Stat Smack, Cockroaches, and a $50K Grant, with Wrangle’s Adam Smith

Adam Smith is the co-founder of Wrangle.io, which was recently awarded a $50,000 grant from NC IDEA – and is on its way to being a game changing technology. Adam has had an interesting entrepreneurial path, especially to sports and fantasy sports fans out there.

Today on the show, Adam and Tim talk about Adam’s new venture and hearing “no” from investors almost a hundred times, the responsibility of a founder to truly know when the money will run out and when they will need more money, and what entrepreneurs need to be looking for in their first hires – and what investors should want from them too.

Transcript

Voiceover: Welcome to First Check, a podcast so you can learn how to be the next great venture capitalist or angel investor.

You’ve seen the Uber’s, Google’s, and Pendo’s of the world; the 10 X to 100 X returns. And you want to know how you can get in on the action. As a partner at Cofounders Capital, Host of First Check, Tim McLoughlin has invested over $43 million in startups. And on this podcast, he’s going to share with you what works and what doesn’t so you can be ready to write your first check.

On each episode, Tim brings on investors and founders so they can tell you the ups and downs of venture capital and what lessons they’ve learned along the way.

Today’s guest is Robbie Hardy, founder and chair of xElle Ventures, an early stage Angel Fund for women founders BY women founders and investors. xElle’s Mission is to invest in the ideas, products and services of women. Here’s the problem – only 2 and a half percent of venture capital funding goes to women-led startups – and Robbie is on a personal mission to fix that.

On the show today, Robbie talks about what all investors can do to help solve the problem, what she looks for in founders, and what mistakes she sees entrepreneurs making all the time.

Here’s the host of First Check, Tim McLoughlin.

Tim McLoughlin:  My guest today is Adam Smith, co-founder of Wrangle. How are you doing, Adam? 

Adam Smith: Great. Thanks for having me. 

Tim McLoughlin: No, it’s great to have you here. I mean, there’s a lot of reasons that I’m excited to have you on. But I’ve seen your journey from entrepreneurial support organizations to VC banks to entrepreneurship. And so, I got a lot of questions, can come at this from a lot of angles, but why don’t you give our guests just a little bit of your background in your entrepreneurial journey?

Adam Smith: Yeah. Yeah. I appreciate that. And I’ve been interested in startup companies and entrepreneurs since I can remember. Did the classic mowing lawns in high school, painting houses, that type of fun stuff. Joined the CED, which is a local organization here; Council for Entrepreneurial Development right out of school right after I graduated.

And that was just a great, great experience. We ran training and mentoring programs there. Specifically, they had a program called Fast Track Tech, which was a, I like to think of it as, like, the Y Combinator before there was one. We met once a week and they had mentors and it was just a great spot to really learn kind of from tech and life science entrepreneurs how to make it work, where they struggled, what they tripped up on, connecting them with investors was a big part of it too.

And we ended up working with the Kauffman Foundation, or I did, to really take that Fast-Track Tech program nationwide. And that was just eye-opening, not just for tech businesses that we ran into, but the Kauffman works with all kinds of entrepreneurs in every space. And so, that just really got me hooked.

And around that time, the Square 1 Bank, which is a local venture bank; local here in North Carolina or was before they were acquired. They were launching their bank. I think that was like 2005. I joined probably like the 50th person or so? And I came on to start a program there called, “Square Roots.”

And it was similar in some ways to what I did at CED in that it was pitch help, plan help investor connections for pre-venture companies.  But that was a great experience in seeing a company grow. It was probably like 400 people or so when I left. And they did a great job keeping that culture together, focusing it on real, you know, values that I took to my next companies actually.

And you know, those companies that I worked with there, raised over $2 billion, both angel and venture rounds. I think there were a couple hundred companies in the program across the country. And so, one of the entrepreneurs I met there, by the name of Robbie Allen, was at Cisco. He had started a company called “Stat Sheet,” which was delivering sports statistics to the world through automation.

And so, I got to know him better and better. And Robbie was, he didn’t know it yet, but the “consummate entrepreneur.” He, he had me working full time as a, as an advisor outside of Square 1, doing his financial model, helping source angels, those types of things, so. 

Tim McLoughlin: That, that sounds like a true entrepreneur, getting somebody to work off-hours and volunteer their time just to help.

Adam Smith: I don’t like to give him credit for anything, but you know and he– he definitely, you know, he likes to say he’s not a salesperson, but he definitely got me in and working, working hard for him without realizing I was doing it. And so, you know, I felt super comfortable with him, frankly. And he was starting– he had started Stat Sheet.

