Hustle Unlimited

Hosted ByDonald Thompson

Donald Thompson, serial entrepreneur, mentor, and diversity-in-the-workplace trailblazer, chose Earfluence to amplify his influence for more speaking opportunities, business development initiatives, and networking with established leaders.

Season 2 – Episode 14 – Advice for Startup Entrepreneurs from Venture Capitalist Tim McLoughlin, Partner at Cofounders Capital

Tim McLoughlin Hustle Unlimited PodcastTim McLoughlin is a Trianlge native and partner at Cofounders Capital, a Cary NC based venture capital firm that has raised over $30 million to invest in tech startups. On the show today, you’ll hear how Tim and David Gardner (founder of Cofounders Capital) got connected, why the Triangle is such a special place for Tim and his family, why not all businesses are investable businesses, and why the only way that your investors can help you is if you’re honest with them.

Hustle Unlimited is hosted by Walk West CEO, mentor, investor, and hustler himself, Donald Thompson.

Music for this episode provided by Jensen Reed from his song, “You Can’t Stop Me”.

Hustle Unlimited is edited and produced by Earfluence. For more on the Earfluence Podcast Network, visit @EarfluenceMedia on any social media platform.

 

Jason Gillikin, Executive Producer:

Welcome to the Hustle Unlimited Podcast. We’re already on episode four of season two and this one is with one of the most influential people in the Triangle startup community, and you’ll want to hear what he has to say about how venture capitalists can help entrepreneurs, but only if they’re completely honest with their VCs, and really themselves. I’m Jason Gillikin, producer of Hustle Unlimited and CEO of the Earfluence Podcast Network. This season, so far we’ve had on Heather Chandler, former senior producer of Fortnite at Epic Games, Javier Leiva from the Pretend Podcast, and Molly Demarest, the GM of American Underground. And today our guest is Tim McLoughlin, partner at Cofounders Capital. Cofounders is a venture capital firm in the Triangle started by David Gardner. And partners Tim and David have raised over $30 million to invest in tech startups. On the show today, you’ll hear how Tim and David got connected, why the Triangle is such a special place for Tim and his family, why not all businesses are investible businesses and why the only way that your investors can help you is if you’re honest with them. Such a great interview and I can’t wait to share it here with you, but before we get started, if you want these episodes in your feed every Monday so you can be inspired for the week ahead, be sure to subscribe to the show on Apple Podcasts or wherever you listen. Give us a rating and review as well and share this episode on any social media platform. That helps find more great inspirational guests; the hustlers, the trailblazers, the movers and shakers, and the people who make their communities a better place. So let’s get started. Here’s Walk West CEO, investor, speaker, mentor, advisor, and all around hustler himself, host of the Hustle Unlimited podcast, Donald Thompson.

 

Donald Thompson, Host:

Hey guys it’s Donald Thompson here with Tim McLoughlin and he’s with Cofounders Capital and he’s here sharing with us on Hustle Unlimited. And we’re so glad that he’s here. So Tim, thank you so much for being a part of that.

 

Tim McLoughlin, Cofounders Capital

Yeah great to be here.

 

 

DT:

Why don’t we start out with getting to know you a little bit as an individual.

 

Tim:

Sure.

 

DT:

And tell me a little bit about you background – married? Kids? Just bring me up to speed with you as an individual.

 

Tim:

Yes. Start with the important stuff. First I have a two and a half year old boy who’s, it’s an awesome age. He’s running around like crazy right now. But my wife and I have known each other since first grade. We both grew up in North Carolina. I’m not originally from here, I was born in New York, but since I was six in North Carolina and our parents grew up about a mile away from each other, so, and they, they still, they still live a mile away from each other. So my wife and I certainly care about this area. We got both of our sets of grandparents. Our son was born in North Carolina. This is where we want to raise a family. And so I think getting to know me and why I’m passionate about Cofounders Capital, it’s important to know that I care about this community, which is important. Some more about my background. I played ice hockey growing up. That took me to Boston when I was 14 I went to boarding school in Boston, left this area.

 

DT:

You must have been pretty good.

