Ask us anything | Founder’s Office™ Lunch & Learn

Welcome back to the Founder's Office Lunch and Learn. Today we're doing something a little different. Over the last several months, you've brought us some really good questions, and it's sometimes more than we can really get to in a live session. So today we're turning the conversation over to you. We've gone back through the questions submitted during our previous Lunch and Learns, and we've pulled several that we think are going to be useful, not just for the person who asked them, but to all of us as Founders. So we're going to start with a question that we got from a founders more broadly. So we're going to tackle as many as we can today, try to give you our different perspectives, and hopefully leave you with a few things you can immediately apply to your own business. So let's get into it. Tom, Candice, thanks for being here today on Lunch and Learn. We're just going to ping pong these. Ping pong, spitball, what else? What else do you say?

Spitball, back a napkin.

Shotgun.

Back a napkin. I like back a napkin.

Back a napkin. Let's back a napkin it. Okay. First question, and these kind of go together, actually, question 1 and 2. What should I look for in an investor? And what am I actually asking investors for?

I'm happy to jump in on that, Ken, if you want. So, you know, we talk about that not all investors are created equal. And so, before you can identify the right investor, You need to identify what problem you're solving because the best investor is going to be aligned with the problem that you're solving. And they've already recognized that problem and have said, I want to invest in this. Now, that sounds crazy because we can take it from the extreme. So, you're going to open a coffee shop and your dad just loves you. And so, of course, he's going to be your friends and family.

Always the strongest investor choice, may I recommend.

Even if they think it is a bad investment.

Even if they don't include them on the due diligence part.

Yes. In all of those scenarios, dad will because dad or mom are being that, or aunt or uncle or even close friends. The problem is dad and mom will probably still love you. It can actually destroy friendships. So, you got to be careful within those and other family members. Mom and dad are probably Close enough that they're going to lose money and still love you. So they don't necessarily have to be aligned in there. Uncles are problems because they also then insert themselves and always give information that are not necessarily needed.

But they do sometimes offer free labor.

They do, and they can build shit sometimes. So, you know, it's kind of funny. We're not talking from personal experience in this, but I can see—

This sounds really, really specific.

He's using a very specific example from like Almost 20 years ago now. So the dude is, is really— okay, 15 years ago now. But, um, I— yes, agreed. I want to ask a couple things because I think you're told to look for accreditation and suitability, right? Those are kind of like the basics of what somebody is going— they're going to have you fill out this piece of paper. And that this piece of paper is telling you, okay, their risk tolerance is a great match and they have enough net worth to be able to make an investment. They're a good investor. And I think that's something we need to talk about is it goes well beyond that.

Well, even, I mean, this is one show, Jackie, in its entirety, believe it or not. And we probably won't spend that much time, but I want to take it along the course because I think Candace makes a really good point. When you're talking to investors that you don't know, all those other things actually start becoming very important. How did you get introduced? Is somebody going to get paid a commission for this or a fee? How is that going on? A fair amount of time, and this has happened, I mean, over the last 2 and a half decades, they're like, all I need to do is get in the right room with rich people and I will get funded. And it's like, that is not how this works. And, you know, it really is somewhat like Hitch, that TV, you know, the movie that came out a long time ago.

Matchmakers, right?

You do. You— so that, that is it. You need to present for the person who's already looking. You don't present fakeness. And that's also what I loved about Hitch. He wasn't taking anything in that and creating something somebody wasn't, maybe a little bit in the dance steps. But other than that, it was like, This is your legitimate self that's going to align with that person. This is how they're looking. And this is how you can show up so that it matches. So, it can be a bit contrived, but it cannot be contrived of who you actually are or what the idea is. And it's definitely not because the people are rich. So, that's what it's not. The best investors are when they've identified, like we've said, we like medtech. All sorts of different reasons. We're interested in that space. You know, we've been in fintech because again, that's been the interest that we're in. You bring me some other things sometimes that may get my— pique my interest. You come in skiing, that could probably get my interest, right? So how do you get that? It's knowing those things. But if it's the problem that's being solved and you can articulate it, you all of a sudden can go search for who's trying to also solve that. And then, the second part of that is, and I'm talking again past the friends and family scenario, but once you've identified your problem and you can articulate it, and by the way, we have built a great, simple-to-use program that you can run your problem through and it'll evaluate because most founders talk about the solution, not the problem.

