Summer is upon us and - as we do every year - we’ll be taking a little podcast break until mid-September, so this is the last episode for a couple of months.
Since this one will be the most recent ep for a while, we chose to focus on two important topics to help founders navigate the summer lull: summer fundraising tactics + useful parenting strategies for the entrepreneurs out there raising kids AND a company.
Have a great summer everyone and see you in September. As usual, if there’s anything we can do to help, please feel free to reach out to us via socials and/or engage with us at interplay.vc/engage.
Transcript (this is an automated transcript):
MPD: Welcome everybody. I'm Mark Peter Davis, managing partner of Interplay. I'm on a mission to help entrepreneurs advance society, and this podcast is definitively part of that effort. This is the last episode we're gonna produce for the podcast for the summer. So you will see more episodes pop up mid-September.
So hold your breath. But that context did lay the foundation a little bit for what we talk about today. We have Mike on and we talk about how to navigate this summer lull, these couple months where a lot of people are not grinding full speed as a founder, right? There's implications for fundraising, operations, and mental health.
And then we also jump in with Phuong and Phuong lays down some really interesting insights around and best practices for being a parent while managing a startup. Something that is probably far under discussed. Given how many people are faced at that conundrum, and it's a real severe challenge. So I hope you enjoy it and we will catch you again in September.
What's up, Mike? What's up man? Today is our last recording for the summer and we have a summer break, so we'll be picking back up podcasting in September. I thought it would be a good topic. To discuss strategy for navigating the summer as an entrepreneur, particularly for those who are coming out for a fundraise.
So headline is let's start there. Let's start at the top. If you're an entrepreneur contemplating a raise, what do you do right now?
Mike Rogers: Yeah. I think you spend the summer really working on making sure your unit economics and your marketing equation work. And that might mean slowing down growth.
That might mean. Cutting head count. It might mean a variety of different things depending on the stage of your company, but I think if you wanna raise venture capital in today's market, especially if it's a series A or seed extension round, which we're seeing a lot of these days, you really need to have your numbers tight and sharp and presentable to investors.
And I think that last part is really important because there, there was an error where, investors would look at a financial model and write a check. Now they really wanna see the numbers baked out. What are the inputs? Where'd you get them? How does it break down and why? And I think it's, I think that's great for founders.
I think it's great for
MPD: investors as well. And so not everyone knows how to do those numbers, to be candid. And at Series A, not everyone's got in-house finance. So where do you how do you get support or advice on that if you don't know? If you know how to do that, if that's not your core skillset, you're a salesperson, or whatever your background might be.
Mike Rogers: I think if you're have, or if you have existing relationships with some VCs, they're a great person to go to. I think it's a great way to build a relationship too. Reaching out and saying, Hey, I, I need some help. What do you look for? What do you include in your CAT calculation?
What do you include in your gross margin calculation? What do you see my competitors doing or similar businesses? I think VCs like being asked for help with companies like this because it, it makes them feel involved early on and way. I think it's a great way if your numbers are good to show the investor Hey, look, our numbers are great.
We know what we're doing. We're scaling and growing. We should be working together. So I think it's a great first date or second date for you with a, with an investor to get the content in front of.
MPD: Do you risk looking like you don't know what you're doing? You come to 'em and you're like, Hey, I don't really know how to show this math.
How do you not look like a chump in that process? Yeah,
Mike Rogers: I think if you're, it depends on the stage of the company, right? If your seed extension seed. Then it's totally fine to do that. If you're going out to raise your series A, I think you have to have at least a certain level of understanding and you can go to the investor for like the rounding of the edges, right?
So you might say Hey, this is how we've been calculating cac. Is this how you like to see it done too? And they might say, yep, that's exactly how we calculate cac. Or they might say, you know what? You have to include office expense, or, some other weird number in there that maybe you weren't including.
And then, okay, great. Look, here's the number. Now it's still, it's things still work or, maybe they don't work. But I think you can go as you get later with a little bit more and still be okay.
