Erica Duignan Minnihan knows what investors like to see in startups, and she knows the difficulties founders face meeting those expectations. She has more than 10 years of experience in early-stage startup investing, and now she’s out to help both investors and entrepreneurs be better at their jobs.
Minnihan is currently the Managing Partner at 1000 Angels, a digital venture investment platform that helps independent investors around the world assess potential deals and build their personal portfolios. She also runs the CoFoundersLab Virtual Accelerator, a six-week online program that teaches founders all the basics of starting up with fewer constraints than brick-and-mortar accelerators.
Minnihan was kind enough to invite me into her New York City apartment and let me pick her brain on all things investing and starting up. In our interview, she lays out the basics of the CoFoundersLab accelerator program, explains how to draw up a roadmap for building your business or product, and shares some of the most important things that investors look for in founders and their startups.
My thanks go out to Minnihan for taking some time to educate the community on the important topics of business planning and investing. Connect with her on Twitter @ericaminnihan, or check out the virtual accelerator if you’re interested in jump-starting your business, and enjoy this episode of Powderkeg: Igniting Startups.
In this episode with Erica Duignan Minnihan, you’ll learn:
- How 1000 Angels is unique from other angel groups
- Why you need to have a marketing plan for your product
- Why investors like founders with empathy
- How to draw a roadmap for building a new business or product
- The easiest way to determine if you have product-market fit
- Why you need to have a sound financial model for your business
- What you should and shouldn’t include in your investor pitch
Please enjoy this conversation with Erica Duignan Minnihan!
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- Stream by clicking here.
- Download as an MP3 by right-clicking here and choosing “save as.”
This episode of Powderkeg is brought to you by DeveloperTown. If you’re a business leader trying to turn a great idea into a product with traction, this is for you.
DeveloperTown works with clients ranging from entrepreneurs to Fortune 100 companies who want to build and launch an app or digital product. They’re able to take the process they use with early stage companies to help big companies move like a startup.
So if you have an idea for a web or mobile app, or need help identifying the great ideas within your company, go to developertown.com/powderkeg.
If you like this episode, please subscribe and leave us a review on iTunes. You can also follow us on Soundcloud or Stitcher. We have an incredible lineup of interviews we’ll be releasing every Tuesday here on the Powderkeg Podcast.
Erica Duignan Minnihan Quotes from This Episode of Powderkeg:
“I think that in order to be a viable advisor, mentor, investor, you need to have gone through the experience yourself.” — Erica Duignan Minnihan
“It doesn’t really matter what you think. All that matters is what your customer wants.” — Erica Duignan Minnihan
“It’s great to believe in yourself and to have faith, but there’s no law that says everyone is allowed to create whatever they want and have it be successful.” — Erica Duignan Minnihan
“A great founder has the ability to convince other amazing people to come onboard and help them realize their vision.” — Erica Duignan Minnihan
Links and Resources Mentioned in this Episode:
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Venture Capital and Angel Firms:
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Coming at you from VERGE headquarters in Indianapolis. I’m Matt Hunckler, with powderkeg igniting startups episode 20. And today I’m talking with the creator of a virtual accelerator for startups designed to launch companies from idea to scale without taking any equity.
So what’s really important about investing in the early stage is to kind of understand what criteria you’re looking for. What we kind of do is make sure that all the boxes are checked as appropriate, so that investors are never kind of accidentally getting into the wrong deal because there was some aspect of diligence that they sort of overlooked or some really important component of the opportunity that they overlook. Showing on HDL here are the different important things that we look at here. And the numbers provide some level of education.
That’s Erica Duggan Minahan, co founder and managing partner of 1000 angels. And this is my conversation with her in the Tribeca neighborhood of New York City, sharing her experience as an angel investor and her new program through co founders lab, this virtual accelerator. That journey and the lessons learned along the way, coming up on powderkeg igniting startups, where each week we share the untold stories of innovation, leadership and technology beyond Silicon Valley. I’m your host, Matt Hunckler. And I’m the founder and CEO of verge, which is a network of local communities with global reach for tech entrepreneurs, investors and top talent outside of Silicon Valley. And as my team and I have grown ViRGE over the past seven years, we’ve hosted more than 1000 entrepreneurs at our events around the world. Those founders have gone on to raise more than $500 million in capital collectively. And they’re disrupting industries, creating wealth and changing the world. That’s why we started this podcast. Each guest has their own powderkeg full of raw skills and talents that’s ignited their startups and fueled their growth. These are their stories. You can find me on Twitter and on Instagram at Hunckler. That’s H UNCK L E R and let me know how verge and powderkeg and I can help you with your entrepreneurial journey. In the meantime, please make sure you subscribe to the powder keg wherever you listen to your podcasts. We’re on SoundCloud, Stitcher, all the major podcast outlets, including of course, iTunes, you can find us on iTunes using our handy link powderkeg.co/itunes. And using that link, you can subscribe make sure you don’t miss a single episode, not a single conversation that we have here. And I just want to give a huge shout really quick to all of you powderkeg guests out there who have already left us a review. It’s your feedback and sharing that helps us reach so many more people and this community that we’re growing is so inspiring. It’s what keeps me coming back here every single day making sure we’re bringing the best guests to you with every episode. Thank you. This episode of powderkeg is brought to you by our friends at developer town. Now developer Town is a company that helps entrepreneurs and enterprises build and launch digital products with traction. I know the folks at DTE really well they’ve got a ton of experience working with people who have innovative ideas. And so one of the things that I love that they do is they always try to push themselves outside of their office space. And they’ve decided to learn a little bit more about where innovation came from with the series that they’re doing. The developer town marketing team flew to New York City to meet with Derek Mach senior innovation brand manager at Anheuser Busch InBev. They were curious were huge enterprises like this, find their inspiration for innovation. Here’s Derek to explain.