Mm-hmm.

So, get in there, talk about the problem that you're solving, how you solve it, how it fits, and then you can run that through Crunchbase. You can run it through a number of different AI models and say, Who's already funding this? Because if they funded it, for one, they're generally not exclusive investments. Investors aren't. They're not like, oh, I'm going to only back this horse. No, I'm going to back Apple and Microsoft because I don't know which one's going to succeed.

This also really goes to the second question, what am I actually asking investors for? I think you start there. Really figure out what are you asking your investors for? Not only how much money, but are you asking them for a certain type of knowledge, a certain type of patience? Are you asking them for trust or not? You know what I mean? You, you're asking multiple things of your investors. So once you get really clear on what you're asking for, that can also help you align who your right investors are. Some money is not as patient as other money. So immediately, if you need patient money, you're not asking the person that wants it or needs it back in a year.

No, if you're having to— we see this far too often, and in real estate, it's the primary one. They lead with yield. They swear it's yield, the return on the investment. And those are only part of the equation. Liquidity, Events, timing, is it appropriate for the right investor? Candace and I talk about this a lot. You know, just because someone's accredited, they're 65 years old, which is still very young, thank you very much.

Yeah.

But, you know, versus they're 85 years old, liquidity events are different. We had a great investor who was incredibly wealthy, brilliant guy, understood the risk all the time. And every time he came in, he was 90 years old, every time he came into the investment, His question was, how do I not leave a mess to my children? Because I'm the investor, I'm having fun, I'm doing this, but I don't want to create a whole massive mess for my children who have to take over that. And by the way, we've started to have these conversations, right? I mean, Candace and Katie are going like, well, does Jackie handle this? So, Jackie, it's all falling on your desk. When I die, all these investments that you guys don't know that I actually made, I'm aware that there will be a heavy lift.

That's what I know.

But it's going to be like finding stuff in a drawer somewhere.

It's like, what did we do? What did we do?

This is going to be like a sticky note somewhere along the line. And it's like, oh my God.

I owe you.

Yeah.

You texted me in a dream. So we're good.

I do that a lot.

I think too, sometimes flexibility. I see this a lot of times, especially with really early-stage, specifically products or solutions. Sometimes those early stages, the product is intended for one specific use. And so you'll get a bunch of investors who buy off on this specific use. They think it's going for FDA approval, or they think it's going for government contract, or they think it's going one specific direction. And what they've really done is they've then painted themselves into a box with their investors in that single, single direction. And then when new opportunities come up, the investors are— can actually be very problematic for them taking the opportunity. We've now seen this a number of times where there's actually a bigger opportunity here But because the investors have this very rigid expectation of what this product is going to be used for, the founder can't pursue the bigger opportunity, and the investors become really problematic. So that's a big piece of the puzzle, is looking for flexibility and understanding who your investors are and what they expect of this product.

Well, that's an interesting one because, you know, we hear an awful lot of times that people use the anomalies as the actual pathway that normally works.

Can you give an example of that, Tom?

Yeah.

So there are a handful of people— there's not a handful. There's a lot of people that have come to us and said, well, I'm going to start crowdfunding first. And then I'll go get other investors and I'll— and we will be very clear with them. We'll say, in many cases, you won't get the other investors because they won't invest in something that's been crowdfunded first. And then they will tell me about the 5 exceptions of people that did hit and did hit values. And I'm like, you are absolutely right. You just went, entered into a universe of 10, you know, 100,000. companies that have gone crowdfunding and you gave me 5 or 10 that are the superhero success stories. Yes, you might be, but you probably won't be. So, let's build. That doesn't mean you won't be successful.

