Secrets B2B Leaders Wish You Knew!

Welcome to the B2B Growth Blueprint podcast, where we talk with entrepreneurs, founders, and leaders at B2B services, tech, and SaaS companies to learn the systems and processes they've used to create success for their business. We'll also learn from marketing and sales experts to provide insights to help you grow your business. I'm your host, Mark Osborne, and the podcast is brought to you by Modern Revenue strategies and their 10x ROI B2B growth guarantee. Schedule a free diagnostic call to learn the fastest path to double your B2B revenues in just 90 days. Hello and welcome to another episode of the B2B Growth Blueprint podcast. I'm your host, Mark Osborne. Today I'm very excited to welcome my guest, Kim Folsom. Now I'm going to read Kim's bio. 'Cause she's done a lot. I wanna make sure I get all this in. She's a trailblazing impact investor, serial entrepreneur, and champion for underserved small businesses. As founder and CEO of Founders First Capital Partners, she's built the nation's only women and minority-led growth capital firm of its kind, deploying over $15 million to help service-based companies scale without giving up equity. Over her 25-year career, Kim has launched and grown 6 tech startups, raised more than $30 million, and created 500 high-wage jobs. She's also the founder of a nonprofit accelerator, a columnist for Inc. magazine, and a sought-after keynote speaker on economic mobility and inclusive growth. Kim, welcome to the show.

Glad to be here. Thanks for having me.

Yeah, I've been really looking forward to this conversation. But before we jump in on some of these topics, Why don't you give our audience a little bit of your story? Tell them the winding trail that brought you to where you are today.

Sure. So as you shared with my bio, I'm the founder, chair, and CEO of Founders First. And it's been a 20-plus-year journey getting here. You know, I was one of those people that was trained from undergrad as a software engineer and wanted to be the next Bill Gates and had learned along a lot along the ways of trying to get there. First of all, it was just figuring out how I was going to start a business because in the late '80s, early '90s, all the ecosystem that helps, you know, founders, be it tech or not, was not available to help you, you know, launch a business. But a lot of the guys that I went to undergrad with, they eventually— we all started our companies working for somebody else. I started mine working in as, for NCR and their ATM processors and then eventually went to work for various financial institutions and then wireless companies and then launched my, my own company having observed other people doing that. My first company I started in the crazy dot-com era around the same time as some others that you may have heard of, Amazon, Google, with the goal of, you know, at a small cap level taking, you know, a company public. But it, we were a, a platform that was called like a Netflix for helping continuing ed for physicians and certified professionals. And instead of going public, we were sold to a— we sold to a publicly traded NASDAQ company. And, you know, thought that at this point I was going to go to work for somebody else running their business. But instead, I started a few other companies. And through that, you know, I would say that I learned a lot, you know, learned how the importance of, you know, not just having a great idea, but the ecosystem, you know, and, and as a venture-backed founder that, you know, you have a big, you know, audacious vision of where you want to go, but you need to really have a great distribution system to be able to scale. The right relevant capital is also key as well. And, and then, you know, going through that a number of times, you know, several of my investors said that, you know, you should consider going on the other side of the, of the table. You know, I don't know if you want to pause. Can you hear the, the air? There was an airline air. Okay.

Sounds great over here.

Okay. Sorry. So, so yeah, I, I went through, raised over $30 million in venture through these 6 companies and had 3 successful exits where, you know, beyond the first exit sold to other companies. And I say I have 2 learning experiences as well. And one of those 6 companies was a consulting firm that helped founders, you know, get access to capital even if they were not tech companies. And it's interesting, all of those things, you know, combined together with what I'm doing today with founders because the companies that we fund, are largely service-based or tech-enabled service-based companies. And, you know, I call it a little bit of my own personal therapy, you know, having, you know, learned that how to start a business and grow it, raise, do the milestones you need to go to, to, you know, attract capital and get to the next phase. And I'm really enjoying being able to help other founders, you know, go through those journeys.

That's great. So you hit on a couple of things in there that I want to come back and visit. And the first of them, sort of towards the end, you referenced that, you know, companies go through sort of these different stages and sort of different phase shifts. And we've seen, you know, from a marketing and sales perspective that, you know, there are kind of things that happen around a million that if they don't get them right, They just sort of will pop around, around $1 million for a while until they actually get those things in place. And then same around kind of $5 million and the same around kind of $10 million. And I'm sure that elsewhere within organizations, there are similar types of things. You've had such great perspective on not only growing businesses through those milestones yourself, but also advising businesses through those milestones. Share with us some of your insights on The things that are sort of most important as companies go through different phases and how they can be sure that they accomplish them.

