Workshop: How to get organized to raise funding (Mark MacLeod, SurePath Capital Partners)

So I'm going to just do a very quick commercial about surepath. I'm going to give you some data on fundraising activity specific to SMB SaaS companies in North America in 2016, just so you know what's happening. And then just give you some kind of practical tips and tricks for how you go about raising capital before we get started. Who here has raised capital for their company already? Okay, about a third of the room. Everyone else is bootstrapped. Awesome. All right, cool. So a brief introduction to myself. I've been in the venture backed startup world since the late 1990s. Spent 14 years as CFO for a number of venture backed startups, most notably FreshBooks and Shopify. In between those two, I went to the dark side for three years as a VC investing primarily in SMB SaaS. So just spent a lot of time thinking about how you build a really large company when you sell to lots of really small customers. And so this SMB world is kind of my sweet spot. I launched SurePath Capital Partners almost two years ago. It'll be two years in May. We help companies like yours raise growth capital and then we help you articulate and then realize profitable intentional exit strategies. And we like to have ongoing relationships with our clients and really help you think through how and when to raise capital and how and when to get to know companies that could ultimately be a buyer for your business. As I mentioned before, we, I've spent a ton of time in the SMB space and we have a very clear aspiration for, for our company, SurePath. We want to be the leading advisor in the SMB software space. Anyone who's thinking about raising capital for their SMB startup or selling their SMB startup, we want them to call us. And because I come from the space, both as an operator and as an investor, we've been able to develop very deep relationships with all the most active buyers in the SMB world. Here's just a few of the deals that we've closed in the last few months and I think that's it for the commercial. All right, so SMB fundraising activity. So I don't know if you can see that here, but this is a look at kind of the deals kind of by round and kind of by quarter. In 2016, there were 234 rounds into companies that serve SMB in some capacity. That includes there's companies that only focus on SMB and then there's companies that serve SMB and mid market and kind of large enterprise. If you look at kind of the breakdown so the black bar is kind of just deal count and then the red bar is aggregate dollars per category. So no surprise, lots of deal counts at the lower stages. So kind of seed series A, but most of the dollars go to the later rounds, kind of series C, series D and up. So no earth shattering news there. But I've also included kind of median round size. So angel rounds were a median of 700k whereas the series A's were a median of 8.4 million. That's actually up pretty significantly. If you've been reading TechCrunch too much, you see that round sizes just keep going up and up. And what used to be a series B is now a series A. And that trend is definitely reflected here. You know, Series A's used to be more in that 3 to 5 range and now they're closer to the 8 to 10 range. If you look at kind of deal volume by quarter, you know, no massive takeaways there other than Q4 was, you know, lower in terms of aggregate dollars than what I would have expected. I'm going to get into some of the bigger rounds and so you'll see the timing of those outliers heavily influences total dollars that you see by quarter. But just to give you a sense for kind of what's going on and. Well, actually I'll talk about this other aspect in a minute. So a lot of information here. This is an extract from the state of SMB SAS report that we issued just about a month ago, which is why you see a lot of text. And I should mention I'll post these slides so you can take photos if you want, but I'll post them and so you can get that report. But I've got a couple of slides that come from that where we just broke down basically the verticals that venture investors are investing into. And it's funny, if you've seen any of those Luma landscape maps. You know, marketing tech has been super fragmented with lots of companies for a long time and yet it remains the most active area for new venture investments. And then back office kind of business management solutions was the next biggest category. But really the punchline here when I look at this is like all aspects of kind of the front, middle and back office for SMBs are being funded. There's just lots of innovation, lots of companies that are being created to go after all aspects of a small business owner's needs. If I drill down, if I take the kind of the business management or back office solutions and the marketing tech solutions, so we just kind of break those down, you'll see just the categories that are kind of most