It transcends level. So I say that to say, if I if I believe I have a good idea, and I sit anywhere in the company, I’m working on a line and one of our breweries on the front end, selling into a handful of accounts in Flagstaff, Arizona, or I happen to be tasked with innovation on the innovation team. It doesn’t matter good ideas can come from anywhere. So we have an idea jam. Internally every year. We have formal innovation teams with a variety of scopes, so it allows us to get even deeper into this mega category. Whereas before it was structured, again by product category didn’t necessarily staff in the same way to allow the variety of focus. So we aggregate a lot of ideas across we have what we call a disruptive growth organization which is tasked with really challenging our business models.
Innovation can come from anywhere. And developer town helps enterprise clients look at problems or opportunities through a digital lens, guiding them through a proven process to building digital products aimed at the core objectives of the business. Think your company could benefit from this approach. Reach out to our friends at developer town at developer town.com/powderkeg developer town start something I’m very excited to share this conversation with Erica Dagenham Minahan because she’s not only a seasoned investor, but also an experienced entrepreneur. Now one of the things I Love about Erika is that she has a background in private equity and investment banking. It gives her a little bit of a unique perspective as an angel investor. And you’ll hear that in some of the ways that she answers questions and and how she goes about approaching valuations and solving problems. As I mentioned previously, she’s a managing partner at 1000. Angels, which is a private digital venture investment network 1000 Angels was actually launched by one vest, a New York based investment crowdfunding platform focused on funding startup entities. Now, Eric has experience working with one vest working with co founders Lab, which is owned by one vest, as well as founder dating now gives her a very unique perspective. And we get into some really cool topics here, including things like marketing plans for your product, figuring out empathy, and how to make sure you have empathy for your customers, but also to attract the right investors. Now, we also get into a little bit of the roadmapping, and how to create a new business or new product within an existing business. There’s a ton of information in here for beginner entrepreneurs, but also for angel investors and seasoned entrepreneurs as well. So I hope you enjoy this conversation. Let’s set this thing off. Thank you so much. I’ve heard so much about Tribeca. And of course, we connected here a couple of days ago, you were telling me a little bit about this neighborhood in particular. What’s interesting about Tribeca in terms of the tech scene in New York,
yeah, well, you know, New York in general has an awesome tech scene, but you know, sort of neighborhood by neighborhood has its own vibe of founders, entrepreneurs and VCs. So, you know, here in Tribeca, we have our own little kind of community. You know, we’ve got Tribeca ventures down here and Tribeca angels down here. And a lot of founders in the tech space, once they get their big exit, this is the neighborhood they choose to move to. So we’ve also got a lot of latent talent in terms of people who are looking for their next big thing, starting their next big thing, potential advisors, mentors, co founders. So it’s it’s a pretty fun neighborhood to live in.
Do you get some of that like serendipitous connectivity happening naturally? Or is it such a big city that you’re not really in, everyone’s moving so fast, that you’re not necessarily serendipitously running into each other? Well, you know, Whole Foods or something?
Well, there’s some natural stuff that happens. You know, I have a bunch of neighbors in my building, who I’m friends with who’ve done startups and really successful startups. So you meet people, you know, that live on your floor or live in the building. You know, we also have a really great public school here. So PS 234, you’re gonna meet a lot of like parents through there. And you know, you’ll usually find parents who’ve done really amazing things in their career. So that’s a great way to meet people. You know, there’s another, a couple other more structured programs for meeting people in the neighborhoods. So one is like Charlie O’Donnell from Brooklyn Bridge ventures always says, like neighborhood dinners for people in the venture community. So to bring together like founders and entrepreneurs for these sort of private curated dinners. We’re a pretty tight knit community. And I think that we like to have fun together, build relationships. And you know, that’s what makes I think, being in the tech ecosystem in New York, a lot of fun,
shared experiences, you can probably have some pretty amazing ones.
Yes, you do. We’re not going to talk about all of them. Is there is there what happens at the dinner party stays at the dinner?
Is there one experience, you know, that you can share that has been particularly catalyzing or interesting, just to kind of give a taste for the kinds of collisions that can happen?