Yeah.

Let's look at how you do that. And if you're doing that because you're being lazy about creating the story and the value and looking at the things and not doing that, that's understandable, right? Fine. Jump in there, go get it, you know, whatever. Half the times, first-time founders especially, they're just absolutely learning as they are going along, the worst thing they can do is spend all their time trying to learn it to get it right before they ever get started. The best thing to do is get started, right? So sometimes it's, you know, what investor do I have? Let's build that and go forward. But crowdfunding isn't necessarily the answer.

So on that, do you think a great team matters at pre-seed? And here's our very specific question from the audience. Um, the audience member said, we have a project in development with proven operators in product development, marketing, and social media that have aided in producing recent 10-figure acquisitions and valuations. But we're seeing no traction in the capital raising campaign despite extensive data, market research, and verifiable team excellence. Does it not matter if you have a proven team or operators behind multi-billions on your project when, when you're pre-seed funding? What are your thoughts on that?

Well, again, Kenes, I don't mean to just jump in there. Here's the great economist and lawyer answer. It depends.

Depends.

So, you're at Stanford, you're around the right people, and you have this idea. There are people that will write very large checks. You just happen to be in Silicon Valley. You happen to get lucky. You happen to be talking to the right people. You happen to have the track record.

You hit the right trash can.

And the reason is, is because most— yeah, exactly. No, that's a great example, right? So, somebody we knew bumped into Steve Wozniak's trash can. I'm like, he could write the code. I could get him financing.

Yeah.

2 totally different good lucks in that same trash can. I didn't bump into Steve Wozniak's trash can, but that was a good example. I did not. So, why that's important is when we go to fund somebody, We start with the enthusiasm. Well, we start with what problem are they solving? And if they solve it, is it a big opportunity? And is there a way to protect it? So, that's kind of the 3 basics that we look at before we ever do anything else. It's also, is it a problem that we want to see get solved? Is it something that we're interested in? Are we passionate about it? Because as an investor, we actually get pretty involved. Then, we look to the passion of the entrepreneur. The founder, because if the passion of the founder is not there, meaning they don't have some personal experience, they don't have some drive that's going to push them through there. If in many cases it's just simply to get rich, which is not a bad course, but that's just not who we're going to invest in, then, you know, they're not going to stay there when it gets tough because it always gets tough.

Yeah.

And then, then to answer your question, Jackie, the team. So, most founders are lousy CEOs, even if they've gotten MBAs, even if they work for McKinsey, whatever type scenario, they're just lousy CEOs. Not all of them, but most of them are. So, in that case, they need to have the right team around them that can actually execute on the various parts of the idea. And we're working with one of our clients as his business is growing so fast, we're having to layer in the next level of team, the next level of team because he's growing at just, you know, Massive pace, right? So, can he do that? Can he attract and retain talent? Can she hold on to that and give them the leadership that they need and then let go to actually let them do? So, for the answer of the question here is, it sounds like they've got the right people potentially. Have they identified the problem they're solving and are they talking to the people that have already said they want to solve that. Because if they've got the right team and they've got the problem identified and the solution of how they at least think they're going to get there, raising the money should be truly relatively quickly because getting the team is a majorly difficult piece.

Huge.

So, I think in answering these questions, you've been very clear. Like, you've given little nuggets of what to do, what to look for. I'm curious, and I love, Candace, I love your, your quick answer on this every time. What makes you immediately say that you're out? As someone diligencing a deal, what makes you immediately say, I'm out?

Arrogance. I'd say arrogance is a killer for me almost every time. When they're the smartest person in the room, It's usually a gut check for us, but when they are just somebody who fails up continuously, like they've never— I've talked about it on the show so many times, like if they've never experienced hardship, if they've never had a deal blow up, I think people should wear their total, like their blowups. And I've talked about mine on the show.

Yeah.