popular. So analytics, productivity, collaboration are some of the themes that you see on the back office side. Again, analytics shows up for marketing tech as well. Content, kind of inbound marketing is very much on the rise on the marketing tech side, but pretty widely distributed. So just again, a large cross section of types of applications are getting funded. And this is kind of in stark contrast to what you see on the consumer side or the enterprise side. If you look at kind of consumer markets and enterprise markets, those tend to be winner takes all markets that have a shorter half life. Inside some number of years, the market will be one. And there's just a huge difference between being the number one and the number three player in the market. No one would start a social network to compete with Facebook. Today, that market's just one. But when you look at SMB, what you see is just a large evergreen market that's sort of too large for any one vendor to dominate. There's like 30 million small businesses in the US alone, 60 million in the English speaking world and 600 million globally. And that's just too many customers for one vendor to go after. And so if we take even the accounting software world where I came from prior to founding SurePath, so again, 30 million small businesses in the U.S. only 5 million of them use QuickBooks. Even though that product's been around for like over two decades. And you would just never see that in an enterprise. You know, that market would be one, they'd have 80% penetration. So, bit of a tangent, but that's an important thing to bear in mind for you. As you're thinking about your funding and your growth strategy, chances are very good that you're going to be serving a large kind of evergreen market. And so the point of that for you as an operator is you can decide how fast you need to go. You know, you could bootstrap for a long time or forever if you wanted. In a talk I gave last year on SMB exits, I noted that well over half of the exits that happen in the SMB world are for bootstrap companies. And again, if you read TechCrunch all the time, you think it's all venture funded because that's all you read about. But most exits in fact are not like that at all. Just another little tidbit. Industry niche vertical applications are on the rise. Legal in particular with companies like Clio out of Vancouver have all raised large funding rounds in the last year. And this is just the beauty of the Internet. Right back when I started out in the venture backed startup world in the late 90s, it was really hard to reach customers. You had to build direct sales teams and you couldn't afford to build these kind of vertical specific applications. You had to go very horizontal, very broad. But now you can target and find exactly who you need to reach. And so you're seeing these vertical applications take off and investors like them because there is a path, if you take the legal industry as an example, that is a very defined thing, it's a specific target market to go after and therefore you can build a thesis as an investor around one vendor being able to be the clear market leader in that market. As an example. So this is just a few of the names of as we looked at those 234 funding rounds that happened for SMB startups last year, here are some of the most active investors. So probably names that you all know. The funny thing is when we look at most VC firm portfolio pages, you'll see lots of consumer startups, you'll see lots of enterprise startups, you'll see relatively few SMB focused startups. And that's reflected here in the numbers. There's 234 deals that have happened, but the only fund that actually got into double digit is techstars, which of course by their very nature they're just cranking out all these seed stage companies. It's easy for them to get into double digits, but in my experience SMB is about 4% of any venture firm's portfolio. And that's just because it's really tough. I'm going to talk about that in the second half of this talk here. But it's tough to build a business that is venture scale when you're selling to lots of small customers who churn all the time and it's expensive to reach them. And so a lot of VCs shy away in the early stages from backing companies that focus on SMB for that very reason. But nevertheless, these are the names. So if you're raising money, find ways to talk to these guys just for useless trivia and conversation around cocktails later. These are the biggest rounds that happened in SMB SaaS last year. Again, as I mentioned earlier, some of these companies such as Stack, Path and Asana are not pure play focused on SMB. They serve mid market and enterprise customers as well. Whereas Gusto is absolutely 100% focused on small business. But some really big rounds here. And you know, Gusto doesn't have the highest round last year, but it has raised cumulatively a ton of capital and is probably again number two on the list here.