 

Tim:

Well, it’s all relative. There wasn’t a ton of hockey down here in a, this is the late 1990s early two thousands so there wasn’t a ton of hockey. So for me to get more than an hour ice time a week, I had to go North. So I went to boarding school thinking it was a hockey school, but it was certainly much more than that. It was all academics and I got some of the best education I could get. Wound up getting in off the waitlist to Harvard. I guess even Harvard admissions make some mistakes from time to time and they me in, and so four great years at Harvard, absolutely loved it. Played a little bit of hockey there and then wanted to start something, wanted to start a business. While my roommates were going to do investment banking and your traditional kind of Ivy league paths, I knew that I was going to start a hockey training business back here in North Carolina. And at that point I’d been dating my now-wife and moved back to the area and grew that business for six or seven years after 2008 and then back to business school at UNC and got heavily involved in this what I’m doing now. So I can happy to talk about that story. But I think the important thing to know from me is I’ve got a family here, plan to raise my family here. And this community means a lot.

 

DT:

No, that’s important. I mean, one of the things is that a lot of folks have this conception, that great business minds, you’ve got to go to Silicon Valley to get funded as an entrepreneur. You’ve got to go out West and what’s really cool, Harvard educated, very successful MBA from UNC, and you guys have decided right here in the Triangle is a target rich environment for you to build a great business from an investing standpoint. Tell me a little bit about that.

 

Tim:

Sure. So I, I think one of the important things with, I say, I often joke that

And so one of the important things to me is just having a network and being in a community, knowing folks. And what I was able to do through my having my own business and being in business school here is create a local network that I can help leverage, help entrepreneurs leverage, help investors leverage. And I think that’s part of what has made Cofounders…some of our company’s success is just kinda knowing, having a really strong network that you can, you can lean on.

 

DT:

One of the quotes that I heard, and I forget who said it, but

And really be a part of doing that. And so I totally echo what what you’re describing. When you guys are looking at businesses and talking to entrepreneurs, what are some of the characteristics of businesses that you think are investible opportunities?

 

Tim:

I think, I think

So it’s, it’s passion, right? Are the entrepreneurs passionate about what they’re doing? Are they doing it for the right reasons? And then their ability to articulate their idea? I know that that seems like you, you need somebody on the team that can articulate what the value of that company is, what the value they’re providing to their potential customers. And if you don’t have that, it’s going to be very difficult to be successful. One small thing we always say is in, you know, David and I say is,

unless you have some other co-founder that comes in and does have that ability to articulate what you’re doing. And so I do think that that’s an important characteristic of an entrepreneur or at least a founding team member.

 

DT:

No, that’s pretty powerful. One of the things when we look at some of the home run investments of our time, we look at the Apples and the Googles of the world and different things. They have been partnerships. Or Microsoft and Bill Gates and his partnership. And then I look at you and David. How did you guys come together and decide that your talents and skills were complementary? Your ways of working together would be able to create a successful partnership.

 

Tim:

Yeah. I, I think, you know, we’re still…it’s, it’s funny cause every day, you know, we’re working together trying to figure out who’s going to take on what responsibility and what role as this fund evolves. But I’ll take you back. When I was in business school, I had some internships and I was working with a couple of the local venture capital funds in the area. So I did an internship with Idea Fund Partners. I got to work with Lister Delgado and John Cambier pretty closely, and they helped me learn my initial ropes in the venture capital community. And I was also interning at the same time with NC Idea, which is a private foundation that provides 12 to 13 grants, non diluted grants for local technology companies. And while I was doing that, I kept hearing this name over and over again and it was David Gardner. And it was David Gardner’s and investor in this company or David Gardner’s an advisor to this company. And sometimes we’d put companies that we’re going to take out of the pile of potential winners and put them back into the pile because we knew David was involved. And the value was that David was so hands-on with these companies where even if they were young entrepreneurs, first time entrepreneurs, knowing from an investor perspective, knowing that David was on their team, they had an even better chance to be successful. And that’s true of any company, having the right advisors, mentors around you are going to give you a better chance of being more successful. So I joked that, you know, I said I’m going to meet this David Gardner guy and finally he had just raised his first $12 million fund with Cofounders and he realized he needed some help and he sent out an email, and the email said,

And that was the start of it. I said, David give me a shot, let me prove my worth. And that’s how we came to be a team with Cofounders.

