Foundersuite Streamlines Startup Fundraising Process

Foundersuite Streamlines Startup Fundraising Process

In this interview with Nathan Beckord, the founder and CEO of Foundersuite, we discuss the idea behind the company, how the product and company has evolved and how they work to make awesome tools that help founders build awesome companies. Foundersuite is streamlining painful tasks like raising capital and investor relations so that founders can focus on product and customer acquisition. Foundersuite is building a true software platform for the world’s 400 million entrepreneurs.

Nathan Beckord Foundersuite

Nathan previously worked as a startup CFO and BD guy at VentureArchetypes.com, where he worked with 150+ companies including Clicker, Kickstarter, LaunchRock and many more. Nathan has an MBA and is a CFA. He is also a fanatical sailor.

Patrick: This is Patrick Henry, the CEO of QuestFusion with the Real Deal…What Matters. We’re here today with Nathan Beckord. Nathan is the CEO of FounderSuite, a very cool company that I think will be of a lot of interest to our entrepreneur audience out there. Thanks for being on the show, Nathan.

Nathan: Thanks for having me. It’s great to be here.

Patrick: Tell me a little about your background. What were you doing before FounderSuite?

Nathan: Immediately before FounderSuite, I had a consulting business called Venture Archetypes. At its peak, we were eight people. We were doing fractional CFO business development work. Our core bread-and-butter business was startups. They would come in the door. We would put together a pitch deck for them and usually build a model. That was our original business.

As we started working with these companies, a lot of them were asking us to help put them in front of investors or figure out their funding strategy. We would go in and spend a week or two putting together a target list of investors. I would go in and build them a spreadsheet to track all of their investor discussions. Later, that morphed into a Google Doc to manage their funding discussions. I did that for about 12 years.

What led me to do that was that I went away to business school and tried to start a startup called Trial Logic. It was commercializing clinical trial software. I had no experience in the space.

I somehow talked my way into a license with MD Anderson Cancer Center to get their software that they were using to run the trials. I got this software. I got a deal going with them. I spun it into a company. I started talking to investors. Then we realized that the guys who had built this software 15 years prior had no desire to start a startup. They were focused on curing cancer. That company imploded under its own weight.

I came back out to Silicon Valley and started a consulting business. I did that for 12 years. It was fun.

Patrick: Coming up with the idea for FounderSuite was a natural extension of what you were doing in the consulting world, but automating some of those things. Is that right?

Nathan: Absolutely. FounderSuite began as a side project of that consulting business. We were doing the same thing over and over again. For example, we were building lists of investors and putting together these Google spreadsheets to track the discussions. I had the light bulb idea one moment that this could be software instead of a spreadsheet. Why isn’t this a product?

You saw SalesForce and all of the CRMs in the sales world emerge. There are now about 200 sales-focused CRMs. Some very successful companies have been built around that, with the help of companies like PieSync to retain customers and sync customer data for ease of use. You started to see that in the marketing world as well with HubSpot and other companies. To me, it seemed like the finance and fundraising world was green territory. No one was building CRMs for that stuff.

Patrick: Does the FounderSuite product also including target list building capability or is it more about managing the sales funnel? I agree that raising money is also like a sales process. You have a funnel. You’re working through the funnel. You’re working through the list. You also said that you were building lists for people. Does FounderSuite have some automation capability around that? Do you need to do that manually?

Nathan: It’s both. I love that you describe fundraising like a sales process. I use that phrase about five times a day. That’s our whole philosophy. When you’re fundraising, you should think of it just like a salesperson does their B-to-B funnel. You build a list of targets. You qualify those targets. Then you move them through your funnel and the various stages of outreach, engagement, due diligence, and hopefully to a commitment or to a “no.” The first step is building that funnel.

About 10 years ago, when I was building that list or funnel for startups, I would look at CD-ROMs of Pratt’s Venture Directory and spend tons of time Googling investors. We’re making it easier because we have this database that you can search by market tag and location. It helps you filter down and generate a couple hundred results, depending on your industry. It still requires some manual work. Even if we filter down something like “medical devices San Diego” you still need to go through that list, dig into each investor a little bit more and make sure that they invest at your stage. There is still a qualifying element to that, which I haven’t been able to automate yet. Hopefully down the road, that will happen.

