We (are) on a BREAK!
In this episode, we talk about the shifts in our execution strategy that have necessitated a little break. (We promise it’ll be short.) During this time, we are getting a new podcasting space, reworking the pro forma (because profit is… bad?), and applying for research grants so that we can spend our first six months post-launch giving the product away and proving the technology works.
In today’s episode, Cynthia shares the changes and shifts that have been happening in Precursa and explains why we are taking a (short) break in the podcast. The episode starts by talking through the value of objections and feedback from investors and how those conversations can shine a very important light on things entrepreneurs hadn’t thought of before. For Precursa, this means realizing that although the founders, being techies themselves, totally get how the tech works, that doesn’t mean everyone else understands or can believe in it. In order to raise significant money, the founders will need to be able to demonstrate real value in the AI and Machine Learning components of the platform, and so they are shifting the plan post-launch to encourage more participation for long enough to prove the claims in the platform. Cynthia also walks us through why profit and profitability can be seen as a death knell in a startup. Because most investors only make money in an exit event, sitting in a “comfortable”, profitable place is bad news, and they don’t want you doing it using their money. As part of the recognition that Precursa needs to prove itself, and the adjustment to extending out the time before which it will charge for the platform, Cynthia discusses how research grants can be perfect capital for just such a strategy. Finally, Cynthia talks listeners through the value of taking a step back, reassessing the landscape, and reconnecting with a business or startup. Doing so will give entrepreneurs perspective that is invaluable to limiting the mistakes and misdirection that every startup founder experiences. And she encourages us to avoid the “I should have/I shouldn’t have”, “what I did wrong” way of thinking, because it only keeps you stuck and limits your creative thinking ability. Be sure to like, share, and subscribe to Precursa: The Startup Journey on your favorite podcasting platform and tune in for the next episode! Email us with any questions or comments (email@example.com). Check out our website (https://www.precursa.com) for more information on getting your startup rolling.
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, friends and entrepreneurs. Welcome back. This is Precursa: The Startup Journey, and, uh, today’s going to be a little bit different of an episode only because some things have changed. Some things have shifted for doing some things differently. Actually right now I’m not in our podcast room. I am literally standing in the quietest closet in the basement of my house. Yes, I am standing. I don’t even have a chair because I can’t fit a chair in here right now. So we are shaking some things up. We’re going to talk a little bit about the things that are the things that have changed and what we’re shaking up. But the end result of this is that we have to take a couple of weeks break on this podcast to get back to a place where we’re actually able to produce it. We’ve even changed the process of how we record and edit and create each of these episodes. So all that to say, we are taking a break. Uh, so this is mid-September right now. We’re going to take about a month to rework some things, fix some process. Uh, and I’m going to tell you what’s led up to this and then what we’re going to be doing during the break. So after today we’ll be back like mid-October. So the biggest thing that’s happened is we have had lots of really great conversations with investors. I I’m, I’m really embracing and loving doing the pitch. And one of the things that came out of it, and it’s really funny, uh, because this has never anywhere at any time been on my radar as the founder of this company, as the creator of, of the idea behind Precursa, this has just never been on my radar. And so it’s kind of funny because we’ve now heard it several different times from several different people. And we went, okay, we might need to address this in a way that makes it more clear what we’re really doing. So part of the reason that pitching is what it is, is the process that it is, you know, does the things that it does, you know, why do we do it? Part of the reason that we do it is because understanding all of the different perspectives and seeing all of the potential holes in your business model or places where you haven’t thought of things, or it just, any, any objection can be an opportunity to strengthen your business. Now, some people will have objections where you’re like, yeah, that’s just totally not within the realm of what we’re trying to do. Or, you know, maybe you didn’t get what we’re doing. That’s totally fine. Right. But sometimes you hear an objection so enough that you start to go, okay, clearly we aren’t communicating this well or wow. We never thought of that. And apparently that’s a big deal to people now coming from a tech background, like I have understanding, you know, I’m not a data scientist, but I do understand a lot of the mechanics of how artificial intelligence works, how machine learning works. I understand how to build an algorithm that can ingest a large amount of data and then return answers to you about that data, especially because I have an entrepreneurial roadmap process that I’ve been using with my clients for years, that I know gets the results that I’m intending for people to get when validating and vetting, is there something here or not? Do I have product market fit definitely in the early stage of, Hey, I have this idea, you know, is there a market for it? Are there people who have this problem, but also on-goingly. So beyond your initial launch, beyond your MVP, beyond the point where you’re scaling consistently checking in and using a process that’s verifiable to make sure