MPD: Yeah. My take on that, just to chime in on it, is, I think you wanna come in with an understanding in most of the numbers, and you wanna be focusing more on how you present it or kick the tires with the VCs.
I think if you come in looking like you don't really, it's a big question mark. It's not a great signal. The place you can get some of this data and guidance before going into the VCs is if you have a friend who's a banker, call 'em up. If you don't have those relationships, Your accounting firm.
We have a accounting firm on platform, Chelsea Capital that does accounting tax and cfo. They'll usually not only know these KPIs, they might have part-time CFO people that can help. It's something that you should be going through. You can get this advice from other parts of your network.
If you're not, if you don't have an accounting firm, something's wrong with you. So get one and. If your accounting firm doesn't know how to do this also CEO networks, other, whether you're in like a ven wise or something else, but just you gotta be out there that people around you in your orbit will know how to run these numbers.
This is pretty commonplace at this point. Okay. Yeah. So people are, should be focusing internally, baking numbers. When should someone start a raise? If they're thinking they're gonna raise this year when do they push the first email to ship
Mike Rogers: out? Yeah. I think founders should be allotting at least three to four months for a raise in this market.
It's not the days of four to six weeks. That's how long? Four to eight weeks. Yeah. It's a long time. And I think that getting close, given that it means that you're cash run is actually less than you think it is. Because you can't get, you can't get to month zero. So if you, before you had to raise with three or four months left of capital, now I think you should be raising with six months left of capital.
So if you're raising for 18 months, really you're raising for 12 months, right? So I think founders should be really cognizant of that and also understand what that metrics you need to get to raise that future capital. So we are seeing a lot of seed extension rounds and someone actually asked me the other day, is a seed extension round a bad signal?
And my answer is overwhelmingly no. In the majority of instances, right? It's a bad signal if the company's not growing or can't grow. But if it is just taking longer to get there, but the growth trajectory looks good. The CAT LTV looks good, the numbers look good. I'm very supportive of founders just saying, Hey, we're gonna take in another three, four, 5 million bucks and to see the extension.
We're not quite ready for that large institutional A yet. That's totally
Okay, so three, we're talking four months of process time to raise the capital. Everyone's heard VCs are on vacation in July and August. It's not totally true, but the world does fall apart a little bit and things slow down. Can't get meetings done as efficiently. It is a social contract that people travel in August and December.
So when should people who are gonna start their process, let's say they have time, they, the four month clock, doesn't limit them to starting today, when should they start engaging in the investor community?
Mike Rogers: Yeah, I think the next month or so is a great time to get your docs in order, put the deck together.
Maybe if you can get an early conversation on the calendar with someone to get to build a relationship and maybe not be fully raising yet. And then, kick off the full form, full fledged raise in September. And then my hope is that you have it closed up by November, December timeframe. I think that's a very like classic cadence for fundraising.
MPD: All right, so for the O C D folks out there, labor Day comes and goes. It's the Tuesday after. Is that the right day to send the email to engage? Yeah,
Mike Rogers: probably not that day, somewhere in that early September timeframe or I do think you can engage earlier on and try to set yourself up a meeting for them.
So if you wanna be a little more proactive, VCs are still gonna be on their email, they're still gonna be setting meetings. So if you've been building a relationship, if they know who you are, if you have some rapport, I think it's a great time in now into the next month, start setting up meetings for for early September.
For After Labor Day? Yeah,
MPD: after Labor Day, draft day. Yeah. Hey, we're gonna be in market. And also I think there's a nice signal too when you posture a little bit and say, Hey, we're not raising yet, but we're gonna be raising. Do we wanna, here's some information. Let me know if you want to get together after Labor Day.
That lack of urgency of not, Hey, let's meet tomorrow, has a nice signal of confidence and thoughtfulness in how the business is being operated. Totally.
Mike Rogers: And shows you're looking to build long-term relationships with folks.