Patrick: I know that there are all of these Reg D filings out there. There are companies that mine that data, like Mattermark and CrunchBase. There are a variety of different sources to do this, which makes it a lot easier than it used to be. Do you plug into that? What is your approach?

Nathan: We don’t. We’ve built this database ourselves. When we originally got started, about two years ago, we were integrated with AngelList’s API. We tapped into the AngelList database. We were also using CrunchBase’s API as well as LinkedIn’s API. We were originally plugging in to all of these different APIs. LinkedIn shut off their API to everyone, not just us.

CrunchBase put theirs behind a very expensive paywall. I think $60,000 a year is the license fee that they wanted to tap their database as a commercial entity. You can go in as an individual and pay less. If you want to use their data for business, it’s $60,000-plus. We were still on AngelList. We decided that, eventually, they’re going to discontinue their API or shut it off.

We built this database of about 50,000 investors. We’re not scraping Red D filings. Interestingly enough, the activity of our users on the system is creating some data. We have a couple thousand startups using the platform. We know who is chasing which investors and which ones are leading further down the funnel.

When I talk to startups, I don’t say, “Our database of investors is the end all, be all.” I usually say, “Search through our database and come up with a list. Go to CrunchBase and plug in some of your similar companies. See who funded them. If you have access to Mattermark, CB Insights or PitchBook, spend some time on them.” I think founders still need a variety of databases to build that killer investment list.

Patrick: Even after you have that list, especially with VCs and some angels, if you don’t have a warm contact, you’re not going to get any response unless you’re known and someone who has done it before. Then you already have your own reputation out there.

A lot of these younger entrepreneurs are first-time entrepreneurs. They don’t have that. It becomes really challenging. One of the things I suggest is, “See if you know someone on LinkedIn who knows the person you’re trying to meet up with.”

Do you give that kind of advice? What other approaches do you have? Do your customers and clients do much cold calling? Do you advocate that warm lead process as well?

Nathan: Absolutely on the warm lead. I can’t emphasize that enough. I’m constantly beating the table and employing a bit of tough love with some of our users. They want to cold email investors. I have to put it in perspective. These VCs in particular are meeting with 25 companies a week. They’re getting 100 warm intros a day.

They’re not even going to open up your cold email. That’s going straight to the “delete” folder. The warm intro is the only way to get in. Every now and then, you’ll hear about some founder who cold emailed Mark Cuban and got a response. There is 0.0001% where something happens. By and large, it’s the warm intro. I tell people to plug in that target investor on LinkedIn and see if you have any mutual connections to that person.

You can even try Facebook. My Venn Diagram of LinkedIn and Facebook don’t overlap all that much. If I’m trying to reach an investor, I might even go through Facebook. There are a few other hacks around that. Sometimes I tell people to send a cold email, not to the investor, but to one of the founders that they invested in. Start talking to that founder. Do an informational interview. Then maybe ask for the intro that way. That’s a backdoor into that warm intro.

Patrick: That’s very smart. How big is the market for the FounderSuite product? You mentioned that there could be a product line extension as well. When you’re sizing the market, what do you see as the available market out there?

Nathan: It’s interesting. It’s hard to get super accurate data around market size. Our market size is the 4,000 or 5,000 companies that raise Series A per year. It’s also the 80,000 plus or minus that successfully raise an actual professional seed round. Those are the tip of the iceberg.

The ones below the iceberg are the 1 million to 4 million startups that are raising some kind of money, friends and family or other, that you don’t necessarily read about in TechCrunch. They are a real startup and they’re really raising money. I think Mattermark has roughly 4 million startup companies in their database. They’re tracking them. Those are typically growth companies.

Patrick: Is FounderSuite a software-as-a-service business model with a subscription, and you maintain that subscription during the period of time when you’re raising capital? Do you see companies stay on longer? How does that work?