am I keeping my customers happy? How can I reduce my churn rate? How can I increase retention all the things, right? How can I get new customers and keep them longer? Because that’s how you, that’s how you build a business. That’s either successful as a lifestyle business or that you can grow quickly scale and sell, you know, in an exit or an IPO or whether whatever that is, you know, in a traditional sort of startup world. So for me, the question has never been, can technology do the thing that I say that it can do. And so, as we have been talking to people, this is actually the one objection that we have consistently gotten. The majority of people we’ve talked to have said, that’s really cool. I love this. Can the tech actually do that? And the first time I heard it, I was kinda like, oh, you know, we’re not always talking to technical people. You know, I sort of explained kind of the overarching entrepreneurial roadmap process and some of the algorithms and some of the AI and machine learning that we apply at different steps in the process to sort of come up with the answers we come up with. And then they got it right. They were like, oh, I see what you mean. Well, we’ve now heard this same thing. So consistently never from tech people, by the way, tech people are like, oh my gosh, that’s a great way to apply this type of technology, right? 05:38 They’re like, this is exactly the kind of problem that technology should be able to help you solve because we have tons of data about what makes a startup successful or not. But we realized that with other non-techie people who are more likely to be our investors, we have to address this piece. So we decided to do two things. One is we’re actually creating an extra slide that we will present only when this question comes up in a pitch that talks about a very high level overview of what is the entrepreneurial process, you know, the entrepreneurial roadmap, and then starts to map out some of the algorithms and equations and data science and data analytics that we use in the various steps. Now I don’t need to give away everything in the secret sauce in order to get the point across that I know what I’m looking for, and we know how to build what we need to build in order to look for those things. So if I was going to say, we’re building one big, huge algorithm that can say yes, success or no success to an idea that would be unreal, but by breaking it down per activity, per se, step in the process and saying at this step, these are the things that we’re looking for that helps us evaluate the quality of the data that’s being put in the chutzpah of the founder. Like the merit of the founder. How, how engaged are they with the process? How deep are they going? How much do they understand what they’re really trying to create? Right? Like answering all those kinds of questions. It’s not one big algorithm. It’s lots of pieces coming together to form a picture that says, is this a real problem? Do real people, have it? Is it painful enough that they’ll change their habits and spend money in order to use it? So that’s the, the first piece of what we’re doing. So we are modifying the pitch in order to be able to tell this piece of the story, because it’s come up enough that we realize not everybody takes for granted the way that we do as technologists, having been, you know, building technology and building web apps and building mobile apps and, you know, writing software for over 25 years, actually, you know, in our, in our lead developers case, I mean, he’s going on almost 40 years of doing this right? For us, it’s a given, but we have to be able to tell that piece of the story when it’s asked. So that’s the first piece, but the second piece that we’re, and this is going to sound really weird, right? Because you think investors, they want to make money. Remember though, that’s that when you invest in a startup, you don’t make money. When the company makes money, you make money. When the company is bought, when it goes public, when there’s some kind of an exit like event and where their shares are purchased by someone else, whether that’s another company or whether that’s on the open market, whatever that is, that’s when an investor makes money. Yup. So here’s the thing that’s really weird about that. Investors get nervous when your startup makes money too early now seems kind of antithetical because it’s like, oh, we want to show revenue that that’s traction. But the problem is, if you’re really building a startup, that’s going to, let’s call it, go the distance and become a potential million 500 million billion dollar plus exit. If you are too focused and I’m going to use the word too comfortable early on because your revenue numbers make it easy to kind of float in a particular space for a while. You are not focused on building the business. You don’t have the drive and the push that you need in order to get you to that level of scale, where the investor is going to get a good return. They’re not investing in you building a lifestyle business. Now what’s the lifestyle business. Anytime you build a business that the intent of it is to make good money, have a good profit margin and pay everybody really well. And maybe your shareholders are getting distributions. Maybe you don’t even have shareholders. That’s a lifestyle business. That’s not the kind of business that an investor wants to be in a traditional startup investor. And I’m going to caveat that in a second, but that’s not the kind of business they want to be in because they don’t want to have an annuity on their money. They want to give you their money. And in five to seven years, they want to get 10 times that amount back. At least right now. Now the 10 X number comes from VCs. Uh, there there’s lots of other ranges. You know, angel investors are sometimes really happy to get a five X return in three to five years on their money. There’s some PE firms that will go in for longer in order to get a larger return, right? But this is distinct from the type of investor that says, I like what you’re doing. And I want to be involved on a longer term basis. And those type of investors are not typically in a true startup investment world. Now we’ve seen, like for example, Gimlet media has a podcast called startup and it Chronicles their journey. And then they also follow some other startups in later seasons, but it Chronicles their journey of, you know, they had this idea build essentially a podcast network. 