You should wear them as a badge of honor. You've survived something, you've lived, you've gotten off the porch. Like, your scars mean something, and it means that you have built stronger muscles. You have resilience. I can count on you to have a whole tool belt of skills that some green founder who's never failed won't have. And that goes back to the arrogance piece. When somebody's really arrogant, That tells me they've never been slapped real hard, and life is gonna slap them real hard.

We love a real hard slap.

A real hard slap. It's coming for you, baby. And I don't want to be there to witness your first slap. I would really like to be there on like your 50th slap because you will hit back harder. Um, who's your—

who's your father? Did he like— did he like tell you to jump and then move his hands away or something like that type scenario?

I mean, I mean, if you weren't playing Like WWE wrestling with your dad every night before bed where he'd like flip you and take your legs out. No, I'm kidding. Uh, he did do that.

No, you're actually not.

I'm not kidding. Um, I just think there is so— there's— and it doesn't need to be somebody older. We have clients who are actually reasonably young and they have gone through some really hard business business transactions, business negotiations, things blowing up, friendship partnerships blowing up. And you can see, it's like watching them grow before your eyes. And it's pretty incredible to see them becoming this new, better founder and their next venture. We're just so proud of them because of what they're building. And you can't replace that education.

What about you, Tom? Anything that you'd add to that list?

Oh, one thing I'm always watching is how they treat others. And, and the reason for that is, at this point in my life, in most cases, maybe it's how I carry myself, maybe it's whatever, but most people generally, except for TSA agents, treat me with respect. I wrote about this not that long ago. I said, you know, If you— and one of the people had said, you got to treat the gatekeeper with respect. And I kind of wrote a little bit longer piece in there. I said, no, it's not that you treat the gatekeeper with respect so you can get to the person who's actually going to make the decision. It's you should treat the gatekeeper with respect.

Yeah.

If you're not that person who treats people with respect, regardless of what their station in life is, their choice in life, if you don't understand, you know, when we built our little ranch, We had these bricklayers that were just friggin amazing. Neither of them, I don't think either of them graduated 8th grade, right? They're of that age, that ilk, that, that was, they didn't have to, but they are masterful at that duty. And so why would I be telling them about something that's on their job or in any way think that my education was superior to their education? And that's not just, I think, how these show up. So those are the people we want to do business with. Right? It doesn't really matter. You know, we've got all these pedigrees in our family and we get all these doctorate levels and whatever else type scenario. That's not what impresses us, right? That is like, it's part of the journey. It shows that we're continuing learners. But the people that don't have any formal education may be some of the best knowledgeable people in the room. So, how they treat others, and we do it in a couple of ways, and some people can fool us. It's happened. But we generally get to know the founder's family because how they interact in the family, and then we all have family strife and different things that go on, but how they interact shows up a big deal. How they treat their spouse or significant other, their girlfriend, boyfriend, whatever type scenario is a big deal, especially in times of stress scenario.

Yeah.

Any family member can kill a deal. Any team member can bring up a red flag and they don't go forward because Tom said, I mean, and you guys know that. There were times that it'd be, oh, Tom said we're going to do this deal or it's Tom's That would be the kiss of death. It used to be. Yeah. But we didn't used to, right? I mean, it was lots of times that things would get through. It's like, well, Tom said we'd do this instead of using their head and said, no, it's not the right thing to do.

Yeah.

So, okay, say we've overcome— we've got all the good things, we've overcome some of these red flags. You've got an investor, you got a founder rather, and they're raising capital, maybe headed towards their next capital raise, their next round, how do they value their company? How do you— how do we help founders value their company? How do we, you know, like, how do you put a number on it?