It was kind of a hobby, internally. And at the time, it was like a site for college basketball statistics. But he had an idea to do what is now called, “Natural Language Generation,” which is basically taking data, pulling that big data in, turning it into stories that sound like a human wrote them. So, it started in sports.

So, we would take a box score for an example, and write a recap of a game, or a live update as the game progressed. And it was all written by software but sounded like a human wrote it. So, I joined stat sheet, I was the first employee, their business employee there. Actually, on my first day, I pitched three local VCs.

So, that was fun. I think by the end of the week I had pitched seven of them.  And so, we ended up raising multiple rounds of capital there, which was great, built a team of, I think probably about 80 people, at the high end. I met some great customers like Allstate, and Yahoo, the Associated Press.

And we were eventually acquired by Vista Equity Partners, which is a large PE fund in Austin, or based in Austin. And so, I was Chief Revenue Officer there, COO there. At different times, spent about eight years there; was a fantastic experience. And eventually, the company exited again, became part of a company called, “Stats Perform.”

And so, I’ve since started a new company, you mentioned it, Wrangle with one of my fellow AI employees, actually. Adam Long was our Chief Product Officer at AI. And we’ve worked together for 12 years, but he, he actually worked with me a little bit at Square 1, and it was the same feeling with Robbie.

You know, we complement each other, we challenge each other, not really worried about who gets the credit. So, you can kind of be completely honest with him. And I expect to get a direct answer when I ask him about something to do with my work, which I always appreciated about Robbie too. And so, I’m excited about where that’s going to go.

Tim McLoughlin: So, so let me ask you, I’ve got to, just, when you were at Automated Insights, were you responsible for the one that kept giving me a D or an F on my draft grade when I would draft my fantasy football team? Was that your algorithm that did that? 

Adam Smith: That was ours. Yeah. So if you’ve ever played Yahoo Fantasy Football or actually the NFL. com as well, that was all AI’s technology generating weekly recaps about your fantasy football performance and making fun of you.

We actually, we pitched Yahoo on this whole idea called, “Stat Smack,” where we would like, you could pick other teams and other leagues and we would just talk trash about them. Of course, the software would, but, Yahoo was great, actually. We, we would, we pitched them on– you know, people probably don’t want D’s and F’s in their, in their draft grades, or their weekly performance. They care about their fantasy teams. 

And they’re like, “No. The, you know, the harder the grades are algorithmically, the more people will share it.” And they were definitely right about that, so.

Tim McLoughlin: Well, I’ll tell you, my friends in our– my fantasy football league loved seeing that I was getting a D or an F every time. So even if I didn’t love it so much, at least the majority of the league did. 

Adam Smith: It’s viral content. Viral content. 

Tim McLoughlin: Yeah. That, that’s great. I’m curious, you talked about the jump that you made. And on your first day you were pitching three VCs and seven by the end of the week. That probably wasn’t your only job description.

So, when you were employee number one working there and joined the team, what, what was your title? And what did you expect your role to be?

Adam Smith:  I think my first title there was VP of Ops and Finance, or Strategy, or something like that. And you know, we had sourced an office, which was really the classroom at CED.

So, Robbie had found three or four developers who had come in and started working. And we were taking a couple of tables from where they taught their entrepreneurial classes at each night, which was a fun experience to kind of grow from there. And so, you know, I grew from there to CRO, as I mentioned, and then, and Chief Operating Officer actually after Vista bought us, was there for a while after that.

But really, I think the, the most challenging, the most exciting part of that was there were just so many smart people that we ran across from the engineering side, to the sales side, to just seeing those teams grow. Seeing young people come in and I was really proud of that team we built. It was definitely challenging. Definitely had its ups and downs like any company does. 

Tim McLoughlin: Well, when I encourage folks to get involved in– that want to get involved in angel investing venture capital, often I try to encourage them– or entrepreneurship. I often try to encourage them to get into a tangential organization where they can see a lot of activity, a lot of investment activity, a lot of startups.

And certainly, with your work with CED, their mentoring program, and the Kauffman foundation, and then your work at Square 1 Bank, you certainly had those experiences and were around a lot of companies to know which ones were real and maybe which ones might not make it. I’m curious what you found with all of those different companies that you talked to? What were some characteristics of founders or companies that made you feel, “This one’s going to make it?”

Adam Smith: Yeah. And that’s a– it’s, it’s a, it’s a tough question too, right? There’s– you want to see– I; I think what you hear from investors who’ve been around for a long time is that you want– it’s all about the team, right? It’s all about who you invest in. And I think that becomes a little cliche, but they need to be super passionate.