 

DT:

That is really awesome. I mean, one of the things that I would equate to that is my mentor and good friend Grant Willard is entrepreneur here locally. And I was employee number seven in one of his companies. And when he was offering me a job, the money was like, this was 20 years ago, but it was money. It was $10-15,000 less than market value even then. But what he said to me is that I’ll give you an opportunity, I’ll mentor you, I’ll teach you to be more than just a sales guy. I’ll teach how to be a business guy. And that opportunity to me was so much more important than the short term money. And my life has changed because of it.

 

Tim:

Yeah. And, and we…that’s the same pitch that we give to a lot of entrepreneurs. And I think I can come from a real honest place when I have the conversation with them, which is entrepreneurs know this and they’re very likely not going to be making market salaries. They’re going to be taking pay cuts and they’re going to be working for equity. And starting an early stage venture capital fund is very much the same way. You’re betting on your success. You’re betting on yourself for five, 10 years down the line. You have to keep proving success to your investors in order to raise more money. And it’s very similar to an entrepreneurial journey. And so when I sit across the table from an entrepreneur and have to have that conversation, I know because I’ve been in that same situation, and David and I had to have that same discussion at the beginning. And so I think it comes from a genuine place.

 

DT:

That’s really awesome. Tell me some of the things that you’ve learned partnering with David that have helped you personally grow.

 

Tim:

Yeah. Just so, so many things. I, I think one is just continuity in the way you treat people in business relationships. So we have very consistent ways that we talk to our entrepreneurs or business partners, our investors, which is, you know, things we’re telling them or ways that we make deals. And it’s very consistent. So I could see, you know, even some times where it’s not maybe beneficial to Cofounders Capital from a bottom line perspective, it’s still the right thing to do, with entrepreneurs or with other investors. And he’s very, very consistent in those conversations. And something that kind of triggered to me very early on that it came from a really authentic place and with the volume of deals that he’s done in his experience in the past of starting companies, selling companies, hiring, firing, the way to do it, that there’s a right way to do it. And in the grand scheme of things, treating people the right way and doing things the right way will come back and you know, come around.

 

DT:

Yeah. That’s really powerful. I remember personally. And I’m a part of one of the funds that you guys have raised and super excited that I got the opportunity to be super clear. And for some of the same reasons – that track record that you guys described, but one of the things that in talking with you and David about that was the authenticity. We’re going to care for this capital. You’re investing as if it were our own. And really, everything I’ve seen has been that. Talk to me about entrepreneurs and that responsibility they have when they start taking other people’s money.

 

Tim:

Yeah. Well, uh, yeah. That, that is, that’s true. And they do have a new responsibility that they take on. I think it’s very important to be open and honest with your investors. I wrote an article a few weeks ago that came out. It was about exit strategies. Just happened to be that the topic of conversation for that one. But it was having open, open and honest communication with your investors and your entrepreneur investors with their entrepreneurs about, what is your exit strategy? What is a successful exit to you at this moment in your life? Because what’s a successful exit might be different when you start a company versus three years in, versus five years in for good or for bad. And just getting your investors’ money back or having a little bit of money to pay some bills that you racked up over the last couple of years. That could be a successful exit for an entrepreneur at a given time in their entrepreneurial journey. And so that is an example of the open line of communication you need to have with your entrepreneurs. And one of the things we kind of pride ourselves on is when we’re looking at a new investment, and the entrepreneur wants to do due diligence on us, we say, well, here are the 23 founders that we invested in through Cofounders. Call any single one of them. Here’s their number, here’s their email, reach out, ask them any question you want. We’re not gonna filter this for you. And we feel confident doing that. We have a lot of pride in that.

 

DT:

That’s pretty awesome. And it comes across both in how you guys operate that I’m aware of and just inflection of voice. When you think about the successes, those are pretty clear and we’ll talk about some of those. When you guys have not been pleased with an investment you’ve made, what have you learned? What’s been a couple of blind spots?

 

Tim:

We like to think that we have a great relationship with our entrepreneurs and we feel that we do in general, but we also have to realize that we’re investors and we’re more likely than not a source of capital for them if they get into any sort of trouble. So how do we separate out the conversation and reporting versus what is actually going on in the company?

We often compare it to the doctor. The doctor’s only going to be able to help if you actually tell them what hurts. And if you keep telling them everything’s fine, the doctor’s not going to be able to help. And not that we can cure all, but we can at least start having conversations about how we’re going to impact the business or change the strategy or do something different to ease that pain point within the company.