It is that. It's exactly that. And, and, um, and it sounds funny, but you can take 2 companies that have the same revenue and they do not have the same market cap. And so, if that's on Wall Street, so, you know, you're like, oh, this company, Bank 1, is worth more than Bank 2 because of what the intangible reputation and opportunities are. And so, Bank 1 actually becomes almost a self-fulfilling prophecy because they're able to use that capital value to buy the next company. Right. So, in that, designing the right story backed up by financials of what you mean, but why is that going to be an exit? So, case in point, you're building something. It's hard to do in something that's never been done before. But you can say, look, the market right now is hungry for this space. This is going back to the team. This is the team we've got. This is the problem we're solving. When we solve that problem, we believe it is this smart, and this is how much we're going to be able to capture. And these are the acquisitions we're going to be able to And this is the 5-year plan. And so, we're going to go forward. And so, your 10% investment today, which will get dragged down a little bit through our various other capital raises, but it's going to be worth XYZ. And so, now, you back into it and say, that's how it is. Now, it's somewhat finance, it's somewhat wizardry, and then it's backed up by here's the 3 exits that that support why we made these decisions. I'm going to take you totally different.

Keeping the market in mind, you start with the market.

Always.

Someplace you're evaluating the market to look at the— what were some comparable exits?

Absolutely. I'm not looking for EBITDA, right? I'm looking for what's the valuable, what's the intangibles, where are we going to get— we're going to have these 15 patents, we're going to be able to sell this licensing agreement, you know, all these various parts. So it's not just a quick— it can be a quick back of the napkin. I do it pretty quick in most cases of a potential valuation. But that's also how my brain works, right? So, I'm taking in the data and I can get that stuff pretty quickly and then we validate it. So, but let's take it into a tangible, tangible scenario, which is real estate. I've got a piece of land, just land, and it is greenfield, which means it's never been built on before. We don't know exactly what's going to be there. And on the other side, I've got a Walmart that we know is looking for space in this region. So I go to an investor and I say, look, I think I can get Walmart to buy this piece of land. However, I need to take it through the entitlement process to make sure I can get city council to approve that. And I need $100,000 or $500,000, whatever it is scenario. If we are right, if we can get that approved, I can get Walmart to buy that. They'll be our tenant. They'll be our owner potentially or our lease tenant. And here's the value of the income over that. And by the way, the bond market is buying that debt once it's done. And here's the exit we'll have. It's no different in doing businesses that way. It's just that most people don't take that. They're like, oh, what's the appraisal of the land? Well, the appraisal of the land as a greenfield is nothing. Relative, right? It's what you can farm it. But if you take that and prove it and various things, so if you look at it along that line, you can actually say this is where we can go. Now, what's all the stuff that has to come into building that Walmart? Everything from getting the improvements and the entitlements, but then the construction loan and the building and actually getting the lease in place, all of those things are going to take a team.

Right?

I think too, what we tend to see in the land scenarios, a great scenario. A personal home is a great, is a great example as well. People tend to talk to you in the value that they believe it is when it's at its top tier, when it's like at its best of the best in best market conditions. And we see that a lot with, with businesses as well. They're taking their best possible month, plus this idea of contracts they may have that they haven't quite gotten yet, but they're close, or they think they're close. Maybe some ideas that aren't totally developed out yet, and their IP, but it's not documented. And so there's, like Tom's saying, is like, there's the potential value, but we got to get there. And that's where I think there's sometimes the gap. And it's going to take time, and it's going to take money to do that a lot of times.

Let me use a couple other just Comments. So, I'd been traveling to Asia a lot many decades ago, and Asia was using WhatsApp. And the United States wasn't using WhatsApp at all, but they were using WhatsApp, WhatsApp, WhatsApp, WhatsApp. And so, when Facebook put together that purchase and acquisition of WhatsApp, it was $1 billion, which at that time was a huge amount. It was a huge, huge amount. $1 billion is still a lot, but I mean, it was a huge amount. And they're like, it has no revenue. But WhatsApp knew, or Facebook knew it had eyeballs.

Mm-hmm.

And so that was able— they were able to take their valuation of how they valued each one of those eyeballs and say, no, we don't have to be marketing to them. But now you're on your WhatsApp, you're actually marketing and all these things over time. They took that in there, right? But they, they built that in there and they were able to justify the purchase. So the value is a willing buyer, a willing and able buyer, and a willing and able seller. That's the value. I have new neighbors up here in North Lake Tahoe on the Nevada side that have spent $125 million on their houses that, that long ago, not that long ago, $15 million was the value for that house, right? It's that the new buyers come in and they're worth so much money and there's so limited number of those houses, it shot— the cost of the house didn't cost any more. But that's that scenario that goes in there. So, that's the cost of looking at the value. How can you build a business that solves a problem and has the IP or the moat around it so that you become the most attractive seller to the marketplace of somebody who wants to solve it?