Yeah, so you mentioned that for early stage startups that are focusing on SMEs, VCs are not very interested. They only look at venture scale. So what is your suggestion for startups that are looking to raise capital, especially at an early stage?

Yeah, so question if you didn't hear it is if the VCs don't like investing in early stage SMB SaaS, because the metrics aren't there, what's the suggestion? And to be clear, there are rounds that happen into early stage SMB. I'm going to talk about this in the second half. Basically. The thing is, you basically need to prove them wrong. So you need to have traction that shows that you clearly understand how to get to customers and that you're keeping the customers. You found a profitable way to acquire customers, even if the absolute number of customers is still quite small. If it's clear that you are growing and month over month, if you're growing 5% last month and 10% monthly growth three months from now, then it's just clear that it's working. You basically they won't take a leap of faith as sort of the punchline. But I'll give you some more specific metrics to shoot for in a few moments. Cool. Ah, perfect. Good segue. All right, how to raise your round? So first let's kind of talk about the VC Alphabet, right? You see these rounds all the time and it's A, B, C, D, et cetera. So like, what do those things mean? And again, those have changed, right? The bar has changed. Where E, you know, the series A rounds that are happening today look like series B's two years ago, et cetera. But as a snapshot today, these are kind of the rounds that I see at the different stages. So seed stage tends to be, you know, anything from initial idea up to kind of early revenues tends to be rounds of 3 million or less. You do not necessarily need to have revenue in order to raise that seed round. Who do you get it from? You get it from angels and seed VCs. And the whole purpose of it is to establish and validate product market fit. Series a is bigger, three to $10 million rounds. We saw the median round a few slides ago was 8.4 million last year for Series A. Generally speaking, with SaaS, businesses you need to have 1 million annualized recurring revenue and up to be series A ready, you're going to raise growth rates. If you look at kind of at the early stage. So at least doubling your business every year. So at least 2x but best in class investors will be growing, our businesses will be growing kind of 3x and 5x per year. So that's kind of the bar certainly at the early stage. And there's just one sole purpose for, for raising the A, which is to find that clear channel of growth or what I call the sausage machine. If you just found a way to make 10 sausages today, I'm going to give you a bunch of capital so you can make 50 sausages. You had a question? Yes. At the C level and at the A level, what percentages are the entrepreneurs giving up in order to get those monies? Yeah, so yeah, good question I've ever heard. You know, what percentage of a company is a founder giving up at each, each round stage? I think it ranges 10 to 20% is probably the typical range. 10 on the low end. I think by the time seed stage you tend to see those, the hat gets passed around to a lot of folks to raise those round could be lots of small checks in aggregate, maybe 20% dilution. But if an investor steps up and leads and has a thesis for your business and wants to lead the series A, they probably want 15 to 20% ownership just to make the math work for their fund. And I should have thrown in a slide to kind of switch gears and talk about basically the scale of returns that you need in order to actually be meaningful for a fund. But I think the punchline is if you don't have a minimum level of ownership, it's just not worthwhile because most of your investments don't work out at the early stage. And so the ones that do need to make up for all the ones that don't do. These companies typically build out a fundraising plan that says that at seed round we're going to give up 10 and at series A we're going to give up 20. Do they go into it that strategically or does each round just present a new range of variables? Yeah, I think here's the thing, there's no market value for your privately held startup. Right. The market value is what an investor is willing to pay. And so you can have intentions. And it's funny, the venture business, it's all about outliers. So if you have that shit hot company that is just growing like stink and investors are flooding into you, you can absolutely dictate terms. It's like, this is what I'm going to raise, this is what I'm looking for. Here's the pre. Here are the terms. Are you in or are you not? But for most merely mortal startups that's not the reality. And so you'll end up just, you know, there's a back and forth and you'll find that, right partner, there are definitely rules of thumb, right, which is that you know, 15 to 20 points of dilution per round that by the way does not include dilution to create a stock option plan, right. So if you don't have, that's just, that's just for issuing the shares to, for the new investors, right? But then you're typically providing another 10 to 20 points for a stock option plan and that's going to get topped up every round. So the all in dilution can actually add up. Now obviously the bet is for you as an entrepreneur is that you are trading that dilution to go for an outcome that would be impossible to achieve without that capital. Any other questions? And then the last, I've kind of put B plus because once you're kind of into series B and beyond, really it's just a sausage machine. You can make 10 sausages today. I'm gonna give you some money so that you can make 50 sausages and 100 sausages. So it's all about just exploiting that kind of very repeatable channel for finding and keeping customers. And then the other big theme, when you get by the time you raise a series B, your early exit opportunities kind of go away. So you're committing to build a market leading company. And so another big theme that you see at the series B stage is building out your executive team, which is maybe something you don't think a ton about before. All right, the three P's. So this is just a handy little acronym that I've come up with for kind of what you need at each stage of the fundraising, you know, this people product or progress, AKA traction. And the way I look at it, at the seed stage, you only need one of those things because the investors are going to take a leap of faith. There's so much that's unknown. It's going to get figured out over time. By the time you get to series A you need two of those three. But series B and beyond, you need all three. And at all times, if you're only ever going to have one, have traction, you could have this totally unknown team that's never done anything before, a product that is maybe incomplete, but if it's just blowing out the doors and you're growing 20% per month, you're going to Raise money, there's no question. And so traction just kind of forgives all sins and so easier said than done, but that's the way I look at what you need at each stage. Yep.