 

DT:

So that springs a thought, right? That level of transparency is powerful in a relationship with an investment entrepreneur. If you’re running a company and you have employees, everyone is typically afraid of that admission of setbacks. And really it becomes powerful and you can say, this is our problem to solve together. Here’s everything I know about the challenge. What would you suggest?

 

Tim:

And I think what would you suggest is good, but also for an entrepreneur to walk in to a board room and say, here’s the problem, here are three things I think might be a solution. Here’s what I think I would recommend. What is your input? I think that’s the most important thing because it shows that the entrepreneur is taking ownership, taking responsibility, but then asking for input and guidance rather than a, please fix this for me. And it might get to a situation where it’s, please fix this for me. But we hope that the entrepreneurs put forth the effort to at least have some thought behind, here’s how I think we could fix it.

 

 

DT:

No, that’s powerful. Tell me some of the diamonds in the rough that you took a little leap with that maybe didn’t quite meet your thesis, but just in your gut you said, you know what, we just feel like we want to do this. And then ended up being something that that worked out really well, without getting into specific companies.

 

Tim:

They’ll probably, they’ll probably know who I’m talking about, but, you know, there’s been companies where you just, where you just can’t check the box on something that you think is really important. Like, you know, we had one company we did in fund two, we just invested in fund two where we just couldn’t really get our heads around the market size, the market opportunity. And we just said, I just don’t know if this is a big enough market for us to invest in. And we told the entrepreneur, we told the entrepreneur and I remember we got to the go, no-go decision. And Dave and I sat and we went through the process like we always do. And we just said, all right, we’re both, we both agreed. We said let’s go for it. And we called the entrepreneur and we told them all the reasons we were thinking about not investing, which was, you know, four or five very, very good reasons. And then I could tell the entrepreneur was like, it’s a no-go for that. But then we finished the call, we said, so guys, despite all of that, we have faith, we’re going to, we’re going to go for it, we’re gonna make this investment. And we couldn’t get over the market and we couldn’t get over the price points. So we couldn’t get there, but then it was just something about the entrepreneurs and we said we’re going to do this and we did and they’ve been rocking it since we made the investment. So that’s one. Other things that are harder, first time entrepreneurs. And with first time entrepreneurs, which are most of the investments that we make, they don’t necessarily have the life experience to…What’s the first time that…what’s going to happen the first time they have to hire, they have to fire, they have to close a big deal. That another investor’s trying to cram them down. Just something happens. And what we, what’s pushed us over the edge on those folks is who are the ones that are going to leverage us in that situation to make, to make the right decision, right? They’re not going to let us run the company for them cause we don’t want to do that. Nor do we have the time to. But in that critical moment, are they going to reach out to us and say, guys, this is where I need help. And you can tell a lot about that during the diligence process and working with those entrepreneurs is when are they going to reach out and say, I need help with this situation.

 

DT:

No, that’s awesome. In order to stay sharp, insightful about market trends, what do you read? What’s interesting to you that keeps you learning and growing?

 

Tim:

Yeah, so I try, I try to follow as much of the just daily updates as I can. So if it’s new articles that are coming out on Crunchbase Daily or TechCrunch, Tech Wire, anything that’s coming out on that. But what I really try to do to keep us up to date on our investments, our technologies that we have, is talk to customers. I mean, nobody knows, nobody knows more about what’s going in the market than a customer that’s been pitched to a thousand times for different software products. And I think that’s an important thing. So in diligence with us, most of our companies we invest in are pre-revenue, or maybe the company has one or two customers. So how do we get to know whether that technology is going to gain traction before we write a check? Well, if you go and talk to 20 customers, you’ll figure out pretty quickly that value prop resonates and whether it’s actually a business there because whoever that decision maker is I’m talking to about that product has probably looked at 50 other products to see if it could solve that same pain point.

 

DT:

So that’s super powerful and simple and that’s the genius of it. I was talking to another investor friend and we were talking about building our product based software companies, and one of the things he said is if you talk to a hundred people, you know what to build and you don’t have to build it twice. And a lot of people that are starting companies in the tech space are computer science guys, they’re engineers. So they want to get really, really focused on the product and how to, how do I define that product development process when a lot of the research can be done with very little investment by talking to people? Having maybe a click through PowerPoint or something like that. So the show, the visual, but you can get a lot of market intelligence, like you said, actually talking to those buyers.