I mean, not to quote The Gentlemen, which I love that show. I rewatched it because the new season's coming out. But the guy's trying to buy his land. And he says, if I say it's worth that much, it's worth that much because it's worth that much to me. And that's because he was the potential buyer for that product. Nobody else was going to pay that much, but he had a different—

Yeah.

He had a different value set for that land, for that property, right? And so a lot of times, yeah, finding the right buyer is part of that equation of getting top dollar.

And identifying it and building it for that. And it's like, again, back to the right investor. If you find the right investor, they will, they will back that horse. If it's the wrong investor, they will destroy the company.

Well, let's circle back on this and different types of investors. I know, Tom, you've spoken about SAFEs before. I don't know that we've done many sessions on convertible debt or equity, but what's a framework for how founders should think about this. And if you want a specific question, several of our attendees have asked variations of this question. Are you seeing a lot of SAFEs and convertible debt for an initial $2 to $3 million round followed by a larger VC raise? Then another founder asked, we're pre-revenue and thinking about selling SAFEs or notes. Is that a good idea, or should we look at private investors or other capital? Let's just talk about the different types of investors or ways to come in, ways to invest. What are your thoughts on safes? No.

Yeah, great. If you're the, if you're the founder, but, you know, Y Combinator, massively successful, and they're kind of the creators of the safes. And you get Marc Andreessen, and it's like, okay. And that's because, again, you're in this ecosystem of Silicon Valley. Or Boston or, you know, you could be some certain— that ecosystem is there. And it's just they're throwing— they have so much money. They're throwing money at ideas in the old idea of a VC, which was you're going to hit so many of them, right? And the kids are smart that are coming out of colleges in most cases or tried their other ventures and they're backing them because they know. It may not even be anything like what the company is thinking it's going to be, but they got their first round. And by the way, back to that scenario, because Marc Andreessen says it's a winner, other investors are going to back it simply because Marc said it's going to be a winner. That does not mean it's going to be a winner. Marc doesn't get them all right. He'll text me and tell me I'm wrong, but that's not true.

Right.

I mean, so, it's just, you just, you You don't get them all right. And there's various levels of what goes in there.

How risky is that to just do an investment or to even as the founder have someone just stating that they're participating? We've seen this on the other side.

I think it leads us to— so, I'm old enough to literally have gone through the dot-com 1.0 in that all my friends were getting these at the time close to billion-dollar valuations, which was off the chart. didn't see anything like that. And then they're getting all this money, the Wilderly Inn, and they're building big offices and big TVs and all the fancy things and getting all those things. And then they blew up and everybody's looking around going like, why? And then you still had Google that came out of that. But you had AOL that bought Time Warner and put their big building on there and then essentially not worth anything anymore, right? Type scenario. So, it's risky.

Yeah.

If you're going to take the money off and you're only in it to play the game and it's kind of like, hey, I'm playing it and take my marbles and going home and I'm going to do my next one, then it's okay. If you're trying to build a company and you really want to see your idea come to fruition, then I don't think the SAFE's the right way. Take the time, take the due diligence, figure out what it's going to be. Be a founder that puts the effort in. That's the founders we back. I'm not saying that founders that do SAFEs aren't going to get back. They're probably going to get back just fine and there's going to be lots of ways to do it. But we don't do SAFEs and I don't recommend them for investors because most investors don't have enough experience to understand that that was just putting it on black. That's all it was.

