that money and being a great steward of it and going through the process and taking the time to go through the steps to make sure you do it right. So the Precursa process is designed very specifically to meet these needs and hit these, hit these waypoints and these milestones at the right times before you start spending a bunch of money and spending a bunch of time and getting other people on board because that’s what responsible, good savvy business owners do.

36:03

And that’s what you want to be as a startup founder. You want people to say that is a savvy business owner, that is a savvy business person, and we want you to get there. And so I’m telling you all this about the platform, not because I’m trying to sell you, but because this is exactly the way we’ve gotten to where we are. We are, we are just now finalizing the pitch deck. We are just now finalizing all the numbers in the proforma. You know, making sure we understand how much is it really going to cost us to acquire that next customer? You know, we had to break down, eventually there will be multiple tiers in our subscription. We’re launching initially with a single tier, all access, you know, come as you are kind of thing. Just because we want, we want to keep it really simple in the beginning to get enough users, to start to see the patterns and to help us build a better product, right? But eventually we know there are going to be multiple tiers. And so we had to say, okay, for the first two years, we’re probably just going to have the single tier. But after that, we’re going to add the other tiers. We know there’s going to be more value in certain tiers. So we’ll probably price them, you know, like this and our spread across the tiers will probably be 65% of people will be in the, in tier one. Only, only about 10% of people ever end up in a tier two. The tier two pricing model in a, in a SaaS or in a subscription kind of basis is usually what’s called a red herring. And you, you can do research about this and we’ll talk about it in the platform ad nauseum. But the red herring tier is designed to get people to want to go to the next phase, but ultimately to make the top tier the best deal. And because ultimately if every one of your users could end up in your top tier, that would be ideal. It’s not likely, and it’s not realistic, but the middle tier can help push more people to the top tier. So we’re only estimating about 10% of people would actually ever choose the middle tier because the top tier is only incrementally more in cost, but largely more in value. And so we’re saying 65% of people will be in tier one only about 10% of people ever buy tier two. And that remaining 25% will end up in tier three, which is about right, because probably one in four founders is really serious enough to dedicate what it takes to turn an idea into a company, right? And a lot of the people in tier one probably going to go through a lot of different iterations of ideas. We’re imagining about half of those will at some point stumble on an idea or find their idea. That is their thing that makes them want to go the distance. And so they will then convert probably to a tier three, but I’m telling you all this, because this is the process of how you get really good at knowing not just the story and the why, which by the way, is the most important piece. But right behind that most important minus 0.00001 is understanding the business. How are you going to execute? When do you expect to have revenue? When do you expect to turn a profit, if you do? Are you going to have to go after more money later? Right? I mean, we’ve got a lot of different strategies in our back pocket for not having to raise another round. One of which is getting cashflow positive as quickly as we possibly can, right? Keeping our expenses low by trading equity for a lot of the things that we need, where we can, and only spending money on the things that we have to until we get to a place where we’re cashflow positive, and we understand what it takes to stay cashflow positive and grow the business, right? That’s one strategy. Another strategy is we have considered after about a year in the platform offering like a one-time lifetime access for $3,000 or $2,500 or $3,500 or something like that. And try and convert a certain number of people to that lifetime access. Now that’s a one-time thing. So we’ll have, if a thousand people do that, and it’s $3,000, we’ve just raised $3 million without giving away anything in our company. But we also have a thousand people who are now lifetime access, full access members of our platform, who we have to make sure we’re delivering on that, on that promise all along the way so that they know they got a great value out of it, right? So we will probably go out of our way to make sure that those people, if we go that route are really, really happy. Maybe even doing one-on-one coaching with some of them or having a special mastermind kind of group, that they, they are exclusively allowed to join, right?

40:36

So there are other strategies, but you need to lay those things out and you need to understand at what point will we need more money? Because if you’re doing your friends and family round to get you through launch and MVP and the very next month after you launch you’re upside down and you need more money, maybe you need to raise more in your friends and family round, or, or you need to be prepared that the minute you raise your friends and family round, you send all your teams off and they’re doing their thing and you are starting on the next round. Like you’re already raising for it. You’re already prepping for it. So that the minute you launch and the minute you make your first dollar of revenue, you can go back to all the people have said, yeah, I’m interested as soon as you got revenue and go, okay, here’s what we need, right? Like this is a process. And so you need to understand your why for your pitch deck. You need to be able to tell that story, but you also need to understand all the ins and outs of the business. And this is on you as the founder and the CEO, you can have a great CFO who can back you up, a bean counter. You can have a great ops, you know, ops person, COO who can back you up, who, who knows how to manage a team and knows how to make sure all those pieces are working right? But ultimately you, as the CEO need to know it all, you need to know it cold. And you’re the one that they’re looking to to steer the ship.