So when you look for traction.

You.

Focus more on the revenue or would you rather have profitability set aside and focus more on growth?

So traction. So there's a few ways to look at traction. Revenue is one of them. I do not think that profitability is important other than for you as a founder. If you're running out of cash and you need to raise money by a certain date or your debt, that's pretty important to you. But as an investor, what I care more about is your unit economics. If you spend a buck to acquire a customer, and that customer is worth four bucks, I want you to go and acquire a crap ton of those customers. And therefore I don't actually want you to be profitable. But at the early stages, revenue doesn't have like revenue is great, is really important. But at the really early stages, there are early indicators of traction that could even precede revenue. If it's kind of a free application looking at engagements like daily active users over monthly active users, to just see the quality of the engagement, kind of session lengths, virality rates, there's other indicators that kind of precede revenue, that could give an investor a sense for the fact that users love your product. That make sense. All right, cool. This is an eye chart. You won't be able to read all of this, but again, I'm going to post it up. But this is just. If we look at the rounds that we run at surepath, this is what a typical process looks like from start to finish and really three to four months, six months at a stretch. But that's usually what we budget to get a round done. I think earlier seed stage rounds can happen faster because you're basically asking people to take a leap of faith on you as a founder. But later on, there's just more meat on the bone, there's more diligence to be done and just takes more time. So a few phases, there's the big kind of prep phase and just getting ready, building your decks, building your models, being clear on who you want to approach, building a pipeline of investors. There's a roadshow. You know, something I see founders do a lot, and I think I'm going to talk about this in a few moments, is, you know, they get introduced to an investor, they start talking, they have one meeting, they have another meeting, they think it's going really well and Then the investor says, you know what, when you look like this, come back, I'd be interested. And then they go and do that with like someone else and then someone else. And before you know it like three months have passed and you've just wasted a whole bunch of time, wasted a whole bunch of Runway. And also your story feels really old to investors. And the point of that is having these kind of one off conversations versus talking to everyone at the same time, you know, just doesn't work. So when you kick off a roadshow, really important to be talking to everyone. Here are just some of the KPIs that I look for specifically for SMB SaaS companies as kind of a baseline. So in terms of churn. So this is one of the biggest criticisms that investors have about SMB SaaS companies is, you know, the customers are really small, then they churn out. If Your churn is 3% per month or more on a logo basis, I think it's going to be pretty tough to raise the round. I think that implies a tenure of three plus years. It's pretty small. Those customers tend to not be worth very much on a revenue basis. The logos is like If I had 100 customers this month and three of them left, I have 3% churn. But the ones that remain, those 97 that remain might actually grow. And so the revenue that I get from those customers, that's kind of the revenue retention. So that's what this is. And on a revenue retention basis, I'm looking for no more than 1% revenue loss per month. In the ideal world you have negative revenue churn, which means that even though those three customers leave as an example, the ones that remain more than make up for the lost revenue you actually grow. And that's why you see companies like Box that Bright burnt a hole in the ground leading up to a very successful IPO. Because the customers that remained grew more than 30% every year. It was way more than their churn. And so basically every cohort of customers was a growing annuity. And obviously investors love that. So that's kind of what I look for on churn. If you look at lifetime value over cost to acquire customer, and let's define both of those things. Like lifetime value is how much you charge your customer per month times the number of months that they stay, times your gross margin. So that's like a gross contribution margin from your customers. And then divide that by how much you paid to acquire them on a fully loaded basis. So how much you paid in terms of like marketing Dollars and like sales and marketing bodies, if you divide those two and your number is less than 3x, I think you'll struggle to raise. You probably can raise, but you have a good, not great business. Whereas kind of 4x and up is really good. On the flip side, if you have like 10x or something, you're probably being nowhere near aggressive enough. You know, you're just, you should be investing way more in your CAC to drive more growth. Payback period. In SMB, I really like to keep it less than 12 months. I say that really because SMB tenure. So the number of months that a customer sticks around tends to be, you know, 36 to 48 months. So if you're, if it's more than 12 months to get paid back, then you're starting to throw off that LTV to CAC ratio and then. Yeah, sorry, go ahead. That's right, yeah. You know, if it costs you 120 bucks to acquire a customer and they earn 10 bucks a month from them, you know, that's the baseline and then growth rate. You know, again, if you want to raise that venture round, you want to be an early stage venture round, you want to be at least doubling per year, ideally more. And yeah, go ahead. Clarifying growth. You're not just talking about revenue and whatever