I'm going to take— well, the questions are turning a little bit. Thank you for that. You mentioned IP earlier. Let's talk for a minute about IP because I think it is So it's the undercurrent. It's the thing that's in common with any investment, any founder, anyone starting a company. What the founder brings to the table and their team perhaps is significant IP. What do you, what do we advise a founder where they're really in early stages and they want to protect IP that's still being developed? And Candice, I'm going to call you out on this because I've been in conversations in a great way. In a great way, where you're like, okay, so you have an idea. We know the founders have you an idea. You guys, you two, both of you spark ideas like this, this, this, this, this, this, right?

We're idea fans. Where do you professional ideators?

You're you're fireflies with ideas. Ten quick starts. How do you go from it's an idea to something actionable to I'm building something? to I need to protect something now. How do you help a founder identify when and where there is IP that needs to be protected? I got that. That was a long way to get there.

No, I love that. 'Cause you and I have had conversations with people who reach out to us because they literally just have this baby of an idea that has nothing tangible attached to it at this point, nothing built.

No.

No team, no investment.

No. To me, that's— Great idea. They need $10 million. They want to go raise it.

I have those all day, baby. Like, that's— it's— I, I couldn't have a team big enough working on all of the shit I come up with, right? Like, good Lord. Thank God. Thank God, actually, we don't have a big enough team because I'll tell you, a bunch of them are stinkers. Um, but—

This is why we get— this is why we get Katie and Angela.

I know, I know.

Kelly.

My poor— our poor team and our— my My poor sister. So I would say, and you guys might have a different scenario than I do, I would say if it is a critical component to your business, Laura, that's morale. It's making some level of revenue or has big potential, you can put a name to it. You can document it.

You have a process.

Yeah, there's a process.

You've started a process. There's an implementation.

There is a tipping point, but I'm not waking up every morning and IPing a bunch of the stinkers that I have because I just— there's no point. There's a lot of duds out there. I'd say to surround yourself. Part of having a good team, just like we were talking about having the team that can say no when you've said yes. Having the team that can go, nope, that's a, that's a dud. Um, and calling you out on the duds or saying like, that's a part of an idea, we gotta expand on that to make it something. Um, you don't wanna surround yourself with ChatGPTs that are like, you are so smart and so brilliant. Yes, that is a great idea.

Run with this.

Nobody's ever thought of that before.

You know, I love South Park. You know, I love South Park. I know. I love South Park. So I love it. Thanks for sharing it. I know.

I've been hiding.

Yeah. So I've just got a crazy sense of humor. But the, the, the point where he's like, and what do I do with this business? And Chat goes all in, says, this is going to be great. And the next thing you see is the bankruptcy sign. So yeah. Hire professionals, use it to brainstorm. It's great. It's super valuable. It is. So, I think one of the questions, Jackie, you guys had up there that I saw in the pre was like, when do you sign an NDA? And we never—

Or what do you protect with your NDA?

Yeah. So, we never really sign NDAs until we've decided to make the investment. And so, let me tell you about the stages of making the investment. We hear it, we do some due diligence and look at, is this plausible? And then, we are going to put a lot of time and money into actually getting from the decision that, yep, we're interested, to we actually write the check. Because what we're checking is that everything that we've been told actually turned out factual. And so, when we need to get into a data room, Those people that get into a data room will sign an NDA. I don't sign an NDA because guess what I'm not doing? I'm not getting into a data room. And we get pitched so many friggin ideas. I mean, how many? So, we've got a group that pitched us on a non-piercing insulin product, right? There's like 12 of them that all of a sudden pitch us on it and everyone wants to give us an NDA. Like, we could never possibly evaluate these things. We don't go into the data room. We're not trying to find the secret sauce, right? That's going to be the IP. And we're going to have our right people validate that those things are valid, but it doesn't have to be us.