 

Tim:

And so one of the last things we do as far as diligence, or maybe it’s on meeting three or four, is we actually look at the tech and we actually do the demo and we go through all that stuff. Because what’s more important than that is, is there a market need? Is there a pain point and can it be solved? If we think we can, then the technology is only…It’s a function of time and money. And you know, the amount of money affects the amount of time too. And if we have the money, we can control that piece of it. Well, we can’t control is the demand in the market. We can’t create market demand, we can help solve that pain.

 

DT:

So when you think about our business landscape in the Triangle, relative other parts of the country. Talk to me about some of the advantages you think we have as we look at growing our backyard as a successful ecosystem and really we’re all helping each other as we succeed and move and learn. What are some of the benefits you think and like and why you’ve really stayed and built a home and a business in the Triangle?

 

Tim:

This morning at a conference this morning, I ran into five, probably five companies that we either passed on or decided to take a different deal outside of ours. I ran into probably 20 different investors that I’ve co-invested with or are raising other venture capital funds or have other venture capital funds in the area, and not a single one of those folks that I ran into, do I have any sort of remorse, any sort of competitive feelings about. I want all of us to be successful. And I think that that is one of the things in the Triangle that is very unique. We’re not all chasing, you know, even if there is overlap of a deal that we’re going for together, the success of one of the funds or one of the companies is going to, you know, rising tide effect, right? Lifts all ships. And we actually mean that here. And we all kind of wish each other well and are rooting for each other.

 

DT:

So from some of the companies that I’m looking at, one of the things that jumps out to me is really what’s the cost of the software engineer? Like when I, when I think about companies and they’re talking about Silicon Valley and different things like that, and it’s, you know, $200,000 for a bright engineer, versus Raleigh Triangle, it’s, you know, $100-$115K, that’s cost-effective there. But I totally agree with that spirit of helpfulness and, and that resourcefulness of people wanting to make it together for the region.

 

Tim:

And on the early side. So when you comparing costs of living costs to hires, how much capital folks need to raise, that stuff matters on the front end. So what I mean by that is, if I’m trying to figure out how much money I need to raise, whether it’s $500,000 or whether it’s $5 million, that matters on the front end where you’re starting and growing that team. On the exit, it doesn’t matter as much. So the company’s worth $50 million or $100 million, it’s worth $50 million or $100 million no matter where it is, it doesn’t matter where your acquires are. That’s the value it has to their business. So here you have the buying power locally to raise less capital or have your capital go further and then exit for the same amount. It’s, you’re not getting diluted on your exit, which, just do the math. I mean, look at the math. It works.

 

DT:

Yeah, that’s really, really powerful. For education of our entrepreneurs, somebody’s got an idea, they think they want to be an entrepreneur. Give them a couple of pieces of advice from a family/personal standpoint in terms of are they ready to really take that leap? And then the second piece of that question is how do they go about vetting if they really have got something.

 

Tim:

Yeah, we always talk about entrepreneurs. We try to be very, very honest upfront and say, Hey, what do you need to live on? Everyone’s kind of in a different place in their life. So some folks are just out of college and $30,000 year, that sounds great. They’ve never had a paycheck before. So they can, they can live and work with that. They got no kids, they don’t have a spouse. They live in their parents’ basement or garage or wherever. And that works. Other folks are very successful business people that have families, have a mortgage, you know, they need a 100-150K to live. And that’s okay. Well, what’s important is knowing that the amount of capital you’re gonna raise, if you need to raise more capital, it’s going to dilute you out a little bit. It’s a give and take, so you’re not going to get your market salary and all the equity you want at the same time, and that’s fine. Just understand where you are on that continuum and what that balance is, and then be honest with your investors about it. So we’ve looked at companies where folks say, Hey, listen, I have to have 150K to live. Well, they’re going to need to raise more money and they’re going to own a little bit less of their company and that’s fine. And we’re okay with that. Or, or folks say, Hey, I want to take as little money as possible. I don’t need to pay myself anything, but I want to maintain this piece of equity. That’s okay. That’s okay too. The other thing I would say to entrepreneurs who want to start this journey is where do you want to be? Where do you want to take this? Does this need to be, do you want to try and build a unicorn? Do you want to have $1 billion company? Do you want to exit for $500 million in 15 years? Or are you happy starting and growing a company and selling it for $10 million and pocketing 95% of that money? There’s nothing wrong with doing that. I think everybody would agree there’s nothing wrong with doing that. So understand what kind of business you need and is it the right kind of business that you need to take venture capital money or angel money or can you bootstrap this thing? Can you do some services work early on where you can get a little bit of cash flow and then you can grow it into a more scalable business? Do you need to grow it into a more scalable business? And I think that, uh, one of the conversations I was having this morning was I think that it’s cool to be an entrepreneur and raise capital and get the series ABC, but it’s not necessary for every business. And