Sure. So, you know, I would go through, I, you know, as a, when I started my companies, I had always thought of raising, doing it with somebody else's capital. So that means that you have a higher level of responsibility and accountability. Now, you would think that you would have that with your capital, but, you know, Sometimes it doesn't work out that way. But, you know, starting with a, a, not just writing a, you know, comprehensive plan, but there's tools like Lean Model Startup that you can start with that really basically has you have some discipline about who's your customer, what's your distribution channel, what's your model, and going through and setting up, you know, sprints, if you will, of saying, I'm gonna do the— this is what my business is, and trying it out and not being afraid to adjust along the way.

Yeah.

You know, there's so many people that say, you know, I started my business because I wanted to work for myself and they launch it. And as opposed to go through and saying, you know, I'm gonna identify, you know, pick a number, 10, 20 companies that would need this, run it by them with a goal of, of some small goal. I'm gonna try to get a pilot with them. And out of the pilot, they're gonna be, you know, satisfied with something such that they would either pay me more for it or start paying for it if it's a free pilot.

Right.

Um, but, but that's the initial, you know, piece of it. You know, so many people start their business, especially, you know, the, the assumption is most people start their business in college, which is not true. For every college, you know, startup, there's probably 5 of them that start, you know, because of an adjustment in the lifestyle. Either they realize that who they work for is ignoring an opportunity or they like My issue, I wanted to start one, but I wanted to, you know, have it be, you know, high 8, 9 figures. So I'm gonna learn from somebody else before I'm gonna start on my own. But, you know, once you get that going, but setting, you know, setting those goals, I mean, the other discipline, you're raising money from somewhere, you need to have a 3-year plan, you know, 3-year, you know, in the Lean Model Startup. And another tool is EOS that you probably have heard, you know, people utilize.

Mm-hmm.

where it's a, you know, 10, 7, 5, 3, 1, and then quarterly.

Yeah.

And setting up your revenue goals such as that, and then being able to have the discipline of looking at where you are weekly, you know, monthly, quarterly, and making adjustments along the way. Um, so that's from a, just a foundational level. And then the other from a business model is to have recurring revenue. Um, that's the other, other one. You know, I find people that aren't, Necessarily into the tech startup ecosystem. They may, you know, hey, I got this contract with some company, but you know they go through and do all this work to get the contract, deliver on the contract, and then they're having to go through and find another contract as opposed to having more sustainability built into the model such that you know beyond me doing this project, what type of recurring maintenance type of things that need, and and that requires. Is getting the discipline of talking to your customers about, you know, what do you like about what I do? What am I doing well? What do I do well compared to others? You know, what are, what are things that are important to you? Because the other thing with you change in the economic standpoint is you want to have a business is not a nice to have, but, you know, a critical— you're, you're providing a critical solution for your customers such that You're not gonna be, you know, a discretionary item that they, you know, eliminate when times get tough.

Right. You hit on some really great points there that I wanna double-click on. The first, I love the, you know, sort of process and system-oriented approach. For our audience that wasn't familiar, EOS that Kim references, the Entrepreneurial Operating System, which is a great format for It's got a really prescribed approach to lots of things that are very important for how to run your business and can save entrepreneurs a lot of time in figuring out some of those things. But you also talked about, and I really loved this, the idea that instead of starting with, well, I'm an accountant, so I'm going to start offering accounting services, instead start with what's a need that the marketplace has that you can solve? And if you're an accountant, chances are a need you can solve is going to be related to accounting, but it might not be the same thing that everyone else that hangs out a shingle does if you start with the marketing. And we have a phrase, you know, all marketing starts with the market. And so, by really understanding those customer needs, you sort of build the foundation for a much more successful business.

Right.

And then rather than sort of starting with Well, what I want to push out there instead, start with, well, what are they asking for? What can they pull from me? And then you also hit on something that we hadn't necessarily planned to talk about, but I think it's interesting and I wanted to get your perspective. We're seeing more and more service businesses that used to have these sort of tentpole engagements. And we'll stick with the accounting example. Used to be like they prepare your taxes for you, maybe quarterly, maybe annually. And then they'd go away, and then they'd come back either the next quarter or the next year and say, hey, can I do your taxes again? But with the proliferation of software and the ease of using technology, those companies are now identifying ways to add ongoing value to their clients through software, software as a service maybe, or software with a service that not only does it sort of give them recurring revenue, but it also gives their clients better outcomes. Like in the accounting example, here's a good tool that helps you keep your receipts in order and identify opportunities to sort of better manage your cash flow and other things like that that are quite simple sort of software implementations, but that make both the provider a better provider and the client a better client and deepen that relationship. Are you seeing that spread throughout other, you know, sort of professional services firms that you work with?