I mean, I don’t know if I would describe them necessarily as collisions. But, you know, I think one of the really cool things that happened for me was that, you know, I was working on a startup, what was it at least four years ago, almost five years ago now. And then one of my co from one of my, you know, sort of co founders, co collaborators on that startup, you know, we were working out of our building, and he ended up loving my building so much that he ended up moving in here, you know, became my neighbor, within the next couple of years, worked on a few different things, we stayed in touch. And then, you know, in over the last few years, he’s actually started a really amazing FinTech company called stash, which is like one of the most successful FinTech apps in the market. So you know, it’s just really interesting how, you know, you kind of maintain relationships with people and you run into them and build a community. And then, you know, sometimes you will, will create things that are really special. So you can sort of never tell where it’s going to end up. Well,
of course, now you’re more on the investment side, and even helping people with this virtual accelerator that you’re running. I definitely want to make sure we talk a lot about that. But maybe you could talk to me a little bit about that startup you’re working on three, four years ago. What’s it like starting a startup in New York City?
I done a couple of different things. The one that I was talking about was actually an angel group that I was starting. So, you know, that was fun in itself. But it definitely doesn’t fall into the category of startup, I actually did start in 2009, a beverage company that made a sort of Holistic Health beverage for breastfeeding moms. And, you know, that was a really interesting experience. That was a true startup experience.
And beverage industry, too. That’s a tough,
that’s a large part of the reason that I wanted to do it was because, you know, I’m very committed to a career in early stage venture capital. And I think that in order to, you know, really be kind of a viable advisor, mentor, investor, you need to have gone through the experience yourself. So it was a great learning experience for me with co founders lab. I mean, you know, we are still kind of a startup, you know, building and growing in New York City. I mean, we’re not, you know, that that early, but we’re still, you know, have to find traction still consider us kind of startup be, you know, we’re, you know, we’re scrappy, we’re growing, we’re trying to serve our customers really well. So you know, even now, I you know, even though I’m an investor, I’m also, you know, kind of in startup mode,
you’ve definitely got that vibe, the sort of culture of a startup. Absolutely. That’s cool. Well, tell me a little bit about the angel group, because it seems like there’s so many angel groups in New York, which, you know, coming from the Midwest, we don’t have quite so many angel groups per city. Yeah. What’s that, like, as an angel?
You know, there are a lot of angel groups all over the country, you know, New York has a few, we also just have a lot of like, super angels. Yeah, who don’t necessarily do groups who, you know, are maybe experienced investors and like, just do their own deal selection. 1000 Angels is a little bit different. It’s not really a New York City angel group. In fact, it’s not really an angel group at all, it’s actually a digital venture investment platform. So it’s basically a platform for people who want to build a portfolio of high quality early stage seed and series A investments, but they don’t really have the time or energy or inclination, or they’re not in the right geographical location to actually participate in an angel group. And traditional angel groups, you know, usually require a little bit more of their members, you have to go to meetings, you’re supposed to do the diligence, it’s really kind of more about the process, and networking 1000 Angels is for people who are looking to get exposure to this really awesome asset class. So we provide a digital portal where they can get all the information that they need on a very select curated pipeline of opportunities, and start to build a portfolio over time. But they can achieve the kind of diversity that would be very hard to replicate on their own.
That’s, it seems like a huge value prop to someone that isn’t necessarily be 100%, focused on Angel investing and building out their portfolio. But what are some of the challenges that come along with that value add, the user might find or someone that wants to get into angel investing,
everyone has sort of a different level of knowledge, a different background, you know, a different interest in the amount of education they want to do to kind of get up to speed. So, you know, certainly, I would say that the asset class is unfamiliar to most people. So there is going to be, you know, a little bit of a learning curve, but you know, with a platform like 1000, angels, you know, our job is to help you get up that fairly quickly. And to, you know, really kind of distill the important information in a consistent format.
Do you guys offer education outside of just the education about the companies themselves? Is there education on the platform,
so what’s really important about investing in the early stage is to kind of understand what criteria you’re looking for. So there are certain criteria that make an investment appealing, right, so what we kind of do is, you know, make sure that all the boxes are checked as appropriate, so that investors are never kind of accidentally getting into the wrong deal, because there was some aspect of diligence that they sort of overlooked, or some really important component of the opportunity that they overlooked. Beyond that, you know, they have a lot of leeway in terms of why I really liked this product, you know, versus that one doesn’t really turn me on. So you know, the format of our offering in itself, like, you know, showing on each deal here, the different important things that we look at here are the numbers provide some level of education. But in addition to that, I also do teach courses. So we do an intro to Angel investing, which is like a virtual course that our members can sign up for. And then also in advanced topics in Angel investing, you know, I just think it’s really important for people to understand not just on a you know, what makes a deal investable perspective, but what is a really smart way to invest in the asset class, right, like, you know, what size of checks should I be writing? How much diversification do I need for this to make sense? What do I need? You know about follow on rounds, you know, all those kinds of things are also really important factors,
what made you decide to go from entrepreneur and starting up to then going into the investment side of things.