They need to be super committed. I think there was a local entrepreneur I worked with back when I was at CED, who said that “Entrepreneurs are the cockroaches. They will always survive. They always make it. You can try to smash them as many times as you want, but they’re going to fight through it.” 

Tim McLoughlin: More true in 2020 than ever. 

Adam Smith: More true. Exactly. Exactly. That’s where this beard came from, actually. But, you know, the idea there, I think is. You can have the most brilliant person technically, or you can have the most accomplished businessperson ever. But if they’re not willing to adapt, it’s not just that they’re committed.

Right? They have to be passionate; they have to really want to make that business succeed. But you never know where the idea is going to take you and they do need a level of flexibility. It’s kind of a weird combination of knowing that your side is important if you’re the technical founder. Knowing that, that technology behind it is important, but if someone in a real market won’t pay for it, it’s not that important. It’s not going to succeed. So you have to be flexible enough to scrap things, scrap things you love. 

We talked about AI earlier when I started there, it was a B to C company focused on delivering sports statistics as stories delivered, you know, from box scores. We ended up morphing that company, probably four or five times, to where at the end of the day, it was a business-intelligence-focused company where we were partnered with big players in the space like Tableau. And we were co-selling with them, delivering narratives that explained business intelligence dashboard.

So, it went from sports statistics to Yahoo fantasy football to B.I. And so, that’s what I love about Robbie and Adam Long, who I founded Wrangle with, is that they are– they’re strong technically, but they understand kind of that there has to be a real market there. And I think as an investor, you want to see people that– they’re going to fight to make the business work.

They’re super passionate about how the business will work, but they’re clear-eyed enough to say, “I know that it’s not going to be the business I think it is today by the time ends.” And “I’ve got a problem I want to solve for, for a group of people,” versus, “I have this specific thing that I think people should buy.” Just like it is today. 

And I think that’s why a lot of people probably lean back on experienced founders because they– they’ve had that beaten into them. They know that that has to happen, or the company won’t work. And I think a lot of times what I saw at CED, at Square 1, even in my times mentoring other entrepreneurs, it’s that if you’re not willing to share your idea, if you’re not willing to go out, if you’re trying to get people to sign NDAs before you pitch them, always a bad sign. 

Tim McLoughlin: That’s right. I totally agree with that. And a couple of things that have come through, and we’re trying to give some advice to maybe some first-time check writers here that I think is important and I’ve seen as well, is it’s not only about flexibility within the business plan or what that’s going to look like five or six years from now.

You don’t want to be entrenched in on the idea if you’re an entrepreneur or a solution. But also the flexibility within the team, and what roles people are tackling, and what hats they’re wearing, and what’s most important to the business at this time. And I find just as from talking to you about your different roles at AI, trying to, even for you to remember what your title was when you first started on day one, it was the role you had is, “Whatever I need to do in this organization to make it successful.”

Adam Smith: And I think I jumped all over on that answer. I probably– listening to myself talk lost track of time there, but. 

Tim McLoughlin: Yeah, but you, you, you jumping all over helped prove my point. 

Adam Smith: Well, it showed I’m not as focused as you need to be, right? No, I think that, you know, early on, that’s absolutely true.

Like, I was writing the first contracts, putting together the employment agreements, trying to negotiate our space, pitching VCs that selling the early product, getting together with Robbie to try to figure out where the software should go, I even helped write some of the notes that you read in Yahoo as far as the structure there.

So, everybody plays a, you know, a critical part there, it’s also a, a tough thing as you bridge– like, I think one of the growing pains that all companies go through. And that is another thing, whether you need to have flexibility is, as the company gets bigger, you’ve got to be able to scale with it, you’ve got to be able to delegate, you’ve got to be. And that was something that I struggled with, frankly, was wanting to be everywhere, wanting to have my ends and everything. But as you hire talented people, giving them the ability to take on those hats for you, and establish the processes that companies have to have, the workflows that they have to have to be able to repeat and be a repeatable business, is so key. And that’s one of the reasons we started Wrangle too, actually, was that experience. 

Tim McLoughlin: There’s one other thing that came through to me that I’ve seen across our portfolio. And the great entrepreneurs are ones that aren’t entrenched in an idea or solution, which we discussed, but the ones that don’t suffer from shiny object syndrome. This is the silver bullet, changing my product to go into this market, or this solution, or this new idea that I had, is a silver bullet that’s going to make everything so easy. Any times that you had as an entrepreneur that you’ve, you’ve had to restrain yourself from completely changing the nature of the business? 