MPD: All right, here's the last one on the summer topic. Founders burnout.
I may have to go dark, but the suicide rates like three times higher for founders than in the average population. What should people be doing for mental health in this period where there is a social contract where the world shuts down a little bit and end of July, August.
Mike Rogers: You know the answer here is try to take some time off.
It's a good time to do it. I think it's important for founders to be like, rested and try to rev back up, especially if the plan is to go raise capital in the fall, because it does mean that you're gonna be doing the job of CEO and then the job of fundraiser as well. So if you can get some time in the next month or so to relax and whine, step away from the screen for a little bit.
I think it's really good for you and the business and your cap table, right? Which is what, where your fiduciary responsibility lies. Rest up prep and get ready for a big push in the fall.
MPD: And by the way one thing I found when I was in the founder seat is it's maddening if you're trying to work when no one else is.
Cuz you're trying to put everything you got into the venture, it's infuriating. Cause no one's responding to your emails or showing up to meetings and you're sitting there running in circles on a treadmill by yourself, right? So getting on cadence with everybody else, I think is really healthy.
I think it's counterproductive from your mental health to work when everyone else is not. Yeah, you're pushing the boulder up. There's something to that.
Mike Rogers: I totally agree, and I think the last thing is, I think this summer is a great opportunity for a lot of entrepreneurs to look around and say, should I raise venture capital?
For a lot of folks out there. Lemme say it differently. I think over the last few years, a lot of businesses raised venture capital that should not have raised venture capital money. They would've been fine bootstrapping, they would've been fine going longer before raising venture capital, et cetera.
Really finding some sort of product market fit or early user adoption. And given the excess capital in the market, they were able to very easily raise capital from VCs because that's what the market was. And now it's not there. And I think what you're seeing is founders are pivoting their strategy and looking for ways to either bootstrap or survive longer on friends and family money.
And what you're getting is much more resilient, better quality businesses and I think a lot of founders should spend this summer thinking about that too. It's do we actually wanna raise money? Can we go six more months? Can we go another year without raising capital? Can we really figure out what our sales cycle is before we go and delude ourselves before we go and take on outside shareholders, a board and capital that we have a responsibility towards?
And I think if that, if you can ponder one thing this summer, it's that because venture capital is very expensive, very dilutive equity, and it's very often the wrong capital for founders. And I think we're seeing a lot of that today too, because a lot of these companies raise money without having product market today and without really understanding how to, what their go-to market was gonna be.
And now those founders are unlikely to return or return capitalists to their investors, and their common stock is very likely worth zero. So you're gonna do a lot of work, spend a lot of time building a company and up making a lot of no money. And no, none of us like to see that.
MPD: Yeah. It's funny when you hear a VC telling you not to raise vc, you should listen to that. Yeah. The I'm the worst book promoter ever. I've ever wrote a book a dozen, literally a dozen years ago called the Fundraising Rules. It's still on Amazon if people are looking for it. The first, it's like around page 30.
I feel like my biggest thought piece contribution to the space is a framework for figuring out what type of capital you should raise. It's funny. You ask a founder what's gonna drive success in their business, and they'll tell you, team market, product market fit, the idea so on.
There's a standard list of things. Almost nobody mentions how they finance the company, but taking the wrong type of capital can really kill your yield as a founder, as an individual, or I can make it, and it's just about getting alignment. There's not a good or a bad capital type. It's just a good or a bad for your business model.
So highly recommend if you're not sure you should be raising vc. That chapter in the book is worth it. There's a framework, a two by two thing that kind of helps you navigate and it walks you through all the hor nightmares scenarios that you'll fall into if you pick the wrong quadrant for your company anyway.
Yeah, totally agree. Yeah. Happy summer everybody. Some good wisdom here, but take some time. Breathe. Lay out a plan of attack for the fall. If you're raising capital, get ahead of it. And Michael, I got you soon, man. Later buddy. Hello, Phuong.