So I’ve actually always been on the investment side of things, it was actually more of the reverse. So I actually, so I started my career in investment banking, I did investment banking for eight years, including a DC that a Columbia Business School. And then in 2006, I got into early stage venture. So I was doing real estate venture for almost three years as Executive Director potencies, which is one of the largest Angel networks in the world. And, you know, I, I was really enjoying my experience there. But, you know, we were one of the first groups to focus on investments in women led companies. So we’re getting a lot of attention in the press. You know, I was like getting quoted in The Wall Street Journal, I was like, going on all these TV shows. So, you know, I had a lot of I had a lot of attention on me as an expert in the field. And I felt like, this doesn’t feel authentic to me, because I don’t actually have experience doing a startup, you know, I mean, yes, now I’ve gained experience making investments, but how am I going to advise a founder when I’ve never actually done a startup myself? So I purposely left, you know, the, the industry for a few years to do my answer at that’s why I did the beverage startup. You know, but always knowing that I wanted to get back on to the investment side. So, you know, I think that what you’ll find, especially with a lot of people in the New York ecosystem, because our primary, you know, or at least since the old days, our primary industry is finance, that people will very fluidly go between investing and and starting. Yeah.
I like that. I would imagine your perspective changed a little bit as an investor, after you kind of went into the entrepreneurial space, what kinds of things did you learn during that entrepreneur phase, when you were working on that beverage startup that changed? How you approached investing? Or did it change?
Yeah, no, I mean, I think it changed a lot. You know, I learned just how hard it is, you know, and it gave me a lot more empathy for founders. You know, I kind of think about the person that I was evaluating deals, before doing my own startup, you know, when you come out of the world of investment banking, you know, it’s not exactly, there’s not a lot of love there is not the kind of industry where there’s a lot of love. It’s, you know, about the numbers. And the other thing that I learned that was really crucial was that marketing is everything. And, you know, you’ll see that that’s the biggest thing that creates a challenge for, for founders, especially in the tech world, they kind of think, oh, you know, if I am going to build something great, and then everyone just gonna use it. I mean, I remember, that was exactly what happened to me when I started my product. You know, my husband said to me, oh, you know, how are you gonna market this thing? You know, he said to me, all right, you know, you’ve built this, you know, you have this idea for this really great drink, you know, how are you going to market it? What’s your marketing plan? And I was just kind of like, well, I don’t know, you know, we’ll see, you know, and then when I actually got into it, I was like, wow, this is way harder than it looks. And, you know, it’s not a consumer brand. Yes, it is really, really hard. And it is getting out there and pounding the pavement. And, you know, it’s just, it’s a whole nother ball of wax. So, you know, I really, I really learned the importance of, you know, having a great marketing strategy and knowing how you’re gonna sell something before you bring it to market. And then also really just, you know, having the empathy for these founders who have, you know, gotten some traction, and, you know, to realize it’s a really big deal, you know, and they’ve worked really hard. And to really have respect, you know, for the type of work that they’re doing. I mean, I think it deserves a lot of respect. So, I’d say a lot of it is much more touchy feely stuff.
Sure. I think empathy is something that probably doesn’t get talked enough about in the entrepreneurial world. Why do you think empathy is such an important entrepreneurial trait?
What differentiates a good founder from, you know, one that’s less likely to succeed, is being able to realize that you know, your company and your product is not about you, it’s about your customer. You know, you see so many founders that are like, I have this idea and I think, you know, and it’s like, well, doesn’t really matter what you think, you know, all that matters is what your customer wants, and what your customer thinks, and you know, can you listen to them and can you get over your own ego, about making it about you and craft a business that is going to address your customers needs but also support you you know, I’ve seen a lot of people who create very negative financial situations for themselves by you know, roof Using to give up as they say, but you know, at the same time, they don’t realize that they’re kind of ignoring the market. It’s great to believe in yourself and to have faith. But there’s no you know, law that says that, like everyone is allowed to create whatever they want and have it be successful. So, you know, I think that founders who, you know, aren’t so ego driven and can really understand other people are much more adaptable when it comes to making the pivots, they need to make a business successful.
Absolutely, that that makes so much sense to me, from a standpoint of those founders that say, I and me, as opposed to my customers, and they, is that something that you listen for, as an investor? Now, when you’re hearing a pitch, or talking to a founder about their company?
I mean, you know, yes, yes. So maybe not overtly, but I mean, you know, it’s just, it’s just one of the, you know, list of 40 to 50 things that you’re looking for, but really, you know, it’s it’s just, you know, is this person responsive to the market? Are they responsive to their customers? And, you know, are they a good person?
I love that you’re really focused now on helping make entrepreneurs better? Yes, printers? Yes, I am. Can you tell me a little bit about this virtual accelerator?