41:48

So this gets into the presenting piece. Okay? So you’ve, you’ve done all your, your research. You’ve put together the perform of the numbers make sense. They’re realistic. You’ve done a sensitivity analysis, which we’ve talked about before. We’ll probably talk about that more in the future, but we have talked about it. So go back and listen to that episode. But, and you’ve put together your pitch deck, which reflects all the pieces from the proforma, what you learned in your market analysis, and also tells the why, like why this is so painful and why, why your people need this and how it changes the world, whatever that is for you. And now you’re getting in front of people. Here’s my three tips for you. The first one is you can never practice enough. Practice makes pitch perfect. Okay? You should be doing it in front of a mirror. You should be doing it and you should be practicing in front of your co-founders. You should be practicing in front of the people who are working for equity for you. You should practice in front of your family. You should practice in front of your friends. You should find some people who are investors who invest in totally different things, and you should pitch to them and find out what their feedback is. So you need to practice your pitch. Practice makes pitch perfect. Number two, get your why and your story into 90 seconds or less. That’s going to seem impossible. It’s not, we are working on this right now for Precursa. And my hope is that in the next episode or two, I’m going to be able to give you the 90-second pitch so that you can hear what, what a 90-second pitch sounds like. And the reason is because this is the elevator version. This is somebody who’s sitting next to you at dinner and you realize that there’s an opportunity for that they may know someone and you say the 90-second pitch to them. And from that, they’re going to know if they know someone and oftentimes those 90-second conversations, you know, the 90-second pitch that turns into a five-minute conversation will lead to one of the people who’s going to end up giving you money. The 90-second pitch matters. Okay. So do it. So practice your pitch, get pitch perfect, and be able to do it in 90 seconds. The last one is objection handling. You have to be able to handle objections, and objections in a pitch look like questions. Now for women, this is a little bit different for you than it is for men. For whatever reason, and, you know, we could dive into all of the things about our cultural norms and our cultural biases and things like that, that mean that, and by the way, it doesn’t matter if it’s a female investor across the table, a male investor across table, it is the same across the board. Okay? For whatever reason, we in our society view men as natural risk takers, so we are more likely to ask men risk-oriented questions. Are you getting new customers? How are you growing the business? How are you scaling? You know, these are all growth questions that are about, we are comfortable with you taking risk and growing. Growth is about risk. And you’re a man we’re comfortable with that. For women, we are viewed more protectionist risk averse. So without realizing it because no investor, very few investors, I believe, have any malicious intent when they’re asking questions differently of men and women, we’re just not aware. And so the more we have the conversations, the more we become aware, the better the situation will get. I believe that wholeheartedly. But for now, our cultural norms and our cultural biases say that we view women as more risk averse, which means women are perceived as more about protecting the customers they have. We’re protectionists, right? Protecting the business we have, not necessarily pushing for big growth. This is wrong. Okay. Paige and I are both examples of, we want to grow. We want to do it fast. We want to do it big, okay. We’re more like Cody in this mix. Here’s how you get around that type of that type of bias for investors. And men, you should listen for this too, because increasingly I’ve seen men get more of these questions, and I just think it has to do with the way the market is shifting. And there’s more investor sentiment is a little bit more bearish right now, I would say, just because there’s fear of inflation and you know, so, so you may get some of these as well because of where we are in, you know, mid 2021 in the economy and the market and all that kind of stuff. So you should listen for it too, but definitely women. You’re going to get more of these where you’re going to get asked, you’re going to get asked protection questions. So a growth question is what are you doing to, to gain more customers? What’s your customer acquisition strategy? And, and you know, in what period of time are you going to be at, you know, XYZ percentage of penetration in the market or whatever, right? A woman, an investor will think that they’re asking the exact same question, but how the risk and protection side of this question gets asked is: What are you doing to keep the customers you have? What are you doing to reduce customer attrition? What are you–see how it sounds really similar, but it’s not the same question. One is about a growth mentality. One is about a protection and risk averse mentality.