So sometimes it's having them go through, I guess, a mind shift of the fact that, you know, yes, you do provide these tentpole project-related services that can be annual, but it takes a mindset different of you need to talk to 10 of your customers and ask them, You know, what are some of the things that they're going through? Because just as you mentioned in that accounting example, you know, is the top thing that you're wanting to, you know, generate, save some money? And what are some of the things that you do to do that evaluation and assessment? And what tools do you use to keep track of this particular things? And, you know, if you could save, pick a number, 5%, 10%, by having this monitoring, it's worth it to do, to do those types of things, such as evaluate your expenses and see, you know, it could be that you don't have an expense plan in place that your employees follow. You know, it may be the expense, you know, tool that you use, just as you mentioned, But those types can be a recurring, you know, element, um, that they can, you know, be able to utilize. And so, you know, where, you know, X percentage of their revenue could be the tentpole projects, Y percent of their revenue can be these other monthly evaluation assessment related things that can, you know, add up and it makes you much more sticky with that client than, you know, oh my gosh, I'm just going to decide to switch.

That's right.

Because Also in the accounting piece, that is one of those hindrances is as you grow your business, you go from quarter million, half million, a million. And then once you get past a million and $3 million, very likely the accountant that you had that took you to there is not the accountant you need to go to the next level.

Yeah.

And that's the other thing that a lot of these businesses struggle with is that They may not have service providers that are up with where they need to be. And it's more of a, you know, well, if I tell the service provider that I do need to do these things, they'll do it, as opposed to the service provider looking at the fact that I serve, pick a number, 10, 20, 50 clients. And what I'm seeing, you know, these are the top 3 things they're doing that's saving money. or that's helping them generate revenue, that can be a big differentiator for the company. And so, you know, being able to go through and say, hey, you know, when you get to these particular levels, it may be that you need to go from a cash-based accounting to accrual-based accounting, or you may need to put in some project-based accounting or, you know, these various, you know, elements, you know, and then, and, you know, those, those particular elements to make your revenue scalable and sticky. And so one of them is changing the accounting support as you go from 1, 3, 5, 7, 10, or at least recognizing that you have to go through and do that. So that's one. The other is it may be how you address payroll. You know, you know, the other thing that we do is fund companies. And too often we find people, oh yeah, we do our own payroll. You know, you know internally, and it's like generally they are not in compliance, which you know depending on the states you live in can be quite you know taxing, and you may get fines for not complying. And so being able to go through and see that you know what it's time for us to use either an outsourced payroll solution, be it a TriNet or you know JustWorks or one of those types of solutions, you know because they're going to like I we're based in California. California, January and July compliance changes for, uh, tax— payroll tax-related things go into play and making certain that you have those accurately in place.

That's right. Well, so you hit on 2 really important points that I want to highlight for our audience. And the first is, you know, if you are a provider, choose niching down to, well, we service people around a certain size. Gives you the opportunity to really deepen that expertise. Although you could do the things that the million-dollar companies care about and you could do the things that the $10 million companies care about, by trying to do both, you're going to be distracted at either versus if you're very specific on what you do, then you really become much more valuable to the marketplace. And then that other really sort of interesting takeaway is that as companies grow, it's very important that they evolve. And of all the advisors that they use, because I guess the old phrase, what got you here won't get you there, definitely pays or bears out. But I think so few companies really acknowledge that and sort of make those sort of purposeful changes of we're now in a new phase of growth or performance or operations or whatever it is. And we want to have the advisors that are experts in the phase that we're at.