Sure. So then it’s been really fun. You know, before starting 1000, angels, I was actually managing director at DreamIt ventures for a couple of years, and, you know, was part of a traditional, you know, full time accelerator. So, we would take in, you know, about 15, companies who would work with us, you know, sort of every day, right, everybody’s, you know, in the same space for three months, you know, we would invest in the companies and, you know, spend a lot of time with them, and then make follow on investments out of our fund. And that was really wonderful. But, you know, it’s not a model that works for everybody, right. So you know, one thing is, you know, you’ve got to give up equity, you know, you’ve got to move, you kind of got to be at the right stage where you know, somebody, you know, necessarily wants to give you the $25,000. And also just, you know, not everybody can do it, you know, it’s a highly competitive process, you know, to get into, you know, a TechStars a Y Combinator, dream it, you know, Angel pad, whatever it is, it’s not accessible. And, you know, the timing, also, you know, might not necessarily work for you. So, as our co founders lab community started to grow, and over the summer, we were fortunate enough to merge with founder datings, we brought the whole founder dating community into our existing co founders lab community as well, we started to think about, you know, resources that we could provide to this group of, you know, 300,000 founders, that could help them get to where they need to be faster. And, you know, I kind of thought back to my accelerator days and thought, hey, wouldn’t it be really fun, if we did kind of a, you know, light version of the accelerator, you know, it’s only six weeks long, we’re going to cover sort of the same material. But you know, there’s no equity investment, you know, you can be at any stage, we’ll bring in some really amazing mentors, you know, it’ll all be virtual, so you can just, you know, dial in from your computer during your lunch hour. And, you know, for us, it was kind of like, okay, let’s, you know, create sort of an MVP of this, which I did, and we started it in November of last year. And, you know, the first cohort was a big success, and the other participants were just so grateful, they were like, This is the best thing ever. And, you know, I, I also really appreciated it. Because number one, you know, I love not just personally helping advise other founders, but bringing, you know, bringing out all the resources that I can from my own relationships with, you know, other successful founders who’ve, like successfully raised or successfully scaled businesses, and then, you know, investors who could potentially, you know, fund their businesses as well. So, you know, it’s been a really amazing journey. And I feel really grateful, because by doing it, I feel like I kind of am learning something new every day, too. And that’s really important in this business, because this business changes like, week to week, for sure, you have to keep sharp and fresh.
What can founders do to get the most out of digital programs, whether it’s a virtual accelerator, like the one you’ve put together, or a Udemy? Course? Yeah.
Well, you know, there’s a lot of resources out there. And, you know, I think that a hybrid approach is good. So, one of the things that, you know, I like about the about the accelerator program that I do, and, you know, there’s, you know, a million different programs that you can do for all different stages, different types of information. Sometimes it’s nice to do something that has something of a real time component just to like keep you accountable a little bit, right, because if I download Got a series of videos, you know, I’m like, oh, maybe I’ll watch. It’s like nobody’s really paying attention to, did I participate? Did I complete assignments? You know, where am I getting in my progress? There’s, you know, there’s zero accountability. So, you know, I think that, you know, taking advantage of all the wonderful, you know, inexpensive and free resources that are available on the web is awesome, you know, read all the great books. There are some really good books that we recommend. You know, my friend, David Ronak, who was one of the founders of stash always recommends a book called running lean, which I haven’t read yet, but like, he’s amazing. So I know that if he recommends that, it’s got to be good. You know, we, of course, lean startup, you know, everybody reads I love the book zero to one, I feel like everyone should read that before they, you know, even start fooling around with the idea should be not an endorsement of Peter Thiel, but and then we also, you know, love to, you know, point people just towards, you know, you can go down like a whole YouTube, you know, rabbit hole with all the amazing videos that are available there from like Harvard Business School, and you know, all the different business schools that are bringing in some real heavy hitters. But at the same time, I would complement that, you know, with something that you might have, that’ll give you some accountability and a timeline, right. So you know, whether that’s a program like co founders lab accelerator, or even just, you know, having your cousin check in with you once a week, and, you know, you having to give a full progress report, you definitely want to have something that’s going to provide a little bit more structure to your progress,
some kind of accountability partner,
I think it helps. Yeah. And that’s, that’s one of the big things that we did it dream it right, wish that you have three months to work your ass off, it’s a very artificial, you know, deadline, right. But you know, as long as you know that it’s there, demo days, in three months, you know, I gotta do all this stuff. You know, sometimes you have to give yourself artificial deadlines for things. So it’s kind of like being in school?
What are some of the things that founders can do to put what they learn into practice? Talk to me about like, as they’re going through this virtual accelerator? What sorts of things are you looking for, to see if founders are really getting the most out of weight?
