What Do We Look For? | Manny Fernandez

So many people say, well, what's the magic behind this? How do I get people's money? How do I get some investors' money to help me build my vision? I think the 3 things we look for based on the group is the team. It's always about the team. Second, early in the market, in a very large market. Why do you think early in a market, in a large market, is important? Because you're the first. I'm going to call on people. If you don't want to be called on, just don't pay attention. The woman over there. Anyone wants to— yes? When it's a market where switching cost is high, you have to market early and then you can iterate on your product. Uh-huh. Anyone else? Another idea why early in a large market is important? You get the first leader advantage. Yes. Okay. Yes. Uh-huh. Yes. Oh, kind of like Google Jacuzzi or Xerox? Yeah. Got it. Well, I think what's important is that I've seen many entrepreneurs chasing after a small market or chasing after a large market with established competitors, very big competitors. So they're not going to get the support of the investors most of the time. Because if you tap into a small market, there's really not much money. Does that make sense? So I like to build things for markets that don't really even know it existed. So that's why I think these 3 fundamentals are used by many people. So you should think about if you're entering a large market, how you're doing it early and what's your team like. Those 3 simple dynamics I think will get people's attention. And I think my successful investments had that model. The one on the— yes, sir. What do you consider a big market? A big market. That's a great question. I don't know. There's this new market called equity crowdfunding started in May. People say it could be $300 billion a year, first time in 83 years. That may be a big market because of the change in the law. Yes, sir. How do you present a good team if you don't have any references from the past? If you don't have any credentials from the past, how do you present your team as being good? Say that again? If you don't have any credentials from the past, how do you present your team as being good? If you don't have any credentials from the past, how do you present your team as being good? That's very— that's a great question. Let me think about that. Sometimes it's school. Sometimes it's showing that whatever you started with, you're really moving fast, you're really great at execution. But ultimately, everyone is measured People are moved by stories. Some people like to tell the story of the present. Some people tell the story of the past. The best tell the story of all 3, including the future. You gotta pitch what your business will do, not what it is today, what it will do, and how your team is going to execute behind that. So maybe if you produce some software or something you may have done that shows that you can execute. So you got to think about that as an entrepreneur. I don't know your specific situation. So the middle one here is WIIFM. I kind of want to talk about that because when I was younger, I thought about what's in it for me all the time. And I ran around, hey, you want to join my team? No? Why? It's— I'm going to be rich if you join me. No one cared. Right? So I thought about— it's about the other person. What's in it for the other person in advance? Then it's easier for you to attract the team members and attract the investors. Hey investor, I think if you invest here, maybe there's a 10-time return on your money. I don't know. I don't know what your return potential is. So you show, hey, this is a winner. You're going to make money with this. That's what they're looking for. And you're going to make money because you're going to create this business and eventually be acquired by this company. Don't think you're going to own this company for 20 years. You got to talk to an investor in that situation. Let them figure out if this is possible or not. How about back there? Any questions? Good. The last part about investing is different than, say, the stock market or real estate where it's really logical. And you would think it's logical, but still emotional. As an angel— hold on, I'll get to your question in a moment. As an angel, we're really emotional people. We're doing it because we like you. We're doing it because we like the problem that we want to solve. And so there's not real much facts. I mean, how many people have $100,000 in sales today? Probably no one, right? Maybe not even $1,000 in sales. So it's you as a person that's got to get them emotionally interested in you. And you do that through stories. 90% of our Our mind is built based on emotion and we back it up 10% with logic. So we like you and then we look for logical reasons why we make the investment. That's how the mind works. And the best way of doing it is indirectly through a story. That's what's so important about you creating a story. Like my first dream was to create a startup. My second dream was to get funded. So now as an angel, my dream is to fund the next big thing. So I created DreamFunded as a way to match— That's awesome. 2 people together. A simple story. There once was this guy that had a little party and he was videotaping things and he tried to put it on the upline— upload it online and it didn't work. So they went to solve that problem. That company was called YouTube. So what is a unique story? What the problem that you're solving? Because that's another thing we're looking for. Like, why do you care about solving this? What personal problem you're having? Because that passion will allow you to Keep going no matter what. You know, I was talking to my co-founder here, Rexford. I said, Rexford, what should I talk about? I mean, I basically covered all the subjects before. And he says, well, you know, you should probably talk about how you're able to figure out systems. I call it reverse engineering. Any programmers in the room? Okay, reverse engineering. I'll talk about that in a moment. And he also talked about attitude. Like, I guess I have a positive attitude. The first one I'm going to cover, but I'm going to do the attitude first. I think the most important thing as an entrepreneur is your attitude. Now, this is not about IQ. It's not about pedigree. It's not about who your family are or how much money you raise. It's your attitude on you're going to solve this. If you have a great attitude with great passion, it's magnetic. It'll transfer from one person to the other person over the phone, via email, in person. And that is why— That's why you're here. People's emotions are triggered and why they invest. It's very not logical because as a startup, there's no— what numbers can you look at? I mean, they have a better chance of making money in the stock market, God forbid, or real estate, other things. So they're not doing it because of that. They're thinking in the back of their mind, I want to help the next generation, and at the same time, maybe there's a way I can make money as well. Does that make sense? So this is something most people don't talk too much about. So the passion of What you're doing and actually having a great attitude is the fundamental of everything. Because if you believe you're going to raise money, you're going to raise money. If you don't believe it, you're fooling yourself. You're going to get kicked around. People are going to tell you no. Not because it's not you. It may not be right for them. So you just got to persevere. The way I like to say my life is, you ever seen those little robots where you kind of wind them up and they let go and they hit a wall? Boom. And they, and they like, they'll come over here and they go over here and boom, they'll hit another wall and then eventually find a way out. That's how we are as entrepreneurs. We're relentless. We'll figure it out. So remember the emotion part of selling the investor. It's about a relationship and knowing how to present your thing and your story and where they can make money. What was your question, sir? Oh no, it actually kind of touched on it a second ago. I noticed you said it takes Okay, you asked me the question, what do I think about financial projections in an early stage? Your storytelling with financial numbers really means nothing. No one knows. Everyone's Financials, let me guess, it's up and to the right, right? You're not like, I'm gonna lose money and never make any money, right? Who would back that, right? All right, so you wanna— it's a theory. It's— no one knows. Don't even add it. I mean, you can have a guess, but who knows? You know, I think that Steve Blank came up— he was a good professor at Stanford. He had this joke. He said he thinks there's a special button on the Excel to show the financial projections up and to the right because everyone's going to present that. I think through how much— how many presentations I went through to the angel group and the many thousands. Not many are in there and I think it's the— you know, you really are not— really paying that much attention to that part of it because no one knows. They're always missing the mark all the time. That's just my opinion. I could be wrong. I think that's more so for the funds and later-stage investors versus the angel investors. Some people are older school, typically investors from New York, the East Coast. They want to see things like that. Over here, They're betting on you. They're making an investment on you. Some people would call it gambling on you. They're betting on you.