That is, here’s how you exit your company with the most amount of money in your pocket at the end of the day. Which maybe I should start phrasing it like that because people wouldn’t find it so offensive.

 

DT:

No, but that’s a great point. One of the things that, just to reiterate, it’s knowing what you want and what you want for you and your family. A value trade off for your effort is not the same as you may read about in Forbes or Inc magazine. And when you understand that, then you can find the investment team that that can best suit you to help you get what you want. And that’s pretty powerful. You wrote in an article, “Tell a Consistent Story or You Might Not Like the Ending.” Can you give us a little synopsis of that article?

 

Tim:

Sure, sure. So investors in the Triangle, we all know each other, we all talk to each other, entrepreneurs all know each other and talk to each other. And honesty is the best policy because if you’re honest with everything you’re saying, you don’t have to try to remember what you told investor X, Y, and Z. And I’ll be sitting with a bunch of other investors and they’ll start talking about a company and how many clients they have and how much revenue they have and all. And I said, I just met with that company and I just heard something very, very different and that throws up some big red flags. And so you always want to be consistent. And what helps entrepreneurs be consistent with their reporting is to clearly define their metrics. Okay. Let me give you an example. If I ask an entrepreneur, how many customers do they have? And they tell me 10 I’ll say, okay, so you have 10 paying customers? And they’ll say, Oh no, no, no, no. Not all of them are paying. Six of them are paying. And four of them are currently beta testing. Okay. So six of them are paying your regular price? Oh no, no, no, no. Six aren’t paying my regular price. Two of them are paying the regular price. Four are paying this early bird special that I gave them. Well now that is a very different outlook on what is actually going on than saying, I have 10 customers. And so what I encourage entrepreneurs to do is build up their story so that an investor can’t tear it down. So they’ll come in and they’ll say, Hey, listen, I have two customers that are paying full price. I have four customers that are paying this beta pricing. I have four others that are current beta testers that aren’t paying anything, which leads to 10 total what I call customers. How I define customers. There’s nothing I can do to tear down that story, but if we start the other way that I said at the beginning, I have ten customers that gives an opportunity for an investor to tear down that story or disagree with another investor that they’re hearing about this from.

 

DT:

That’s such a powerful example that works at every level of a entrepreneur. If you build up the right story then what the investor will do is ask leading questions forward and not take the conversation backwards and what you want as an entrepreneur is you want that investor dreaming with you. Right? All right. If you’ve got 10 customers constructed that way, what’s the next step to get those two paying customers? Two to 10 fully paying customers and now me and that investor, you and that investor, we’re talking about the future and that’s what you want.

 

Tim:

Yeah, you’re exactly right. The other big example that we see all the time is with users. Users, okay, well how many are active? Okay, well if a 10th of my users are active, well that’s not as impressive as the original number of users that you said. So I would say to an investor, if I was an entrepreneur, I would say, Hey, we have a hundred active users out of a thousand sign ups, and I measure active users by people that have logged into my system once every week. That’s how we define it. That is very clear. I know exactly what we’re talking about and any number now, greater than a hundred, is a step forward. Like you were saying.

 

DT:

 

That’s right. And one of the things I’m seizing on this because, even at the level that I’m playing at, as an angel, and really just kind of looking at some things I want to do. You’re looking for somebody that understands what truth is for their business and if I can’t get through that with you, it’s like how do I, like I don’t, how do I put my check with you? Because then now I’ve got to dissect, when you say use of funds, did you mean you were going to hire somebody full time or you’re going to hire somebody part time and you needed a little extra tuck in? Personally, it just creates a little bit of weirdness in terms of now I have to sanity check every word that you’re saying.