Adam Smith: Yeah. Well, I–I should probably say that we did change the nature of the business multiple times, so maybe I’m not the best person to ask that. But I, I think, I think you’re totally right that the shiny object syndrome is a, is a real, real problem for entrepreneurs. And not just on the tech side, but on the business side too.

You’ll notice like the, the business founder will often jump and redo their business completely around one specific customer because they just need to close that deal, right? Or they’re letting sales drive exactly what the customer says they want. And so you end up with a professional services organization that you’ve had to hire a ton of managed service professionals and customer success professionals, just to service and build those deals.

 And you don’t have a repeatable business. On the tech side it’s, “Hey, oh, look at this new company that I think is cool how they’re doing tech. Let’s just do our business that way.” Right? And they just jump all over the place. And I think that’s one of the things too, as a team, that as you look at it, if you’re an angel or you’re, you’re evaluating a company, will these entrepreneurs be honest with each other?

Do they cancel out in some way? Or do they self-reinforce? Or will one of them be honest with the other one? Like, I think Robbie was probably really excited about new businesses all the time. Adam does that a little bit too. I’m probably more excited about, “Hey, I’ve got a deal I can close. And they’ll pay us money.”

You know? So being able to say, okay, well, how do we turn that into something where we have a recurring marketing engine where we can bring on that same persona over and over again? How do we close that same person over and over again? Or is this just a one-time, you know, software thing that we haven’t evaluated in front of real– done any real product interviews or that we haven’t, you know, seen other customers that would want to buy that?

And just to illustrate that a little bit, between Stat Sheet and AI, we actually, I mentioned we were probably four companies. So when I started, we were B-to-C, we launched 800 websites, thousands of Twitter and mobile apps, all powered by software, right? We became a professional service organization.

And part of that was, you know, and I think this is important when you’re an angel looking at a market is, is it a new market? Is it something that is completely new? I know that’s always exciting, right? Like, this technology never existed before, like natural language generation didn’t exist before. But inherent in that is you don’t know who the customer is, you don’t really know where it’s going to end up at the end of the day, and therefore, it’s going to take more money. 

So, if you’re an angel who wants to eventually syndicate with VCs and bigger VCs, that’s great.  But part of that beginning is going to be educating the market on what this thing is. I don’t know how many talks we had at AI, where we were like, “Oh, and so the software wrote this, this, and this.” And they’d be like, “But who wrote that sentence? Software, right?’ And go like, “But who wrote that?” So you’ll spend hundreds of conversations, tons of years of your life educating the market that this thing exists before you actually know who a repeatable buyer is and where that market is. So, we eventually launched the first self-service platform where we tried to sell it as SAS.

And that worked pretty well, but it– it was too many different markets. There were too many different, you know, from SEO to Yahoo to Allstate to Vanguard. So, where we really made that business work, eventually, was a channel business where we were partnered with the big business intelligence vendors. And you had a repeatable persona who they wanted to tell a story with data, they had access to data because they were using Tableau or power B.I. or whatever.  And they were data savvy and that they– they knew what they wanted to do with that data. They had demonstrated they could build something off that data. But we didn’t know who that user was when we started. Or even that that was the market.

So, you know, that’s one of the things, frankly, I’ve looked at with Wrangle, looking at it kind of as an entrepreneur and thinking about, how do I want to invest my time in this next startup? And Wrangle’s in an existing space. It’s automating processes, it’s automating workflows. It’s taking, you know, core recurring workflows, like customer onboarding, contract management, getting a sales quote out, and automating that process. Letting people quickly map it, automate it via Slack, or email. And then track it so they know exactly where certain deals are and so that they can really improve their operations over time. And that’s a space that’s existed. We’re just going after it in a new way. You know, partnering with big platforms like Microsoft teams and Slack and building it in a no-code way versus, like, heavy IT development.

And so that’s, I think, when you look at a market, how is the entrepreneur going after it? Are they going after something big? Or are they trying to be a 10X entrepreneur? Are they trying to, you know, change the world? That might be something you want to get involved with as an angel, but just keep in mind how much money that’s going to take, how much time it’s going to take before you see real repeatable businesses that are paying in a similar way. I mean, it’s great to get a customer that pays you a seven-figure contract, but if they’re the only one that will do that, it’s impossible to scale.

Tim McLoughlin: Well, I think, I think one of the, the questions that is fair for an angel investor, and certainly an early-stage investor like ourselves to ask the entrepreneurs is, what inflection point does this money take you to? And how much more money do you need to raise to get to the next inflection point?

And as an angel, you often have to be comfortable, or an early-stage venture investor, comfortable with the answer not being too revenue or too cashflow positive. It can be to understand who our customer is going to be, understand who our channel partner might be, understand what our value prop really is.