You know, ours is very simple to follow. Right? So you know, we do you know, there, there are actionable deliverables that you’re gonna have a chance to work on during the program. Now, whether you finish them all in six weeks, I mean, I would say that, you know, you probably have to be more of like a superstar to get it all done in six weeks, just because, to me, all these items are very, very natural. But that’s because I’ve been doing this for 20 years, right? What are some of those? So I’ll tell you what we do. So the first thing that we do is putting together like an MVP questionnaire. So basically, a complete outline of like, this is everything that my product is, you know, a million questions around, you know, what your product should be doing, how you want it to work, who your customer is, you know, what’s the problem that you’re solving. So really like filling out a very complete questionnaire to make sure that you’ve kind of like thought through all the aspects of your business on the
on the MVP questionnaire, I would imagine that the temptation sometimes for founders would be to put more into that MVP than is actually
yeah. And if you’re a minimum, I’m going to tell you don’t like delete all of that. Right? So that’s kind of the point of it. Okay, figure out what, what can I really build that is, like, what is the problem? And what’s the minimum viable solution? Right? Let me figure that out. Then we work on, you know, user surveys and questionnaires this is something that a lot of people don’t want to do. But it’s so important, because same thing, you’ve got the ego problem, which is that it’s really hard to hear people tell you that your idea sucks. And you know, I’ve been there, I’ve been like, Oh, my God, I have this great idea. And then I started talking to people about it. And you know, my, some of my potential customers are like, Yeah, I don’t really like that, you know, and it’s horrible when you hear that, and you’re like, oh, man, you know, but But you have to go through and do it. Because otherwise, you know, you’re just kind of like lying to yourself, and you’re gonna put yourself into a bad position. So we, you know, help people figure out how to do a user survey. It’s gonna give them the kind of valuable information that they need to either validate the problem that they’re solving or to figure out is there something else that they can address? Then we have a really amazing digital marketing person who comes in and does a whole session on kind of like growth hacking, growth hacking, and traction channels, and she actually has this amazing like seven step plan to getting your first 100 customers so we really kind of like lay things out. Like you know, here are some actionable things. You can take what you have and start doing, either to build a pipeline of customers or just are getting customers really depending on where you are with development? Then
outside of that accelerator, yeah. Have you talked to founders that skipped that user feedback stage and jumped right to marketing?
Almost everybody does? Because they don’t want to hear it. Yeah. You know, and it’s like, the protecting their egos a little bit. If you know, it’s like, well, you can do that. I don’t advise it. I know, it’s more fun to skip that part. You know, but to me that term, yeah, that’s the like eating your vegetables, part of starting a business. You know, the other thing, too, that we learn is that a lot of people are not aware of whether or not they have product market fit. And instead, they’re trying to grow when they don’t have product market fit. That, to me, is the biggest problem that we see with startups. Which is that, why are you investing money and growth? If you don’t have product market fit? And do you know what product market fit is? Well, his definition, which I think is the best definition that I’ve seen, is basically that you do and you do, you know, a survey of your users. And you simply ask them, How upset would you be if you couldn’t use this product anymore. And they can pick very upset, kind of upset, I really don’t give a shit. And so if at least 50 50% of your customers don’t pick, I would be very upset, you do not have product market fit.
That’s a good test,
it is a really good test. And it’s like, oh, no harm, you know, you kind of realize products that you really love, you would say, Oh, I’d be very disappointed. And the other ones you kind of, you know, you don’t really care. And then you realize, do my users not really care if I disappeared tomorrow, and you realize just how high a bar it is, when you want to have a successful product, successful business, things that have product market fit slack. I’d be very sad if that disappeared tomorrow, you know, Facebook, although we said it’s been very stressful lately. So it’ll be very sad. Yeah, me too. Now. I mean, it’s it’s like very obvious when you’re gonna miss something. And you know, same thing, this is a very black and white test. That doesn’t let you lie to yourself about whether or not you’ve achieved product market fit.
That makes me want to do that test. Right? Yeah,
we should right this minute.
That’s good. Maybe I could live without it. I meant more for our users. But yes, no, I think we definitely if people are still listening at this point, which of course they are. That means that there’s definitely product market fit on this particular episode. I love this concept of a very prescriptive, do I have product market fit? And it’s very binary, and things
that you know, sort of get you to face the truth without making it feel like it’s about you personally. Right, you know, so So after we do that we go, we review how to build a financial model, you know, the right way?
What is the right way? Bottoms up?
Well, yes, everything is bottom up, I will punch you. With a top down one, literally,
the market so big.
We just got one. Yeah, it’s gonna be bringing it right. So it’s always bottom up. You know, we always have, you know, revenue drivers from like marketing activities or, you know, things that we can reasonably predict. And then, you know, just showing people what, what is really the purpose of it, right? I mean, how are we projecting our future cash needs? And, you know, also analyzing, is there a business here, you know, will this thing ever make money, you know, is it scalable, are there enough kind of like deep pools for this to be scalable. And then the last part is, figuring out how to successfully do an investor pitch. You know, we do sort of like a very, to the point kind of 10 Slide format for an investor pitch and just get people comfortable with, you know, being able to present their idea in a way that’s compelling and understanding what investors want. And then we wrap it up with like, a very small virtual demo day where I’ll bring in like four or five, you know, Angel, super angels VCs, I will let people do their presentations, and then get some feedback, cool, you kind of, you know, come out of it with the chance to at least pitch to like a few real investors and get feedback from them. And you know, they’re sort of captive audience, they have to listen to you. So it’s nice. So it’s, it’s really something that’s applicable and great information for people at almost any stage.
I love that. I think that those last two pieces, the financial model, and then the pitch, sometimes get a little too connected right where you I don’t know if you’ve seen pitches like this, but like, where the founder will jump right into their financial model right off the bat. And they skip some of those steps like hooking attention relating to the audience, and actually talking about why this is a pain point and how to solve that pain point. Is that a problem that you see?