10:47 And how did they talk about it in the early days? How did they talk to investors? What it takes for them to get their first round of funding and then later rounds of funding. And one of the things that they talk about is when they went for their second round of funding, they actually took the majority of their money from an investor who wasn’t looking for a big exit, fast. He was somebody who said, I like what you you’re doing. I want to be a strategic investor. And I’m willing to stay with this a little bit longer because he, he cares more about the product that’s getting produced than he did. He does a big exit in three to five years. And they went with that investor over other investors on the same terms sheet, because they wanted pressure to grow fast. Now, at the end of the day, Gimlet media ended up selling to a Spotify for about $230 million. So they still got that big exit. They didn’t have the pressure of investors asking them, can you grow faster? Can you grow faster? Can you grow faster all the time? Right? And so for them, that was a strategic decision. That made sense for them. So I tell you all this, because sometimes when you’re raising money, if you show revenue too early, if you show profitability too early, it makes investors really nervous because that’s the point at which you get stuck in sort of that zone of comfortable. And there’s nothing worse for an investor’s money than getting stuck in comfortable. They don’t want you comfortable. They want you living on the edge. They want you pushing the boundaries. They want you scaling like crazy. So when we started getting this objection, what we realized is one of the other objections, we were getting a lot, which we kind of laughed off was you’re trying to make money too soon. You’re profitable too soon. That may, that tells me that you’re not growing fast enough, or you’re not investing in the technology fast enough or whatever it is. So as part of this step back, we realized we need to not only prove the tech, but we need to invest more in data science as early as we possibly can investors actually want it. So what we did was we took a step back and we said, okay, let’s just assume we’re launching in October of 2021. So likely sometime around the next podcast, we’ll be getting ready to be launching, or we will have just launched. Let’s look at the proforma, let’s adjust the numbers. Let’s take out any attempt or any expectation of revenue for six months. Post-launch and let’s use that time to onboard 300, 400, 500 entrepreneurs into the platform, get them working, get them, get their ideas in there, start seeing what are they producing start seeing? What is the, how is the technology, how are they interacting with it? What is coming back out of it with all of that data and prove the technology. Then we can take that technology that we’ve proven works and we’ve honed and refined, including bringing on a data scientist much earlier than we originally intended. And I’ll come back to that in a second. And one of the things that became really clear is we can actually find research grants for that purpose. There are grants out there where if you are conducting research and turning that into work product, you can actually get grant money for that and, and not charging customers for it at that early stage makes it more attractive for us to get some money out of that. So the first thing that we’re doing, so, so we adjusted the run rate on our, on our financing. We adjusted the revenue projection, and we started looking at research grants. The other thing that we decided was to bring in a data scientist earlier than we originally intended, the reason that we weren’t going to do this right away is because agnostic of the outcomes and the, and the feedback to a point, the process of going through the platform, getting the data that, and having to put in that data that has inherent value in it. So if all we did was put out an e-learning platform where you could put in your data and we would produce a proforma and a pitch, a pitch deck, and give you sort of like basic levels of feedback on, do you need to do more interviews? Does your performer really work? Like, like just basic stuff that I can do in my sleep, right? That provides value beyond anything that’s already in the market. 15:13 So the AI and ML piece was something that we knew we could do a baseline level of, which is beyond what I just described, but we knew he could do a baseline level of it. And then as we got more data in the system, hone and refine and tweak and add new data sources against which to validate and vet that data. But we didn’t think we, you know, we weren’t thinking, well, we need to do that right away, because there is inherent value in what we’re already doing. However, if we engage data science as part of this first six months effort that increases the value of the research grants that we can apply for. So it only makes sense for us to go ahead and use somebody else’s money. Non-dilutive, non-equity backed money in order to get that, get that feedback in and, and start to do that work. So that’s the new plan. We’re not going to be charging in the platform for specific audiences when we launch. So there’s going to be a coupon code or a promotion promo code or something like that, that we’ll give out to people who are welcome to come and participate for free, probably for up to six months in the platform. So you, as our podcast audience, we will make sure that you get that promo code, you know, when, when we’re ready and when we’re about to launch the other way that you’ll get it is if you sign up for the email list. So go put your name on the list, precursa.com. There’s a button request, an