Adam Smith: Right.

Tim McLoughlin: And those are, those are questions that I think are fair to ask the entrepreneur and you need to be comfortable with the answer that comes back. And it can’t always be revenue’s going to grow to a million dollars ARR off of this investment. Depending on the type of company and what the outcome you want to be.

So, listen, I want to get more to Wrangle, now that you’re back in the entrepreneurial seat, but I got to ask you; day one on the job you pitched three VCs. By the end of the week, you pitched seven.

Adam Smith: Yeah.

Tim McLoughlin: What did you do then that you look back and you’re like, “Man, I really shouldn’t have done that or said that.” What, what have you learned through the years that you would just completely do differently if you went and pitched a VC today? 

Adam Smith: Yeah, that’s a– so. That’s a great question. And yeah, we ended up pitching 80, I think. 80 or 90. So that’s another, it’s a good practice for an entrepreneur to learn “no” before they have customers beat them about the head and shoulders with the answer, no.

 And so, you know, we tried to tear it, we tried to go after, you know, specific VCs in specific areas. But it was kind of a downturn in the market. It was 2007-8. So, you had the financial crisis, not too dissimilar from the poor companies you are probably trying to have raise money today.

It’s probably worse today. But I think part of it was, you can get as an entrepreneur, focused on just raising money. A lot of times you see on Twitter, you see in the news that we almost celebrate the company like they finished when they raise a series A. But if you haven’t planned out those milestones about what you talked about, about what you’re really going to do with that money, you will just be on a hamster wheel and then trying to set your company up to raise again.

And, you know, a lot of times I see where entrepreneurs, they end up making the mistake of just trying to raise a round to get out there and get going. Because they think they have to raise money to get started. So they’ll raise enough money for like six months, but they haven’t thought out the fact that they’ll have to raise again in three months, and they won’t have accomplished any of those milestones.

So, I think part of it was, you know, really thinking through, “What are we going to do with that money?” So, probably a financial milestone, like a first customer, a technical milestone, some sort of accomplishment there, maybe a key hire or a key customer we need to bring in. And when are those going to happen?

So, how much money do I need to really make the, the investment more valuable for both myself and the investors, halfway through where the money is? So, when we raise again, we’re raising with some wind behind our sails and with leverage. And I think, you know, AI would have been really tough to do this with, because again, it was a new market and, you know, NLG didn’t exist.

And we really had to build– I often call Stat Sheet the most expensive demo ever. We had to build it to have people understand what it was. Whereas, like, with Wrangle, I think, you know, there’s a lot of stuff that exists now for entrepreneurs that didn’t exist when we were starting AI. So AWS was just getting started.

You know, you didn’t have, like, marketing machines like HubSpot, you know, web flow, all these like SAS apps and tools that help you get started. But today, you know, you can start some landing pages, you can really test, you know, with, with some Google ads, and targeted PPC efforts on, is there real traffic here? Will people land on those landing pages? Will they take conversations? What will they say when they do it so that you can understand the business in a way that is not too capital expensive and really understand how you’re going to go after that market before you even go out and raise money?

And so, I think a lot of entrepreneurs just go right at it because I think they have to, or they’ve been, you know, they’ve been kind of told that that’s, that’s what success is. Whereas, I think in reality, the better thing for the entrepreneur and for the investor, frankly, is getting some traction, seeing who’s out there, is there a real market? Are they coming? What are they saying when they land there? You know, is it something that’s differentiated? Is it a real pain? Or is it a vitamin? 

And you know, is that something that is big enough to support? Is there enough traffic out there to support a real business? Even if you niche it later, you know, that first niche might not work. So is it, is it generally a big enough space to make that business work? And if you can come to an angel with real numbers, and if entrepreneur can come to you with real numbers of traction they have hopefully with actually people paying. But even just showing kind of that there’s real want and hunger out there. I mean, you know, that’s something you can do today that I think all entrepreneurs should do first. 

Tim McLoughlin: Well, it sounds like, it sounds like part of what you’re saying is, is, come up with a real number of real money and time that you need to prove something out. And, and depending on the type of business that is in the stage of the company when you’re investing, that something might not always be paying customers. It could be, but it might not be. And– but be thoughtful.

You know, the, the investor has the right to ask, why that amount of money? And how much time is that going to take? You know, give you? How much runway is that going to give you? And the entrepreneur better have thought about it at that point. So, so that brings me, that brings me to Wrangle. All right? You talked about pain point, not starting with a solution, you know, realizing a pain and then, and then working with your customers to kind of solve the problem. When did you realize that there was a pain point? And tell me how that led to you jumping back into the entrepreneurial ring and getting Wrangle going? 

