Should You Raise Substantial Capital? | Parsable CEO Lawrence Whittle

More time and more money. What I learned with— so if you look at my career, I've done 5 early-stage companies, of which 2 have IPO'd, 1 trade sale. The company I thought would be the best was my worst outcome. Like, the company I honestly thought was my worst outcome. It's my tattoo for a flameout. And that's because we just didn't manage the cap table. So it's not so much about whether you raise venture money or debt. You've got to understand what the terms are of what you're raising money on.

Maybe a few more questions of last night. I hope everyone here has been thinking about things they want to ask because we'll spend the rest of the time talking to you guys. One thing that I hear a lot about, and it's very funny because it's actually counter to the investor's best interest, is a lot of folks were opting out of raising quite a bit of money. And they're going with dilutive equity, non-dilutive equity models instead, or they're trying to keep the company lean. So you guys did choose the path of venture financing. I'd love to hear, A, why you chose that, and B, maybe what are some of the advantages and very truthfully disadvantages Of raising substantial capital?

Yeah, so I think it's, it's less about— so you need money to build businesses. Okay, that's the one, one thing I've learned over the years is that it always takes more money and takes more time. So one bit of advice, do not underestimate how much time it takes. Even if you think you've got the best model, it takes more time and more money. What I learned with— so if you look at my career, I've done 5 early-stage companies, of which 2 have IPO'd, 1 trade sale. The company I thought would be the best was my worst outcome. Like some— the company I honestly thought was my worst outcome. It's my tattoo for a flameout. And that's because we just didn't manage the cap table. So it's not so much about whether you raise venture money or debt, you've got to understand what the terms are of what you're raising money on. So if you look at my cap table, it's something I've learned over the years, I've got a very clean cap table. So you'll hear things like liquidation preferences. If you raise a dollar, sounds great. Most unicorns, sound fantastic, 30% of unicorns have a funny coincidence that they're valued exactly at $1 billion. It's an artificial— meaning you can value a company whatever you like. It's the terms of the money you need to focus on. So it does take time. It does take money. And you do need investors to help you buffer the growth of the business. The reason why we've raised so much money is because we're going for something really big. So we decided not to do something small with a small outcome. We wanted to say, OK, my investors around the table myself, I have no interest in a few hundred million dollar outcome. We want to see if we can build a legacy company in a massive market. And the backend of our solution— so the frontend is a web app. It's actually a consumer-like web app. It's difficult to build, but it's not hugely difficult to build. The backend in terms of data, a massive scale, you can't do that cheaply. So there's not like, let's not raise money. You want something that can go global scale with multiple languages, you need to raise money. So I'm a great believer in venture capital. It's what's created this market here. You just need to make sure you understand the terms. And the strong advice I give to everyone, make sure you have someone that's an advisor that has raised money before, because money is cheap, but the terms typically aren't that cheap.

So managing investors can be like shepherding sheep, right?

It's like herding cats.

So what are some of the skills you picked up even for dealing with your board, even with a clean cap table? For dealing with your board and dealing with the folks who have invested in the company?

Yeah, so again, it's something I learned. You want to find an anchor investor, first of all, because if you have too many investors around the table that aren't necessarily connected, it's very, very difficult to manage because they have different expectations. And the other thing is, VCs over the last few years have had a lot of churn in their own businesses. So if you're my investor and then you disappear, The person that inherits the investment, it's not their baby. So I believe fundamentally in finding an anchor investor and then building the investors around them, as opposed to saying, let's get 10 investors in because I want $100 million. Always get an anchor investor.

So maybe one more, one last question between us, then we'll go to hopefully your questions too. All right, so if we could turn back the clock for a little bit and go back to early career Lawrence, what are the things you wish you had known then that you've since learned now that you should go back in time and tell yourself?

Yeah. So I think the single biggest thing that I've learned over the years, which I didn't know when I was in my early career, was patience. I came into Silicon Valley when it was just really starting to explode around the dot-com. So I thought, let's have a piece of dot-com. Everyone's making money. And I thought overnight success. And then I realized actually, it takes more time and more money. So patience is the major thing I've learned. I've learned. It's what I always say to investors, you know, you need to— I think I've got something really good. I've got a great track record. Looks like we're really doing well. But patience is really, really important because companies fail often early because of either founders or investors were not patient. It just takes time to find. And I hate the term pivot. You hear pivot in the Valley. That typically is a— that's really an excuse for failure. Really stay the course is the better way to— rather than pivot because it didn't work, is stay the course because If the idea looks solid to start with, and you did research, it probably is a good idea. You just haven't found the right sequence to actually get that commercial engine going. And that's whether it's a consumer play or an enterprise play. Patience is really, really important. Unfortunately, the one thing I've learned over the last 5 years, actually, is there's even less patience than there ever has been before with investors and with entrepreneurs. Everyone wants this overnight success. But as a fact, in my market, which is enterprise SaaS companies, the average time from start to finish is 11 years for a big outcome. So, and that's companies that have got magical solutions like mine. It's 11 years because it takes time. And as you know, you make mistakes along the way. So patience is the single biggest thing I say to entrepreneurs. Because you're going to fail multiple times, but don't give up because it's really about Finding the right path.

Yeah, I completely agree.