invite, and we’re going to be going through that list in the order that people requested to be part of the platform. And we’re going to be sending out promo codes to get you free access as part of this, let’s make sure and prove what the technology does because that only bolsters our position when not only raising with investors, but also selling B2B. So accelerators that we’ve talked to in the, you know, in the past few weeks, since we had talked about the shift to, uh, to the B2B model, all the managing directors and applicant, you know, sorters and all the mentors are like, this would be phenomenal, but how does it work? Right. They want to know that it works too before they’re willing to say, yeah, well, we’ll put, we’ll buy into not only the platform, but we’ll buy into either paying for our users to be on it or, or offering them to pay, to be on it, through our membership or whatever that is. Right? So our goal now is do this six months, prove all the tech add in that data science piece earlier than we in that than we planned on originally. And then come April, get our first sale into an incubator or accelerator. And that will sort of catapult us. So this is all part of a larger conversation that I know we’ve had before, which is you have to plan, you have to make a plan and you have to be executing on your plan, but plans change. New information is going to come. That information is going to point a spotlight at something different, or it’s going to elevate a piece that like, maybe you haven’t spent enough time on, or you haven’t paid enough attention to pay attention to those spotlights, pay attention to new information that comes in. Now, I’m not telling you to pivot your business every time someone gives you feedback or, or unsolicited coaching or advice. I’m telling you to have enough passion and enough belief in your vision that when you get pieces of advice or when you get coaching, or when you get strategic input, you can fit that, like compare it against a longer term vision and say, does this make sense for us to pay attention to, or does it not? And that comes back to the coachability piece, which I know we talked about a few weeks ago. So that’s exactly what we’re doing. Some things have shifted. We’ve totally abandoned advertising, paid ads right now. And that’s only because the cost per email address through paid ads has been really expensive and has not turned into the traction that we were looking for weirdly enough, without really any promotion whatsoever. This podcast is our largest lead channel right now. So part of the reason why I’m standing here in this closet is because we are shifting our customer acquisition, focus over the next six to nine months. While we go through this proof phase, while we work through our, you know, get getting finalizing our investment, like while we’re working through all this, we’re going to put everything we have into this podcast, because this is producing a better audience that is more engaged than the paid ad strategy that we’ve been using. So one of the things, you know, if you, if you’ve been listening, we do actually have a podcast room, uh, in our office to, in downtown Denver. The problem is we now have that set up as a video recording studio, and we’re doing all of the video content that goes into the learning modules that makes it really hard to podcast in there because I’m now relegated to like, you know, a two and a half foot by 16 inch space where I can have my mic and my headphones at my computer, which you wouldn’t think you’d need more than that. But I talk with my hands. Okay. Um, half my family is Italian and we talked to like this. So, you know, I generally am knocking things over, which, you know, really doesn’t make my video producer very happy when next time we go into set everything up, cause he’s like, why are all these lines wrong now? 20:40 So we are repurposing a room in my basement. We’re going to be putting up sound baffling. We’re going to be shifting some stuff around. That’s sort of stored in this closet right now to be able to fit a small desk and a chair. And we’re going to be focusing more on using this podcast as a way of not only communicating with you, but also getting more information to you that will help you in your journey to that end. We’re going to be switching up the format of the podcast a little bit. So once or twice a month, I’m still going to give you those updates in the, you know, what are we doing in Precursa? How have we switched things around? Have we pivoted? Is things going well, what’s happening with our investing, by the way, we do not yet have a lead investor. Uh, we’ve got probably 150 to $200,000 waiting in the wings for when we do find a strategic lead investor. Sometimes you hear the term smart money. What smart money means is those investors don’t typically invest in tech or they don’t understand this area of tech. And so they’re waiting for someone who does know this area to sort of lead the round and say, yes, I am putting my money in and it’s smart money, which means that I understand this. And I believe that this can be that this can be, you know, a good business and that there’s a good return potential here before they put their money in because of all the things they can vet. They’re very confident in us and our team and what we’re doing. They just want to know the tech piece. So they’re waiting for smart money. So I’m going to continue to give you those updates, but, um, I’ve got a bunch of guests lined up for us. These are founders at all different stages, right? So founders who are just starting to take the journey and asking great questions. And what is their experience all the way to, you know, founders who have failed companies, founders who have exited companies as well as investors. So angel investors, venture capital investors, investors in social impact. I want to bring you more information, more perspectives. So you followed us and there’s a lot in our journey and there’s going to be a lot to come. That’s, that’s no doubt whatsoever, but hearing other people’s stories about