metric you're trying to. That would be a revenue growth. Yeah, I mean you could look at user bases again for those early rounds. If your user base, if you're growing 10% per month or something, that's an early indicator. But yeah, on the revenue side, at least doubling. And best in class, like Thomas Tungus gave a talk here last year and he really talked about 3x is sort of a baseline for him, but he really is looking for the companies that are growing 5x per year, which is few and far between. And you know, the last thing I'll say in terms of the KPIs. So again, one of the criticisms from investors about SMB. So I'm repeating myself, really small customers, hard to acquire, they don't stick around, it's really expensive. And there's only so far that direct performance channels can go for you before your marginal cost of acquisition just starts to go up and up and therefore compressing your LTV to cac. And so what you really need to be thinking about, maybe not at the very early stage, but certainly after that is starting to think about channels because ultimately again, if we go back to 30 million small customers, you can't reach them all directly. Right. You could just not possibly Raise enough capital to reach them. And even if you could, your cost to acquire those customers would just keep rising. You'd be a victim of your own success. And so having channels is super important. And I know that's a focus of this conference and having folks talk to each other, but I can't overemphasize that. Best practices we've covered probably some of this already and you've probably heard all of this kind of VC101 platitudes in the past, but nevertheless, we'll spend some time on them. First thing is, you know, know what investors are looking for. And that's not a general statement, that's a very specific statement to each stage. If you're a seed stage company, you need to know what you need to look like to raise a seed round. Same for the A, same for the B, et cetera, et cetera. And also know, you know, if you are targeting I see this all the time where let's say you have a marketing tech startup and you get introduced to a partner at a fund just because your friend knows them, that partner may not actually look at marketing tech. And so you're kind of wasting your time. And that's especially true at the later stage rounds. The early stage investors tend to be a little bit more broad based. But the growth stage investors tend to have certain categories or verticals that they spend all their time in and they'll talk to every company in those verticals. And so if you're not in their vertical, you're kind of wasting your time. And so doing the research up front and knowing exactly who you should be talking to at a given firm because they spend time at your stage and in your vertical is super key. And then once you know who those people are, don't just guess their email and email them. Get a warm introduction. Best source of introductions are from existing portfolio CEOs, especially if that CEO has already made them money. Other co investors one really bad source of an intro. Let's say someone passes on your business and you say hey could you introduce me to so and so? Like that's like the worst possible intro ever. Like an investor who's making an intro who's not investing in the round. It's just really bad. Anyway, control timing. I talked about this a little bit. You want to be talking to all investors at the same time. So parallel processing, not these one off conversations. I think that's particularly true down here in the Valley. I don't know where everyone's based. I find that I don't know, there's just sort of like a short half life. Like stories can feel really old down here versus in other parts of the country where they can go on longer. Look for forcing functions. So as you're thinking about now, a forcing function for you could be, well, I have six months of cash left, so I need to raise money in six months. So that's great. But that's your problem. If you now look within those six months, like what is happening in terms of new product releases, big announcements, big partnerships, are there events that are happening in the next six months that could drive an investor to actually move and commit? So think about those forcing functions and build them into your timing so that you can use those positive events to generate momentum and get the investors to commit. You know, next point is on lawyers. And I'm sure everyone's got horror stories about lawyers going through an acquisition right now. And there's literally a one to one correlation between the headcount of our client that is selling and like deal professionals and you know, company reps on the buy side. It's ridiculous. But the bottom line is kind of startup life boils down to a few big moments, all of which involve competent legal counsel. And if your cousin Joe has like, you know, a general law practice and you're using him, it's not going to work. You know, stick with the ones like Gunderson Cooley, they just, they've got it figured out. Just stick with the name brands and you know, you'll be good. Last best. Yeah, yeah, you need legal help, but what about accounting help? Yeah, for sure. No, it's important as well. You know, if I again, if I look at. So whether you're wanting to raise money or you're wanting to exit, there's a whole process kind of leading up to some interest and then you're going to have a deep anal probe. Pardon the visual. And the point is you need to have a really solid back office. You need to have really great numbers and you need to be due diligence ready. And so I would kind of break down the accounting back office needs really into two buckets. One is kind of just your day to day running of the books. And for you as a founder, you shouldn't be spending a ton of time on that. Personally, that's okay. To outsource. I personally really recommend Cruise consulting here in town for that. They