Is this like a Midwest thing? Because I feel like most founders, you know, are like, Oh, God, do I have to do a financial model? Why are you making me? Yeah, no, I, it’s
hard to get the founders to do the financial,
I see the opposite. You know, I mean, today, I was just, you know, sort of finishing up due diligence with a friend of mine who’s got an amazing startup, and she’s, you know, closed on kind of, you know, 50%, over $2 million seed round, and, you know, we want to invest in the rest, and, and she sends me all the materials. And I’m like, Hey, where’s the model? And she’s like, Oh, you want that? Yeah. Well, I did it, because I’m a total nerd. But you know, most investors don’t really want that. I’m like, I want it, please send it to me. So you know, I mean, it’s willing to, you know, and the thing that, you know, I just tried to impress upon founders is that listen? Yes, I think it’s very lazy investing to invest in startups without going through a model or investors that don’t have a model. But I also think that as a founder, the model is really important, because this is you putting on paper, hey, this thing that I’m expecting to do, actually will make money one day, you know, and unless you’ve proven that to yourself with math, you know, I don’t know why you’re doing anything. You know what I mean? And if it’s obvious, then fine, it should be easy to make the model, but you don’t know what your capital requirements are. I mean, you know, look at that company’s virtual and what happened to them? I mean, you know, the founder, literally, after like torpedoing, the company was like, Oh, I just, you know, I didn’t know what burn rate was like, I didn’t, I never built a financial model. You know, I thought this thing was just like, obvious. I mean, it boggles my mind that people can get to that level, and not, you know, even once kind of, like, run the numbers properly. And you know, at the end of the day, it’s dangerous. Yeah, you know, for you as a founder, but then also for your employees, you know, you have a responsibility to your employees, to your investors, and to yourself, to make sure that whatever it is that you’re building in the way that you’re building it, that it makes economic sense.
2030 minutes of time, and an Excel spreadsheet can go a long way. Yeah. Which of course, you can model a lot further than 2030 minutes. But it’s clear sometimes when founders haven’t even
done that. Yeah, no, no, and a lot of them don’t. Yeah, especially in California,
you. You mentioned, you mentioned a couple of things, key metrics that are, you know, capital requirements, burn rate, what are some other like key areas of that financial model that you really hone in on when you look at it?
Well, you know, what we’re looking for is scalability, we’re looking to make sure that the assumptions are reasonable. The biggest thing that a proper model shows is that you’ve thought out your marketing channels, that’s the number one thing that this is showing me, if you’re doing a top down one, then I’m gonna punch you, because I know you haven’t thought a lot about your marketing channels. Because why else? Would you be saying, well, we’ll just get 1% of the market per month, you know, or whatever insane assumption that is that you’ve made. So, you know, we’re looking for, you know, do the marketing channels make sense? Or the pools kind of as deep as you think that they’re going to be? You know, is your customer acquisition cost reasonable? Have you kind of like really done the research and thought that through? How much total capital does this company need, you know, how much are they going to burn total before? You know, they get to be cashflow positive? You know, do they get to a significant enough level of revenues that they would make an attractive acquisition target? Because, you know, m&a is that most likely outcome for most companies? Yeah, and you know, is it right? Yeah, check the math. Yeah. When there’s mistakes and it tells me something about you.
Yeah, that’s a really the that last points are really good one.
Yeah. Check your work. Right. It has to be perfect. Yeah, measure twice. cut once. Yeah. What bankers know all about? Yeah, I
bet. I bet you hone in pretty quickly. Yeah. The pitch. Talk to me a little bit about the pitch when when these founders complete your accelerator.
So yeah, I’m basically like giving away all my accelerator info now there is there’s obviously more that happens but you know, the number one number one values in the experience Oh, no, no, no, in the process. No, I know. But the number number one thing that happens and you know, I’m it does Doesn’t matter how many times I say it, it really doesn’t matter how many times I say, it really does not matter, founders continue to do this is that you’ll give them a sort of iron clad template for what’s supposed to be in the pitch. And then they’ll just instead just talk about their product the whole time. And it’s like, this is a pitch to an investor to make me feel like, if I give you some money, now, you’re gonna make me rich, and to inspire a greedy feeling, not for me to hear how awesome your product is. Because the thing is an investor pitch is an investor pitch. It’s not, you know, a product detail demo, right? So know your target, right? Getting people to focus on what is the problem, right? Who has that problem? Right? Who is my Market? What is my solution? How am I going to make money doing my solution? You know, why am I the right person to do this solution? I mean, it’s like a very simple formula. But you know, time after time, I will, you know, we’ll go through this whole thing here are the, you know, 10 pages, here’s what you need to cover on each page. One of them can be about your product, not all 10. And then who will be like, Oh, I did my deck. Eric, can I should we go through each other? Yes, it says, and it’s like, all just about their product. So you know, really getting people to realize that a business is not about your cool idea. It’s about a pain point. That’s what you need to focus on to investors. People have this problem not I came up with this cool thing. You know, and that’s the number one problem that I see with bad engines.