Adam Smith: Yeah, yeah, absolutely. So, the idea for Wrangell came out of some of the pain that I experienced firsthand at AI and at Square 1, frankly. It was just like, as teams grow, and you’re trying to put it– early on, like you said, everybody’s got to wear multiple hats. You’ve got to be everywhere to make things work and you just don’t have enough people to have somebody in charge of every little detail.

But as you grow, you’ve got to define those roles. And you know, when you start adding departments, when you start adding middle managers, when you start separating yourself from other people, the message becomes tougher and tougher to deliver.

So it was a, you know– different departments, they have different goals. They have different timelines. You know, add to it today. Every different group is a different app. So, sales is in Salesforce, marketing’s in HubSpot, customer success is in Confluence. None of them communicate, nobody’s really talking, you start having fights between departments.

Now, everybody’s working from home. So, you know, it’s even harder to track where the work is. And I, I’m convinced that a lot of the, the reason for employee turnover as companies grow is that people are frustrated. They can’t get approvals done. They don’t know what the other department’s doing because it’s not transparent.

And they just think that legal’s, just holding up these contracts, because they have nothing else to do. But really, it’s because they can’t see what that other group is doing. 

Tim McLoughlin: And now literally they can’t see it. 

Adam Smith: Right, they literally can’t see. And like, so much, and that’s another thing is so much context is lost. Like, you’re trying to do a deal and your– you’ve got customer success involved, you’ve got support involved, you’ve got custom development involved, you’ve got sales and finance involved. So much context is lost in zoom conversations. Don’t get me started on Slack, and like DM channels and all that kind of stuff, where, you know, was that approved?

Who has that? Did we do that task? You know, a lot of times– it was amazing how often I talked to another entrepreneur and their customer success team learns of a new deal because it is just automated, and a win wire, and in Salesforce. There’s no conversation between sales and customer success to actually make that handoff successful.

And so, what we’re trying to do is build software that bridges that gap. So, we want to build something that you can easily map it out so you have a live map of exactly how that workflow should work. Who should do what at which side, you know, you’ve got rules associated with when that piece of work should go to each person. We ping them right in Slack, or email with kind of one-click approved buttons, or I did this task, and then we track all of that. 

So, you have analytics on the health of all your workflows. And as a manager, you can start to say, “Okay, we’re hung up here, there’s a bottleneck here, this person needs extra help.” And you can act on improving that. Because I think every app has workflow and that’s one of the things that attracted us to this space. Workflow is a real, real problem.

Obviously, it’s crowded. There’s a lot of people trying to solve it. But if, if you’re only solving it for the HR team, or you’re only solving it for the customer success team, and only the customer success team is in that app, or only the sales team is in that app, you’re not actually automating or tracking or making a better process out of the handshakes that have to happen between departments. Even though no one really shakes hands anymore.

Tim McLoughlin: Yeah. Well we, we, yeah, it’s not handshakes. 

Adam Smith: The hand-outs. 

Tim McLoughlin: Elbow bumps. 

Adam Smith: There you go. 

Tim McLoughlin: Yeah, we invest in workflow automation software, and we often say that the value of that software is only as good as the organization’s ability to use it. And so, that workflow automation between departments is something that hopefully Wrangle can solve and show that, that process improvement. So that’s great.

Adam Smith: Yeah, we thought we’d do it in a no-code way. So, you know, when you think about as an angel investor, how you’re looking at a space, I think you can look at technological differentiation or execution, right? And so, a lot of these markets, it’s not a zero-sum game. You know? There, there can be multiple winners or really strong, sustainable wins as an angel investor. You just have to make sure that, you know, that company is solving a real pain and they’ve got the ability to execute in, you know, whatever niche they’re kind of attacking within that space. 

Tim McLoughlin: So, I normally ask the question about characteristics of an entrepreneur that you want to invest into, right? But with you starting your company and where you’re at– as you build your team and you hire for different positions, what characteristics are you looking for, for your first hires that are going to join you in this entrepreneurial journey?

Adam Smith: Yeah, I think you’re kind of looking for future founders in a lot of ways, is somebody who might want to run their company someday, someone who is comfortable with ambiguity, who is accountable, who– You’re looking for those people that really get stuff done where you know that you’d be kind of lost without them or their, their past employer describes them as someone where they made the trains run. Or like, “Oh man, I don’t know what we’d do if we lost this person or we had to hire three people.”