Yeah. Right. And don't do it alone. You know, you know, there's, as a founder, CEO, there's things that you're, you know, highest and best use of your time and expertise. But there's other people that are subject matter experts and learning to leverage those and, you know, joining groups, be it EO, like EO Vistage, you know, like women presidents organizations, supplier councils, you know, where you're gonna get a chance to interact with CEOs at the same level as you or, or higher, you know, like the supplier councils, they have like 4 or 5 different classes. So they may have a class for companies that are $1 million, another one $10 million, number $25 or $50 million. And, and by being able to have those interactions with those companies that are where you want to go, you know, they can give you a chance to kind of peer around the corner as to what's working and what's not and how they got there. And so, you know, I, you know, I, I think some of what I do is a little bit like therapy because when I did my very first company, one of my investors said to me, hey, Kim, you should consider— I'm a member of YPO. You should consider joining. And I was just like, I don't have time for that. You know, I'm so busy, you know, working on my business, but you have to take a step back and work on your business and not just in your business. And, you know, had I known what I know now, I should have jumped at the chance. You know, I eventually like joined Vistage and those types of things. But, you know, joining those organizations can be so helpful. You know, still, even in my 7th company, I'm a member of like probably a half dozen CEO groups that I, I contribute to and I learn from.

So you raise a great point. And I love that you're highlighting that even now, you know, after you've had success that many people, you know, aspire to and may never achieve, you still bring, you know, make the time To get that expert coaching, and I think of this you know all the time from you know the best athletes in the world not only have a coach; they have a coach for you know each body part almost. They have a coach for their eating. They have a coach for their mindset. They have a coach for you know their speed and endurance and strength and all of these different things. And to think that you know as entrepreneurs. we should not take advantage of that because there's this sort of myth that entrepreneurs can do it all or should do it all. It's really sort of limiting in the mindset that it brings people to. So you touched on something earlier that I do want to sort of take a little bit of a left turn towards, which is, you know, sort of funding. So, you know, a lot of our listeners that are operators, you know, they have sort of one mindset of, well, we're bootstrapping because that's what we know how to do and that's the capital that we have access to, or we're venture-backed because that's what, uh, you know, our plan was from the start and that's what, you know, we've, you know, sort of built our business around. But you have a unique perspective in that you've seen lots of different approaches, uh, to that and, and can sort of recommend different approaches for, for different companies. Talk to us a little bit about the differences in, you know, sort of funding and how they work differently for, you know, for different companies.

Certainly relevant capital is so important. And, you know, trying to force companies that are not venture-backed companies to pursue venture, which happens a lot because that's what's been so promoted, is such an exercise in futility. That's just crazy. But there are alternative capital solutions. We're one of them at Founders First. You can use like revenue-based financing, various types of working capital financing. I mean, believe it or not, there's some companies that have built billion-dollar businesses from various having working capital lines as well as, you know, even, you know, various types of invoice factoring that it's worked for them. Now, The thing that's key, it kind of marries along with having, you know, a solid finance and accounting support, somebody really helping you manage your cash flow of saying, hey, I got this new contract, I'm gonna get paid in X amount of time, but I need cash flow to cover my expenses because generally those things don't line up. You know, you have, you know, you're paying people or expenses that may be weekly, biweekly, and you get paid from your clients monthly, quarterly. And so being able to have that alignment is critical. But, you know, especially service and non, like, high-growth companies, you know, having alternative capital, especially using models like revenue-based financing, can help you work with, you know, those fluctuations in capital. The pure revenue-based financing is more of like a royalty-based model, which basically takes a portion of your capital a portion of your— you pay back to a portion of— with your portion of your revenues, anywhere from like 2% to 8%, depending. And, uh, and that could be a way of getting access to more flexible patient capital. But the other side of it is you've got to look at what your cash flows look like, you know. Um, and, and the other side of it is, you know, thinking about types of businesses. There are some businesses that raise equity capital thinking, oh, I'm going to be a unicorn, and they find out they're not. And, but, you know, just because you're not gonna be the next, you know, Facebook or Google and you're not growing, you know, 50 to 100% period over period, all's not lost. You know, the average business may grow anywhere from, you know, 5 to 20%, you know, period over period. So that's a great, you know, uh, source of raising various types of debt capital, be it, you know, revenue-based financing, working capital, and those types of things. And it's, again, it goes back to having that accountant. But one of the other Other critical areas in order to get access to capital is your cash flows, really understanding your numbers and all those other things. But, you know, in the area of expertise that, that your organization have is your revenue, you know, revenue, the strength of your revenue, because that's going to also provide you with more options. And the thing that I see with some founders making the journey from $2 to $3, $2 to $5 million, is to have somebody other than them helping them with generating revenues on a consistent basis. You know, having those 2 components, one, net new organic clients and being able to see and understand kind of the cycle that you're going to get those new clients. And then the other, having an ongoing, you know, batch of existing customers that you have those recurring or renewal types of things, um, because that's gonna help you, uh, attract much more reliable capital that can help you with growth. But, um, there is a, you know, what we call the capital continuum, you know, from traditional, um, bank, you know, debt financing, which, you know, they want you to be over, you know, $10 to $20 million, you know, to get access to, you know, more than like $50K, of capital. And then there's, you know, some mission-driven, you know, types of funders that can provide, you know, capital that's a bit more lenient than traditional bank. And, uh, and, you know, mission-driven, that's, um, you know, the, the bucket that we fall into. Um, because, you know, unless, again, unless you're gonna be the next Facebook, um, you know, there's limited amount of venture or equity. I mean, as people talk about less than 2% of equity capital is raised by companies. And, you know, they're not raised by non-tech and service-based businesses.