Can you tell me about a founder that did a really good job of describing and bringing that pain point to life and their pitch? If you were getting pitched by slack? Well,
that’s a really easy one, right? Is email is, you know, it’s horrible, right? inboxes like, the structure of an inbox is awful. You know, we use Gmail at work. And, you know, messages get threaded. I’m like, constantly missing things, because, you know, it got threaded under another subject line. So I never saw it. You know, everybody knows how painful email is. And so slack, basically, it was like, Hey, let’s, you know, get you guys on to something totally different. That makes it easier to communicate. So I think that that pain point is very obvious to everybody. And it’s, it’s pretty intense. Yeah. Right. So
definitely, as intense Yeah, you get the head nod pretty quickly in the room, if you’re pitching a product that solves that pain point.
Yeah, absolutely. We had in dream it, a really good girlfriend of mine, where she was actually my first roommate in college, who, you know, I worked with, and we invested in, you know, through the dream at fund, who was solving the problem of sort of doing dynamic pricing for fitness studios. So, you know, what was the pain point? Well, you know, you look at what’s happened with class paths, and all these platforms that are, you know, creating a lot of economic havoc for these studios, that kind of, you know, they don’t really understand the numbers, they don’t understand how, like, you know, going on class paths are built, you know, is gonna actually cannibalize their business. And they don’t really have tools for extracting the most value from their courses, or sorry, their, their classes, not courses. But if you look at hotel industry, airline industry, you know, it’s something like, every time an industry has instituted dynamic pricing, total revenues for the industry go up by like, 30%. So you know, we could see how, hey, there was this, you know, very serious pain point for the studios, you know, this something that’s been successful in other markets, let’s apply it to this, you know, $6 billion market.
That’s something that’s really interesting that I’ve noticed that successful founders do is they’ll compare this industry with this industry, how technology affected this industry, or how cycles tend to repeat themselves, in terms of software and how Software is eating the world, which gets tossed around quite a bit as well. So that’s a really good point, just kind of pointing out that not only describing the pain point, but showing how the same thing happened in another industry. Yeah,
that’s a very valuable tool when you’re trying to convince investors that you know, what you’re trying to bring to the market as possible. You know, if your name isn’t Elon Musk, people are going to have a really hard time using their imagination.
Fair enough. Fair enough. Well, I would love to see the next round of pitches for the virtual accelerator. Definitely,
we’ll invite you to be on our panel. That will be really fun.
I would love to see it. And if I can be helpful in any way, certainly let me know. But if listeners would like to check out the accelerator through co founders lab, where should they go?
So you can go to co founders lab.com and click on accelerator, I think it’s just like link in the top there. So we have a whole learning center, but I think you can just go straight to our accelerators. So pretty sure it’s learning.co founders lab.com backslash accelerator, but you can always just click it and link there from the homepage. If you want to, you know, chat with me if you’re interested in the program, you can email me my email is Erica er ICA at one best.com. Happy to, you know, answer any questions that you have about the program and learn more about your startup.
Thanks for making yourself available. I really appreciate that. Well, we’ll definitely link it all up in the show notes so people can check it out and get enrolled.
Yeah, I’d love to see some cool people from the verge community. Yeah,
me too. Me too. Well, hopefully see some of our founders listening there. Erica, thank you so much for taking the time to share your expertise.
I always love a good chat with you and getting to spend some time together. So likewise, now that you’re going to be a New Yorker, hopefully, we’ll do more of it.
Of course, let’s make it happen. Yeah, thanks so much. Thank you. That’s it for our conversation with Erica Duggan in Minahan. Make sure you give her a follow on Twitter, she’s at Erica Dagny Minahan, you can find that link. In the show notes. Of course, make sure you also check out this virtual accelerator program, which you can just find by Googling co founders lab accelerator, very cool program, they are doing open enrollment right now. So you can check it out, I highly recommend checking out some of those mentors that are there and some of the programs and sort of process they put behind launching new ideas and building them to scale. Thank you so much for joining me today. I really appreciate you tuning in and the continued support. Thank you for all of the reviews and subscribes particularly on iTunes, which is just growing every single week. Thank you so much. And I will look forward to seeing you next week. I just wanted to remind you real quick that powderkeg is presented by verge which is a network of local communities with global reach for tech entrepreneurs, investors, and top talent growing companies beyond Silicon Valley, we have a ton of free resources for starting and growing your business at verge hq.com. We also host several events every month around the country. So check us out and see where we’re at, I would love to link up with you in person, learn a little bit more about what you’re working on and how we can help. So again, that’s verge hq.com. And of course, you can always find me on Twitter and Instagram at Hunckler. That’s at hunc K L E R, I appreciate all of your feedback, all the conversation and dialogue there. Thank you so much for continuing to give great feedback, great ideas for future shows. And of course, let me know how I can help. I want to help you. I want to help your business. And I want to help make this podcast better and better. So that again, we’re helping more and more people. The more interviews we do, the more episodes we have. So thanks to everyone who has done that. And of course, thank you. Thank you. Thank you to everyone who has left us a review this past week and subscribe on iTunes. You can leave us your honest review by using this link powder keg.co/itunes Please give us a subscribe while you’re at it. And we’ll be forever indebted to you. Because it’s your reviews. It’s your subscriptions and your feedback that helps us get better and reach more people to build bigger and better businesses that really matter. Thank you so much for tuning in.