MPD: mark. How are you? Good, how are you? You're busy
Phuong Ireland: I am. We have a bunch of companies starting up in the incubator. So I'm really excited to get those guys in. Yeah, I
MPD: think people go through the process. They don't know how much competition they have. I know Will, who puts his podcast together and everything else ran the numbers after we had done it for a year and I had no idea, but it's a 0.2% acceptance rate, which is outrageous.
Phuong Ireland: It is. And I feel bad about it because there are, I come across a lot of companies that, I'd love to work with a lot of great founders, but I think what we're looking for is always such a unique combination of having the right team. People who are really passionate about their ideas have grit, have humility but then also pairing that with kind of business ideas that we as a team feel passionate about.
And, are really believe in. Yeah. So that's just really tough to find.
MPD: And, the thing that a lot of people say, but I think we're, I really believe we're doing is we try not to work with things that we can't actually help. Correct. Yes. And that, by the way, that's one of the hardest things in Ven, in venture, is that discipline.
Because you see a good opportunity where you know you're gonna make money, but that person is gonna walk out the door at the end of a program and say, oh, these guys are frauds that didn't do anything. That's a bad decision. Yeah. And so we try to avoid those, but those, that's hard. That's a really hard choice to reject a great company where you're like, wow, I'd love to own a piece of this.
Phuong Ireland: But yeah, I think that aspect is really hard because I think based on how we run our incubator, it's such a intimate one-on-one operational coaching experience that's, not it's I think, unlike anything else on the market. It really has to have the right combination of founder fit, business fit as well as, a fit, but that we're a right fit for them, that we'll be able to, yeah.
To help them in a way that really moves their business to the next level.
MPD: Anyway. I love the work you're doing. It feels it's the work of the gods. It's helping people crush and. Make their dreams happen. So it's pretty inspiring. I know everyone looks at it and it's money and business and yada yada.
But it feels good. Anyway. All right. So it does feel good, digressing, too much. We got a podcast to run here. All
Phuong Ireland: right. Let's do it. Let's do it. What do you got for us this week? Today we're gonna switch gears a little from the usual business strategies and talk about a product that I think many founders struggle with and don't often talk about, and that's parenting as a founder.
Now, a lot of people say that starting a company, something I know a lot about people say that starting a company is like having a child, right? Especially in the early stages, a startup just can't survive without the constant attention and efforts of its founders. So then if you're a founder parent, you now have another child that needs your undivided attention in addition to the human ones.
So how do you balance your responsibilities so you don't mess up both? I became a founder when my kids were pretty young. One was almost two and the other was five. And each age is different and it comes with its own challenges. I think my younger son probably doesn't remember a lot about how I just wasn't around for a few years, whereas my older daughter will happily launch into a diatribe about how mommy had to work on weekends and would be gone overnight and was always at the Weekend Nation store.
So I can't say that I did it a hundred percent but I did learn a lot. And these are some tips I found helpful and would definitely use if I could do it all over again. So the first tip is don't be too hard on yourself. There's gonna be a lot of times during this journey that you're not going to be around as much as other parents.
Being a founder is time consuming. It takes a lot of emotional energy, and it's just not going to be possible for you to be there for your children like you would be if you weren't a founder. Yes, there's gonna be times when your children will be impacted by this. It's okay. I think hearing that's okay is really powerful.
I think the example that you're setting in terms of taking risks and pursuing your dreams and what you're teaching them about work ethic and the entrepreneurial mindset can more than outweigh any negative effects if you're able to create the right balance. Next tip is to involve your kids in your work.
This is related to the first point. This is your opportunity to use your founder experience to hugely impact your children's learning and give them early exposure to important business concepts. It's also a great way to bond and spend time with your kids. Involvement can vary depending on what type of business you have and how old your kids are.
But I ran a fashion brand that had e-commerce as well as physical stores. So I would show my daughter sketches of product designs, ask her opinions on which one she liked, and then teach her about the production process. What would happen to create the clothing once we finalized the designs. My kids would spend time with me at the store counting inventory, restocking sending up for pop-up events now, and they were too young for it back then.