So you’re– early on, you’re looking for those people that can wear multiple hats. As you grow, you need to start bringing in the people that really care about process, they care about repeatability. And one of the things, you know, from the founding team is you’ve got to be able to bridge those two groups and make them both happy. Because they don’t always, they don’t always mix. Especially as you make that transition, but I think that’s, that’s kind of who I’d be looking for. 

Tim McLoughlin: That’s a great answer. And it worked for Robbie when he brought you in, right? So. 

Adam Smith: I don’t know, ask him. 

Tim McLoughlin: Yeah, I think, I think everyone would say it worked out pretty well. So you and I have talked about this a little bit before and you know, your fundraising strategy for Wrangle and maybe an approach to it. And you’re the recipient of a $50,000 grant from NC Idea as of today. Congratulations.

Adam Smith: Thank you.

Tim McLoughlin: That was, that was just announced. And NC Idea, for our listeners who don’t know, is a great private foundation here in North Carolina that supports the entrepreneurial ecosystem. And so Wrangle was a recipient of that grant today. But how has your fundraising strategy changed with Wrangle from where it was with AI? And why are you looking at it a little bit differently? 

Adam Smith: Yeah. So between CED and Square 1, I saw, you know, billions of dollars raised, a ton of different entrepreneurs raising money, help them do that at AI. Obviously, we probably raised 10 to 15 before we exited. And then, you know, worked with Vista after, after that exit. Raising money, if you do it at the right time, for the business can be extremely powerful. It can help you really leverage and take off when you have product market fit in a way that you just couldn’t do bootstrapping, or it’s just really hard to do bootstrapping.

 But it also changes the way you run your business, changes the way you hire, changes what your goals are, changes what your exit potential is. It changes how long you can kind of stay around. I mean, a lot of those companies that I helped to raise money, they were great. They created a ton of jobs. They were acquired and now those employees are no longer at those jobs. Right? Which is, you know, might be the goal of where they’re going. 

I think one of the things that we wanted to do with this business, specifically, was have the optionality to grow a sustainable, bootstrapped company that when we leverage outside capital, whether that’s friends and family or angel or VC, we know exactly how to put that money to work and where. And maybe we, we don’t need to raise that money.

Again, I, you know, angel, angel money specifically, we had some great angels that at AI that really made us successful, but, as you bring that in, depending on the capital, I think this is important from the angel side, too. What types of businesses do you want to invest in and how much money are you comfortable with them raising for you to be a part of?

Right? So, if they’re going to have to raise $30-$40 million and your, your take is going to be shrinking like the entrepreneurs do for that whole bigger pie promise, are those the type of deals you want to be in? Or do you want to, you know, be a larger part of a company that maybe creates a repeatable marketing engine, creates a repeatable sales engine, but maybe grows a little bit slower.

Tim McLoughlin: And the great part of that is there’s no wrong answer to that. 

Adam Smith: Yeah, that’s true. 

Tim McLoughlin: It’s, it’s, it’s all about setting expectations upfront. And for our angel investors and other future VCs that are listening, the important part is setting expectations with your founder before that investment, and for entrepreneurs to know that just because they can get money from a certain angel investor or a certain VC, doesn’t mean they should if their goals aren’t aligned.

And–

Adam Smith: Exactly. And I think it’s the same between the founder and employee too. Knowing kind of what your goals are, and that will change who you hire as well. But I think that’s really important.

Tim McLoughlin: And to be fair, expectations on returns for investors can change within deals. It can change within funds between funds if you’re an early company, if you’re a later company inside of a fund. If you’re a part of one fund and not the next. Expectations, return expectations, timelines, amounts, that can change as return expectations change. So, I think that’s, that’s just good to talk out. So– 

Adam Smith:  It’s good to also understand, we had some early– we raised money from some VCs. It’s important to understand who you’re getting into, not just for the entrepreneur and the, and the VC, but the angel and who they’re syndicating with as well.

What are their expectations? Have they done seed deals before? Like, Cofounders is great. You guys know that early-stage company, right? You know, kind of what they’re going to go through.  And you, you can support them there, but some VCs who maybe are getting into early stage investing and it’s their first time doing it, may behave differently when the company is going out there for that A round or B round. And that can really signal poorly and, and kind of harm things. So knowing who and how you’re getting married is, is important for, you know, employed entrepreneur, entrepreneur to angel, angel to VC, everybody, and everybody involved. 

Tim McLoughlin: So, if you’re, you know, you’re wildly successful with Wrangle and you’re starting to think about your own angel investing portfolio and how to build a portfolio, or what guidelines you want to make investments, how you want to make investments, what kind of criteria would you start setting up for yourself?