That's right. That's right. Well, it's so interesting just to think about it as a continuum rather than sort of binary choices. And instead, you know, I have seen lots of companies have success with blending some of those things. But as you say, ensuring that it aligns with your business model, Uh, and with the sort of structure of your cash flows, because, you know, if you're not going to achieve sort of certain stepwise changes, then taking outside capital sometimes isn't the best idea, even though it might sound sexy on paper. Uh, it's not always the right thing based on your business model and what that trajectory looks like.

Yes. And, you know, just recognizing that it's a partnership, you know, or even depending on the amount and type of capital, it can be like a marriage, you know. And so there's a level of accountability that goes along with that.

So, Kim, you're obviously an expert in a lot of really great things, and I'd love to, you know, sort of pick your brain all day, but I gotta be mindful of your time. But before we go, what's something that's on the horizon that you're really excited about?

Certainly. Um, so, uh, Founders First, we just launched a series of capital activation, um, uh, events, uh, regionally. Uh, we're— this year we're doing them in 4 regions. We just did one 2 weeks ago in Chicago. And then we have, uh, 3 more planned this year, one in New York City, another one in Pittsburgh, and then the third will be in San Diego.

Wow.

And, you know, as a tech founder, you know, there are, you know, events that you can go to, to not just go through and do these, you know, lightweight networking, but really having a deeper level of conversation to build relationships with funders about your current needs and future needs over the next few years. And, you know, in the tech environment, there's lots of those, you know, ways to connect where, you know, you share some background information, financial information, and, you know, if you're of a specific category, you're gonna be able to get connected and having a much more meaningful conversation with prospective funders as opposed to, you know, the, you know, lightweight, hey, you know, there's like 500 people and you're just exchanging cards. And so that's what we're doing with these capital activation events. They're 2-day events. where you really get a chance to get to know, um, the funders, a small group of funders in the region. And, you know, our goal from these is to create a pipeline for these non-tech, you know, service-based businesses to, you know, get on the path of getting connected to capital and being able to get funded and being able to be, you know, inspirations to other you know, asset-light service-based businesses is that you can intentionally get funded and grow.

That's fantastic. So for our audience that's listening and sort of loving what they're hearing and would like to get in touch with you, what are the type of businesses that you work with at Founders First? Who should reach out and what's the best way for them to get in touch with you?

Certainly. So we are focused on service-based businesses that are between $1 to $10 million in annual revenues. Um, and they use a B2B, like they sell to either corporations or regional governments. Those are the ideal, um, profiles. You know, they're people-powered businesses largely, so service-based businesses, and they want to grow. They want to grow, you know, anywhere from 20 to 30% period over period, and they want to do this with a partner, you know. Um, it's— and so that partner is going to be such that they're going to share feedback about how they're doing, want input about how can they, you know, grow and, and make improvements, make introductions, and, and provide that wraparound support. And as far as being able to find out where to find us, if you look, you know, Kim Folsom or Founders First up on LinkedIn, you'll see some of our posts about our upcoming capital activation events. planned for 2025. And, you know, we've got a 3-year commitment, so we're looking to do this for the next few years.

Fantastic. Well, Kim, thank you so much for joining today and sharing some of your insights with our audience.

Thank you for the opportunity. I really appreciate it.

All right, talk to you soon. Thank you for joining this episode of the B2B Growth Blueprint podcast. We hope you've gained Insights to grow your business. If you enjoyed this discussion, please rate, comment, like on your favorite platform, and share to others who will find it useful. Do you know a CEO, founder, or leader at an early-stage B2B services, tech, or SaaS company who would like to be a guest and share their story? Send us a note. Let's schedule a conversation.