But I imagine if I was still doing it, I would have them more involved on the tech side, adding products to Shopify, running reports, learning about creating emails. Those were learning experience, I think that will forever shape their work ethic and how they view their own aspirations. Next tip is to be present and engaged.
So this one wasn't one that I was good at, so it feels a little weird talking about it, but now I realize how important it's towards the later stages of being a founder. I realized how detrimental it was to my kids when I was always on my phone answering emails when I was with them during those couple hours before bedtime.
Which was really the only time I was ever at home. So I told my team I wouldn't be available during that time. I put my phone away and gave my kids my undivided attention. Quality time, especially when you can't provide quantity, is crucial. Next tip is to not work. Don't work like a parent. Don't work like you're not a parent and parent, like you don't work.
I think there's a lot of pressure for all working parents, not just founders to do this, especially working moms. You wanna be just as involved in your kids' lives as any other parent, and you don't want the fact that you're a parent to prevent you from giving your all at work and committing as much time as others who don't have kids.
I think trying to do this at all times is just not sustainable. And would ca will cause you both areas to suffer? I think what's really helpful is to create support systems in both your work and personal life to help you navigate the challenges and show the responsibilities. I have a group of other parents as well as my husband who can lean in when I can't be available.
They'll help with drop off. Take them to things where I can't go. I also level set with my kids that I can't always be there for everything, but that doesn't mean I don't wanna be there and that I love them any less. And then at work realize you won't be able to get to everything.
Prioritize tasks based on importance and urgency. Focus on the high impact activities that will move the needle on your business. Delegate, outsource, or deprioritize. Deprioritize, everything else. This allows you to focus on the most critical areas and keeps you from being overwhelmed. I think this is crucial regardless of whether or not you have kids.
And then the last tip is, finding the right balance between being a parent and a founder is a lot like the Lean Startup method. It's a process of testing and iterating regularly. Reassess your priorities, try new things. Communicate with your family and your team to get feedback on whether things are working, and then iterate and repeat.
Hopefully you'll find something
MPD: that works for you. Wow, that is a huge topic and something that's not discussed a ton. And I think there are a lot of us who have been navigating it. I know when people would look at interplay from the outside, they'd be, they'd say that's not, that's a firm, it's not entrepreneurship.
And I've obviously been a lifelong entrepreneur, but it was a startup. Yeah. And I started interplay when my daughter was one and I was making the same choices in trade-offs. The things you, that you said that really resonated with me is the quality over quantity and the balance I find in that is when I'm there I'm really present.
I try to like, make the time we have together special, so we'll go and do unique things. I put a lot of effort and thought into those windows. But it's a, yeah, I love that. It's a tough, it's a tough cycle. One other tip I would add. Is I ask my kids how I'm doing, I'll grab them, I don't know, every six months and say, am I around enough?
Am I being an okay dad? And I get a feedback loop, which is very entrepreneurial. And maybe, maybe it's guilt, but they're telling me I've got a good balance and whatever else. But they have a kind of a say in it to a certain extent, and I think that's empowering. And helpful for me because if they end up screwed up, I'm gonna tell 'em it's not my fault.
They told me I was doing okay. So you had a say in it. You didn't say anything. Yeah. Yeah. You didn't say that's
Phuong Ireland: it's your fault. That's funny. I, when I was working on what I was gonna say this morning my daughter came up and was said, you know what, tell them not to ask. Don't forget to ask your kids cuz they know stuff too.
Which is exactly like what you're saying.
MPD: Yeah. They do know stuff. Anyway, great topic. Thank you and I will talk to you very soon. All right,
Phuong Ireland: thank you.
MPD: All right everybody. Thanks for listening. Have a good summer and we'll catch back up with you in the fall. And if in the meantime we could be helpful with anything with your venture feel free to jump to interplay dot bc and you can get in touch with us through there.