47:00

Here’s the key to this. This is why you have to practice. You can answer both of those questions with the growth answer. Investors will never know the difference. They will never know, even if they ask the risk question, they’ll never realize that you didn’t answer the question they asked. You’re actually answering what they want to hear, which is I am steering the ship to grow the ship and grow the market. That’s what they want to hear. So you have to practice it because your tendency is going to want to be, we’re people pleasers. Right? And especially when we’re talking to an investor, we want to give them the answers that they want. And we think that we, we want to treat them like an adult in the way that we think that they understand the question they’re asking. They don’t always understand though. So what we have to do is we have to answer what we know they need to here. This is our customer acquisition strategy. You are going to talk about probably an attrition rate or whatever inside of that, you know, a churn rate. But it’s more important that you’re talking about how you’re acquiring new customers, which makes your churn rate insignificant to a degree where when we do focus on growth and customer satisfaction, we can reduce that churn rate even more, right? So I just want you practicing objection handling, and I want you doing it in front of the toughest naysayers you can possibly get in front of. And I always want you in a growth mindset. So every question that you can think of that could come at you, every question that you hear from all the people that you practice with, how can I answer that with a growth mindset? Okay. So to recap, our three, when building your pitch, and before you start presenting to your investors, one practice makes pitch perfect practice, practice, practice. Two, get a 90-second version. It you’re going to use it way more than you think. And it’s going to be incredibly valuable to getting you really clear on what’s most important. You need to talk about. Number three, practice, objection handling with a growth mindset, answer questions with a growth mindset and practice it. You have to practice all of this a ton. You guys, okay? So this is what we’re doing right now. We are in the process of finalizing our proforma, you know, reworking some things based on some investor feedback we’ve gotten. We’ve reworked the pitch deck several times, now that we’re actually back to pitching. I have a bunch of conversations lined up over the next few weeks. And here’s the last thing I’ll say about this process. The investment process, the process of getting money also takes longer than you think it’s going to. So you need to be prepared. It’s not going to be like it’s, you know, June 1st and I’m going out to raise money and I’ll be done with that by July 1st. That’s probably not what’s going to happen. So what you need to do is you need to know how much do I need to keep going. So if somebody says, what’s your 90 day burn rate, or what’s your 30 day burn rate or whatever, you need to know how much you need to keep yourself alive for the next 30 to 90 days. If you don’t know that, you don’t have a good enough proforma, or you don’t know the data well enough, okay? You need to know what your burn rate is. You all, because some investors will say, you know what, I’ll keep you going for the next 90 days. And that gives you the, the runway you need to keep raising and keep your team working, right? That’s just as valid a type, a way of raising money, which is sort of like just-in-time raising, right? And sometimes that’s easier because they’re in smaller increments or smaller amounts, but it’s going to take longer than you think in every raise I’ve ever seen in every round I’ve ever seen. It always takes longer than people think. I can’t give you a number for how much longer, if you think it’s going to take a month, that will actually you to take six, because that’s going to be based on your individual situation, how many people you have conversations with over a given period of time, your intensity and your ambition and your drive in this process will have as much to say about that as any statistic I could give you. And way more, in fact, than any statistic I could give you, but just plan on it’s going to take longer than you think and be okay with that.

50:59

Okay? Because the more comfortable you get with this process and the more comfortable you get with it’s going to come at exactly the right time when I need it. And if I need to pivot, or if I need to pull back, or if I need to make changes along the way to give myself the room to do that, then that’s the journey. That is the journey. This is why it is a journey. It’s not a destination it’s going to take longer than you think. And that’s okay. And learn how to self-reflect, grow yourself, grow your skills, put new people into your life who can help you take that next step, so that you are ready and your organization is ready as soon as it’s time. And as soon as that next piece comes through. Okay. All right. So, like I said, in the next week or two, I’m going to have the 90-second pitch and I’m going to give it to you here so that you can hear what that sounds like, because I think that be really valuable to you understanding how do you take, you know, 17 slides in a pitch deck and turn it into a 90-second pitch that gives the investor that gives a, you know, an investor or a person you’re talking to everything they need to know. Okay. So that’s coming up. Next week, I think we’re also going to talk more about other types of investments. And we’re going to talk about grants and getting grants, because this is something that, this is something that I think we don’t talk about enough and they’re hard to find, but there’s a lot of really great ones out there. And sometimes they give you some metrics to work towards in your fundraising in order to be able to qualify for them. And they’re essentially free money, but that also sometimes come with some really phenomenal resources. So I definitely want to talk about that as well. Okay. So go work on your proforma, get your pitch solid, make sure you understand your market. And as always my friends happy entrepreneuring, make sure you subscribe so that you don’t ever miss an episode of The Startup Journey. And I will see you next time.

Thank you for listening to this episode of Precursa: The Startup Journey. If you have an idea for a startup and you want to explore the proven process of turning your idea into a viable business, check us out at precursa.com. Make sure to subscribe to this podcast wherever you listen to podcasts, so you never miss an episode. Until next time…