are running books for maybe about 150 startups and it's just smooth. They know exactly what they're doing. That's just a solved Problem, just use that when it comes to then kind of audit tax, founder tax planning and just those big events. You probably want to be with the big four accounting firms versus a regional firm. PricewaterhouseCooper stands out to me as one that's made a commitment to the tech vertical. But others have as well. Kpmg I know is trying to catch up to them. I think with all of those professionals, whether it's the Gundersons and Cooleys on the law side or PwC on the accounting side, you know, they should be looking at you not as a source of near term fees, but as a valuable relationship. Right. And therefore they should be heavily, heavily discounting and having fixed fees at the early stage so that they can be there and you know, rob you blind come the big exit. So that's the way I think. Does that answer your question? Other considerations. Are we doing a time? Okay, good. I want to just contrast early stage fundraising, which is probably what everyone's most familiar with, and what you read about on TechCrunch, and contrast that with growth stage fundraising. So early stage, it's all about the hustle you as founders have to get out there. You got to get introduced to investors, you got to just work it and try and get to a close and it's all you making the effort. Whereas when you get to, let's call it 7 million ARR and up, suddenly all these firms that you've never heard of are emailing you and introducing themselves and they all have these Ivy League analysts who are introducing you to their firm and the tables change. And that's because, well, first of all, not all that many startups get to that scale. And, and if you have that repeatable sausage machine that I talked about earlier, then that's just an amazing thing for a growth stage investor because you basically can generate venture scale returns without taking venture scale risk. The thing just works. And that's why everyone's doing these outbounds, trying to find those diamonds in the rough. And to be clear, for every 100 companies they contact, probably two of them are interesting, but they nevertheless want to talk to everyone. And then the other dynamic at the growth stage is again, if I am a growth stage investor and I'm writing, I don't know, $15 million check stakes are really high. That thing needs to work. And so I'll probably talk to every single person in the industry before making that investment. So I guess the point there is if you're starting to get that now, if your inbox is starting to fill Up. It doesn't mean they're actually interested in you. Those are not qualified conversations yet. Yep. That's a great question, because I feel like a lot of times you get the associates that try to contact you. Yep. So how do you politely say, hey, I don't want to talk to the guy who's been out of Harvard for four years. I'd really talk to partner. Yeah, great question. I think you should spend time with the associates. That associate could be a partner at some point, or it could be out in the industry. It's a really small world. No deal is going to get done at the associate level. And I do think there's a much higher probability of getting a deal to close if it originates at the partner level. But the associates and the analysts are there to bubble things up. And so I would say after that initial conversation, if they want to get more serious, you could politely ask them who would be the lead partner on this? If these discussions go all the way, or even better, you've done your homework and you've looked at their partner roster and you're like, yeah, Joe Blow looks like they have exact relevant experience. They've invested in xyz company that's in our space. Can you bring them into the next call? Raising too much capital. Suneer's given me the time check, so I'm going to blast through this. But, you know, I think too often we see these companies raising these big rounds and we celebrate that as success. But in reality, success is the exit at the end of the day. Right. And there's too many exits that get celebrated where the founders make Nothing because the VCs all have these massive preference stacks and they take all the money. And so I think just the point here is, you know, it is possible to raise too much money and it feels like it's a free for all. There's all this money there. It's easy to raise money these days, but just remember that it's a powerful instrument. Right. And to your question around dilution earlier. Right. It's very dilutive every stage. I'm not against raising capital. Obviously, it's half of what we do, but just go into it with your eyes kind of wide open. Raising from strategic investors versus raising from VCs, this is something that comes up a lot. I think what I would say there is do it only when you're at a certain stage. Like call it at least 5 million in revenue and up. Because I think before that, you don't know what you're going to be when you're growing up, your company's still really young, you want to remain neutral. Whereas when you're further along, I think that's when you can think about making some informed bets and creating some deeper alliances using advisors. Okay, I'm biased because I am one. I think you should, but not at the early stage. Use them only kind of at the growth stage and absolutely use them for exits. You do not want to be negotiating your exit with your future boss when you've never done this before. Explain exactly what you mean by advice. I don't like to use the term investment bankers because they have a well deserved horrible reputation. But folks who can help you, intermediaries who are deeply connected to investors and buyers and can help make those deals happen for you. Is that usually a percentage or. It's usually a percentage, yeah. Any other questions? If not, I think we're done right on time. Oh, sorry. Yes.