Adam Smith: Yeah. I’ve thought about that a good bit. I’ve, I’ve thought about, having looked at it so much over the years and participated in it from the entrepreneur side, how I would go after that. I do think that the founding teams and who’s involved in that early stage, especially at the startup level, is critical.

They’ve got to have that flexibility and that passion that I talked about. I think for me, I always worried that I– if you’re only looking at the founder, it’s pretty easy to get snowed by past success, you know? Which might be just survivorship bias, or are you just like that person very much when they pitched and you’re just like, “I’m in.”

So, I think, you know, you not only need to say, can they survive? Will they fight it through? But also, what is the market they’re going after? And is it a market that I’m passionate about too as an investor? Or that I think I can help them. And so, you know, I’ve always, there’s a guy, Jason Cohen, I think who found a WP Engine. He founded a number of startups, but I’ve always been kind of into his, he looks at, like, good markets, bad markets. And I think I, I, I follow along with his philosophy of, bad markets for startups are– they have real time requirements. Right? So I’m going to have to have support 24 hours a day.

It’s valuable at only, you know, a given point in time. It’s a two-sided marketplace or requires virality. Right? All those things mean lots of extra money to sell through, or maybe it’s like feature wars or something like that versus you know, if you’re going to bootstrap it, or you’re just angel investing where you’re going to get that company started and you want to see them get to traction quickly, is there something where customers have to do that once a month or do that once a week or it’s a, it’s a recurring thing that they have to do? And they always have to do it. And once they do it, they have to keep going. That’s what we hope with Wrangle, obviously. 

Tim McLoughlin: Sure.  

Adam Smith: You know, is it close to the sales cycle or the financial cycle of the business? Can you mark it on top of bigger platforms like we tried to do at Tableau and now that we’re trying to do with Slack? And you know, is the market big enough? Does it have enough niches that if that first niche doesn’t work, there’s another niche to go to? That’s a framework that, that he laid out that I think I would try to look at too, but it’s, it’s up to the investor, right? About that philosophy of how you’re going to support the entrepreneur. 

Tim McLoughlin: I think, I think the important thing is that there is a philosophy, no one’s saying your philosophy is right and someone else’s is wrong.

Adam Smith: Exactly. 

Tim McLoughlin: But if you’re a known angel investor, you’re going to get a lot of pitches. And, and it’s important to have a philosophy, I think is the key. So, so this takes me pretty seamlessly into the last question, which is a nice hypothetical for you. So, Wrangle’s a huge success and you get actively involved in the angel investment community, and you meet with 10 companies, 10 different companies. It’s the first time you met with them. And you have to write a hundred-thousand-dollar personal check into one of the 10, but you only get to ask one question to each company. What question do you ask? 

Adam Smith: Oh, I’m going to steal this a little bit. This is one Adam Long, my co-founder at Wrangle always uses, which is, can you give me access to your Stripe data? Can I get in there and just see what’s going on in Stripe? Because I can tell– almost, I can tell so much from that. That’s probably where I’d go.

Tim McLoughlin: That’s interesting. So, so a little bit, a little bit later, a little bit realized, but you’re also probably want to just see what the reaction is from them. 

Adam Smith: Yeah, yeah. I mean like earlier, you could look at analytics data that they’ve done around maybe ads, if they’re trying to drive stuff off landing pages. And obviously I’m coming at this from like a SAS perspective of a web app, type play.

It’s probably different for different spaces. Obviously, I’ve worked with life science entrepreneurs. That’s a whole different ball game. But yeah, you want to see how have they thought that through? How is pricing set up? Is their churn? Is it low churn? Is it high churn? Is it repeatable? Do people upgrade?

You can tell so much from that. That’s why, you know, what Stripe is doing with their lending products, and getting people started, and getting all that data, makes, makes a ton of sense for them. 

Tim McLoughlin: But I can guarantee you that an acquirer of that company will ask that same question pretty quickly to see that that’s right. That’s right. 

Adam Smith: I believe that. Yeah. That’s, you know, at the end of the day, what you want to see. 

Tim McLoughlin: Yeah, that’s great. Well, Adam, listen, thank you so much for joining us. Congrats again, on the NC Idea award today, the grant, Wrangle is officially out there. And I wish you the best of luck with that company and hopefully, we can collaborate on something soon.

Adam Smith: Would love to do that. Thanks for taking the time and really appreciate it. 

Tim McLoughlin: Yeah. Great. Thanks. 

Adam Smith: Thanks.

Full Episode Transcript

First Check is hosted by Cofounders Capital partner Tim McLoughlin, and is a production of Earfluence.

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