Yeah. Well, and circling back on the IP component, I think I'm very visual. So follow me with this. Rather than having an idea and an idea and an idea and an idea, and it's just like free floating stars in a constellation in the sky. That's great. You could protect every single one of them, all of your stars, but the expense, the, the cost, you know, benefit analysis on that, it, it like, no, you don't have the time in the day. We all have so many ideas. What I say is rather than picking all of those things and protecting all of them and then trying to fit them in a box or 2 boxes, start with your box, your box. Like what have you built? What's, what's your business? What's your container and what, What's in there that's trademarkable? Very likely there's a ton of stuff that's already in your box that's trademarkable— models, frameworks, processes, things that you do only you can do, your unique knowledge. And then work backwards from there. How are you using it in commerce and who owns it? Big thing, big thing. Because if it's huge companies using it but it came from your mind, these, these are just kind of some of the the ways I like to approach thinking about IP, and you can kind of organize it in your head that way. So to answer your question, how do you protect IP that's still being developed? Ask yourself, is this a random star in my sky, or is this part of something I'm building?

Can I go on that just a little bit more? Because first of all, the person you were talking about was me, and unfortunately, when you have— when you do have resources, I can can be like, Jackie, get this. Jackie, get this. Jackie, get this. And she is my temper. Like, okay, what do we try?

Things revoked. Your GoDaddy account was revoked.

I've asked several times. I'm like, that was recently.

That was recently. Like, you guys killed 100. You guys killed like 100.

Nope.

Nope. He'll have an idea and he buys the website, the domain.

Yeah, I know. I buy the company sometimes. It's all funny. But I I look really at the AI governance side. So, I'm trying to figure out how constitution, global, how we fit all this in there. And one of the things that's really up in the air is when it gets created on AI. Well, AI doesn't sit there, at least not today, and be like, it doesn't act as Candace. The good idea fairy comes in, it has to get a prompt. Even if it's a prompt to get a prompt, it may be doing work overnight and coming up with stuff and coming up with ideas. It still had to have The spark, the idea. And I, you know, I love something that was years ago. Somebody said, if you looked at a battleship, think of all the things, it came down to one person's idea that at the end of the day created that thing. And then all the people that they got involved in everything, any large building, you know, the Empire State Building, anything along the line, it was one person, one person.

Yep.

And so, that's where it gets down to like who owns that. Now, as the investor, I want to have rights to the IP. As the founder and as the founder's advocate, we always coach on getting the IP out because it's usually the founder's side.

We're the investor warning you about.

Yeah. No, no, no, no, no. Because I mean, going, going back to the late '80s and early '90s when the VC kind of world was kind of culminating up. The world that I was in in Silicon Valley was get the founder the fuck out of the business as soon as you can, take everything over from them, get them out. Maybe they retain some stock, but we are just going to cram them down as fast as we can. And that happened over and over and over and over again. And we said, no, that is never going to be us.

Yeah.

So, when you hear our stuff, we talk about, yeah, of course, I want to have maximum security and all the rights ownerships to it. And maybe we do negotiate along those lines, but we tell you fairly. So, but the ideal is that the founder owns that and licenses it to the company. Some people aren't going to finance that. So, you got to look at it and say, what's the trade-off? Just like personal guarantees, sometimes you got to do a personal guarantee. But we highly recommend against it.

These are conversations deserving of their own Full episodes. They really are. Thank you guys both for your wisdom. And for our audience, thank you for all of the questions that you've continued to bring to these conversations. One of the things we've learned is that every founder's company may look a little bit different, but the challenges underlying all of them are remarkably similar. So we're dealing with capital, people, risk, decision-making, valuing, valuations, knowing when to put— to push forward and maybe when to pivot or change direction. Knowing how to get the right type of support. So that's exactly why we've created these conversations. Please keep sending us your questions. We love them. We'll keep bringing them into the room and we'll continue having these conversations that founders want and need to hear. So thank you. We'll see you at the next Lunch and Learn.

Check out The Founder's Office, right? And check out, check out WTF, because there's more to this show even there that you get these 2 brilliant people as well as their guests that are on there all the time. And so you just kind of see this whole ecosystem that's going on and it's around the founders and the world that we're growing. And I really do believe free enterprise saves the world. Let's keep doing it. Let's keep supporting that. And I appreciate it.

Definitely.

Thank you so much.

Thanks, guys. Bye.

Bye.