Say you're in a scenario where you can receive seed funding during your seed round, or maybe you even completed your Series A and you're looking at the numbers and you have the option to become profitable or go pursue another round of funding.

Yep.

What are some reasons you can be. What are some reasons that you would raise funding? What are some reasons that you wouldn't go the other way and just become profitable and not take on any more funding?

That's a great question. To be honest, we could spend a lot of time on that question. I don't know if everyone heard, but like you raise some money and you have a choice between either being profitable or kind of raising more money and basically discuss. That's the question. And so the way I think about that is there's a few different aspects. If you have a recurring revenue business, then your unit economics and the profitability of them is more important than your bottom line profitability as an investor. But investors do not covet like the companies that investors covet the most are the ones that don't need them. And so if you're profitable, they're like, oh my God, I really need to invest in you. So there's this balancing act. And I think if profit comes at the expense of growth, like if you were growing like this, but then in order to become profitable, you kind of start to flatten. That's a bit problematic. Right. Because it's harder to bend the line back up again. So that's a thing. I think another thing to think about is just your aspiration, like what does success mean for you? What are you trying to achieve? How big do you think this company can be. Most exits are pretty small. And if you raise too much capital, then that exit could be unprofitable for you. So there is a thing to think through there. If you really think you know what this thing is just it's not going to be the next Zendesk. It's its own thing. It's fine, it's going to have an early exit, then maybe raising less capital would make that exit more profitable for you. So it's lots of nuances, to be honest. That's not doing your question justice, but a few things.

Profit comes at the expense of growth. That's, you know, you have to consider what your personal objectives are.

Right. That's very helpful.

Thank you.

Cool. We're good. All right, thank you very much, everyone. Oh, last question. One quick question. In seeking an advisor, as I was considering Exim, do you have any advice.

Or opinion on whether or not those.

Advisors should be licensed? Oh, great question. Yeah, I think for sure. Yeah. I mean, you should be an exempt market dealer in Canada or FINRA. FINRA registered in the U.S. there is this kind of gray area where you can be a consultant, but if you are basically offering securities on behalf of someone, you should be licensed.