what they did well in their companies, what they did poorly, the lessons they learned can also spark for you as an entrepreneur, thinking about building a startup or in the midst of building your startup, it can prompt some new ideas. And I think that’s really important and that’s where the podcast wants to go next. So that’s what we’re going to do. So the end results of this is we’re going to beginning a new podcasting space. If you saw me, uh, we, so we record with riverside.fm and they do video and audio. Although we have not pushed out anything on video, as of yet, that’s something that we probably won’t really start to think about until maybe next year. But if you could see me right now, I’m literally standing here like crammed into a corner, like have, have two places where my hands can go and they don’t hit anything so that I’m not like it’s, it’s really funny. Uh, so the podcast is getting a new space where in the format a little bit so that we can bring on some guests, we’ll definitely keep doing a founder session probably about once a month guests once or twice a month. And then probably once a month, I’ll do like a deeper dive here’s what’s going on Precursa episode. And we’re going to, to all of that end, because of all of those things, we are taking a few weeks off, like I said earlier. So I wanted to do this episode, uh, so that I could give you kind of that update. We are still fundraising. We are madly, madly coding working towards our initial launch. We’ve got a different, we’ve pivoted our, our revenue plan and we’ve pivoted the goals and the metrics that we’re measuring ourselves against for the first six months post launch. And I wanted to give you all that I want to, because I think there’s some there’s might be some ways that you can start thinking creatively and take a step it’s really important. Whenever you can to take a step back from what you’re doing and ask yourself, is there some other way this could be done? Is there a way that this could be easier? Are there things that I’m going after that hard or, or tasks that I’m doing that feel hard and are, do they feel hard because they’re actually not the direction that the business wants me to take it. Right. And so taking a step back, giving yourself some perspective it’s critical to not wasting time and money. Now, I don’t think, you know, we’ve talked, we’ve talked a little bit. What about in our ad strategy really didn’t work. We were not happy with the company that was managing that strategy or building our ads. There just was a whole lot of stuff kind of wrapped up in that. And they, they, they understood and, you know, acknowledged that we were a challenge for them and they didn’t do well for us, you know, no hard feelings, water under the bridge, but it definitely was one of those things where we were like, okay, this isn’t going to keep working. 25:39 Right. But I cannot say that that was wasted money. We got a hundred, probably a hundred leads out of it. Um, really good. Hi, all of the leads who have been very highly engaged with the emails that we, that we’ve been sending out. So I can’t say it was a waste because we learned paid advertising is going to have to be a different kind of strategy. What we’re actually thinking is when we do turn paid advertising back on, we’re going to advertise the podcast because the engagement levels of listeners in the podcast and just the reach of the podcast is so much higher and so much more valuable than general advertising, trying to catch people who or potential entrepreneurs with a startup idea. So I want you to consider, I want to ask yourself the question, like put yourself in a quiet place, grounded and yourself, maybe close your eyes for 20 or 30 seconds. Like, let all your stress go, workout your shoulders, you know, release the tension in your jaw. Like, feel your butt in the chair, your feet on the floor, like really get into like a grounded place. And then I want you to ask your business as if it’s an entity that’s separate from you. What am I supposed to be doing right now? What do you need from me? What’s next? And listen to the messages that you get, get that perspective and then consider, what am I doing? That’s working. What’s not working. Why is it not working? Is it the wrong thing for me to be doing? Getting that perspective will never, you’ll never regret that you might find yourself potentially regretting things that you’ve done along the way that, you know, if I would have done this exercise sooner, I probably wouldn’t have done that thing, but don’t go there because it’s not useful. You’ve done it. You’ve learned from it. Learn what there is to learn and then figure out what’s next. Okay. So in the very wise words of a very smart cartoon fish just keeps swimming. Like sometimes you just have to take the next step one step at a time. So we’re going to be changing up how we, uh, you know, the, the process that we use to edit and deliver the podcast, um, which is why we’re taking a month off. Um, it’s not that we are not working for Roche mostly it’s that we want to be able to deliver really great content on a T on a schedule and a timeline that actually works or what you are expecting as our users. And the current process just doesn’t do that. So we’re working on a new process and we are pivoting madly in terms of our plan post-launch and how we get users in the platform. If you have questions, if you want to make sure, Hey, Cynthia, I signed up for the list, but I’m super keen on getting in the platform for free. When you launch, make sure you send me that promo code. If you want to argue with me about something, if you want to be on the podcast, if you’re a founder or you’re an investor, or you have a perspective that may help other people in this situation, send me an email firstname.lastname@example.org, let me know, and we will figure out whatever we need to figure out to make sure that you get what you need. So we will be back with you mid-October until then as always happy entrepreneuring. And I will see y’all 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…