 

Tim:

Yeah. No, and I think that’s, that’s really important is once you lose that credibility where everything that I’m seeing is, is the truth and it’s not, it’s not a shade of the truth, it’s the actual truth. Once you lose that with an investor, it’s very hard to go back the other way.

 

DT:

You’ve probably read a lot of books. We’ve talked a lot of people. What are some of the things you’d recommend for up-and-coming entrepreneurs or even seasoned entrepreneurs that want to sharpen their teeth in terms of books that have a good blueprint for how to think about starting and growing a business?

 

Tim:

Well, I’m going to, I’m going to give a little plug to my partner here because it really is one of the nuts and bolts about starting a business. David has a book called The Startup Hats and it’s right where most of the entrepreneurs around here live. It’s when they’re first thinking about starting a business, it’s do you want to be an entrepreneur? And then all of the different hats that you need to wear at some point to be an entrepreneur. The hardest part for some entrepreneurs isn’t putting on those hats. It’s taking them off. It’s so I’m the, I’m the technology person or I’m the sales person. Well now you need to scale a business. You’re no longer the technology person. You’re no longer the salesperson or you’re no longer the finance/fundraising person. When you take those hats off and listen, it’s great. And I’ll give it another plug because it helped me get my job. I read it the night before I interviewed with him so I knew how to answer all the questions he was going to throw at me. So I cheated a little. And when I reached out to David just to get to know him, I read the book first and just said, Hey listen, here are a couple things I liked on your book. I got a question about this. And then he responded back and we hooked up. But it’s very good.

 

DT:

I agree with that. Recommended totally. It’s also an easy read. It is not something that tries to make running a business, a complex educational dig. It just says, here’s some platform ideas that you’re going to need to understand to be successful. And then it’s spelled out. And so I would echo, I would echo that in a big way.

 

Tim:

I did just also read a Bad Blood. The Theranos story is Bad Blood, I believe is the name of it. And that was a very interesting read just to, as a lot of the topics that we just talked about, honesty with your employees, honesty with your investors. How it’s possible to raise capital just by fudging the truth here or there. Or just saying, you know what you think, saying what you have today is what you think it’s going to be in three or six months or a year. It just shows how everything can go off the rails very, very quickly and how you can get yourself behind the eight ball. So kind of goes back to our theme of just honesty in how everyone needs to be on the same page.

 

DT:

No, I think that’s, that’s powerful. What would you…we’re gonna move away from business just a little bit. Think about our country. Think about everything that’s going on, whether it’s business, whether it’s personal, political. If you had a magic wand, what would you do to change our country?

 

Tim:

Oh. Um, I would love more open discussion. There are certainly people, friends, colleagues, business investors that I can have an open dialogue with on things we disagree about, but I feel like those conversations are getting fewer and farther between, whereas they’re more likely now to result in, you know, defending yourself and getting a little bit more confrontational and, and risking friendships. And I really just don’t like that. Um, where it’s, you know, you should have some open dialogue and open disagreement. And one thing that, that I find from, especially for fundraising with a lot of very successful people here locally is, you know, there’s Republicans, there’s Democrats, they’re all very, very smart people. They can also support their beliefs, right? And that’s fine and that’s great. But more open dialogue. One thing that I see in, in a business I, that I think I’m concerned a little bit for, for our startups in this area is how our immigration laws have been tough on some entrepreneurs. How do entrepreneurs coming out of school here, how do they maintain their work status in this country? You know, you can have entrepreneurs coming out of school, they can raise capital and create jobs for tens, dozens, hundreds of people and be able to get funding. But are they going to be able to, to have that window of a year, two years, three years out of school where they can stay here and start that business. And that’s something I’ve seen. I think that’s a bigger level issue that I’ve really seen impact here. Another thing for this is this is high level tax kind of implications from our country that can affect early stage startups is you look at things like stock options. You look at, you look at, that’s how we’re able to recruit talented people when we can’t afford the market salary is the, you know, future hope of these big exits. What happens if we start taxing some unrealized stock options. Okay. Mathematically and politically, you can probably make a statement that, yeah, this is how we’re going to fix the budget or this is how we’re going to do this. But if you look at the actual impact of legislation like that, how does it affect the entrepreneur that has, you know, on paper they’re worth $10 million because they have all these options in a big company, but they’ve been working for $30,000 a year. So anyway, those are, those are some big things. I know that’s multiple answers.

 

DT:

Oh, it’s good. Just when you see these sweeping political statements or ideologies and then you see how it actually impacts folks at the ground level. I think I get concerned. One of the things you said is very smart people defend their point of view, independent of open-mindedness or not, or facts. I do see the same thing that you do and feel it, that there are less people that I can talk with openly about things that do actually affect all of us. And that shrinking of dialogue doesn’t help any. And so I would absolutely…I would…you’d be preaching to the choir in that regard. As we wind our time together, number one, totally appreciate both the candor and the thoughtfulness of you taking your time. What are any parting thoughts you’d like to share for emerging entrepreneurs? Any points of wisdom that you’d like to give back to our listeners as they chase their dreams and journeys?

 

Tim:

Yeah, I’d say

There are so many cases where someone asks for a cup of coffee and I just didn’t realize, you know, I didn’t see the opportunity there for me, but I’m glad that I did it in hindsight because two years later I said, Hey, you remember that guy? He was an expert in this field, which I never thought I’d be involved in. And help people when you can because that stuff comes back around to you. You know, people want to pick my brain about fundraising, about whatever it is, and then all of a sudden, two, three, four years later, you know, there’s a way we can work together on something and help each other out. So set some time aside for that. So another, another point would be on a similar kind of subject is

People are getting to know me, they’re making a decision on whether at some point maybe they’d like to work with me in the future. You’re always recruiting because at some point you’re gonna want to call on that person and say, Hey, now I have a job open. Or Hey, now I can afford you now. Do you want to work together? And so set time aside just to give back, to meet with people where you don’t know what the outcome’s going to be and set some time aside. If you want to be an entrepreneur and you want to be a manager and you want to grow a team to recruit people even when it’s not obvious.

 

DT:

That’s phenomenal. One of the things with fundraising that one of my lawyers said to me is it’s a full time job as a CEO. So then you’ve got to figure out who’s going to run the company and who’s going to raise the money because fundraising is really, really hard. The other thing back to your point on recruiting is that you have to recruit the talent before you need it because when it’s available, you’ve got to make a decision usually with a window because if they’re good enough, they have other options, right? And so building that relationship before you need it gives you that edge.

 

Tim:

Especially right now when you look at unemployment rates and where it is. It’s very difficult to recruit right now, but if you have a preexisting relationship with somebody and they’re looking the opportunity to work with you, it makes it that much easier.

 

DT:

No, that’s powerful. The other thing I’ve found is if you, you’re, many of the businesses that I’ve run in are in I’m running are bootstrapped and they start really, really small. So we here at Walk West, as a digital consultancy and agency, 2015 we had two people, a couple of hundred thousand dollars in revenue. Fast forward to 2019, second year on the Inc 5000 and 5 million plus in revenue. We’re growing, but there’s people I was recruiting two years ago that I told them what was going to happen. They saw it come true and now when we can afford them, they want to jump on board because they saw the actual progression of what we were pitching even when we were small. And so it gives you an opportunity to give people a seed of what you’re trying to create and then as you’re successful, they’re going to watch you and will be a part of being on that train. And so that’s really, really good advice on several fronts that you’ve shared, which I think is amazing. I think that what you and your team are doing and really not just staying in the community but being embedded and active and giving in the community, spending time with us, we just appreciate it.

 

Tim:

Yeah, no, it’s, it’s great. And this kind of spreads the message and like I said, I think the rising tide will lift all these ships in our local community.

 

Jason:

That was Tim McLoughlin from Cofounders Capital. For more on Cofounders, head over to CofoundersCapital.com or you can Google Tim McLoughlin or David Gardner and find entrepreneurial advice articles that they’ve written on so many sites including WRALTechWire and GrepBeat. Also the book Tim referred to that David wrote, Startup Hats, it’s available on Amazon. This episode was edited and produced by me, Jason Gillikin for Earfluence. For more on the Earfluence Podcast Network, including Weddings for Real, Beyond the Obituary, Backstage at DPAC, and Talk West, visit Earfluence.com or check us out on social media, AT EarfluenceMedia. Intro and outro music for this episode is “You Can’t Stop Me” from Jensen Reed. You can find more of his music at JensenReed.com. Thanks for listening and we’ll see you next Monday on Hustle Unlimited.

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