Nathan: Yes, it’s software as a service. We have a free version of the product that is free forever. You never get cut off. It’s not a trial but it does limit you on the number of investors that you can have on your CRM. Then there is a $49 a month and $69 a month plan. We’ve extended the product line. We launched the investor’s CRM in March of 2016.

Then we’ve added a few pieces on there. We added our own database. More recently, we added an investor updater tool. Now, if you’re raised money, you have a handful of angels or VCs on your cap table. This is a tool to do your monthly or quarterly updates.

If you’re getting ready to do another round, I tell people, “I’m going to pitch you in three months, start sending updates on a monthly or a bimonthly basis so that you start to see that line develop. You’ve heard of us. We’re in your mind. You see steady progress.” This investor update is to update your existing investors but also to warm up your next round.

Patrick: The $49 and $69 includes the additional features with the updates?

Nathan: Yes.

Patrick: It has a relatively straightforward user interface. It’s easy for entrepreneurs to use. They don’t have to be very technical, correct?

Nathan: We try to make it as simple as possible. This is an embarrassing admission. When we first launched the product, it was comical. It was confusing and weird. I have a finance background, and I was here designing products.

It wasn’t until I got a product manager involved and we rebuilt the thing from scratch that it became simple and clean. The point I’m trying to make is that, making things simple and easy is so much harder than you think it will be. You need people who do that for a living. Don’t let the finance guy design the product.

Patrick: Are you constantly getting feedback from your client base around new features they want or ease of use?

Nathan: Yes. That’s one of the beautiful things about this business. We’re a startup. Our customers are startups. They’re really involved and vocal with what they want, and ways to improve. Some of these guys are product guys themselves. They are viewing our product through a product person’s eyes and constantly coming up with feedback. It’s good. Sometimes it’s a bit of a firehose of products, but it’s good.

Patrick: I know that you have revenue now. Do you have a clear path to profitability?

Nathan: I was having this discussion with my wife this morning. We’re thinking about putting an offer in on a house here in the Bay Area, which is a crazy market. The discussion went something along the lines of how much I pay myself versus reinvesting into the product. We could be profitable today if we stopped reinvesting. We do have a path to profitability but it’s a variable lever that I adjust.

Patrick: Do you see yourself raising outside capital to fuel the growth, do more promotion and create broader brand awareness? Are you going to continue to self-fund?

Nathan: We did raise a seed round. We have some investors on the board already. We’re one of those startups that is beyond the seed round. Maybe it’s a seed plus. We’re not quite at the Series A level yet. As a SAAS business, that bar keeps rising. It keeps getting harder and harder. Anecdotal things that I hear are that SAAS businesses need $100K to $150K monthly revenue MRR.

I feel that, a year ago, that was $50K to $100K. That benchmark keeps rising. I think we’ll get there eventually. We’ll probably do another seed round this summer. I think we have an opportunity to be a platform. Like SalesForce has established itself as this sales CRM, I think we can do something analogous in the finance and fundraising space.

Patrick: Is there a lot of intellectual property in a product like this? You mentioned that there is this broad set of CRMs out there focused on different niches in the market. Infusionsoft has integrated the CRM with email marketing. Then you have big ones like Marketo, SalesForce and HubSpot. Is there something unique about what you’re doing in the financing space that makes the product somewhat unique? Is there intellectual property there?

Nathan: I don’t think the product itself is ripe for intellectual property. There aren’t a lot of unique things that we could patent. I think the database is very interesting. We built this database, and now it’s used by users. That usage itself is generating data. That’s data we have that no one else has. That is proprietary.

It’s not so much something that could be patented, but it’s intellectual property. We have data about which startups are raising money, who they’re targeting, who they’re getting interest from, who they’re in due diligence with and who they’re getting commitments from. We have this information well before anyone else, before it’s reported to the press or it shows up in another database company. That’s an interesting IP angle.

Patrick: Are there ways to take that data and make more intelligent recommendations or algorithms that you can apply to big data? Everyone talks about AI but there is machine learning that’s been around forever. Are there applications of that to your database that can help improve recommendations for your client base?

Nathan: It goes back to what we started off talking about. It’s still a pain to build those target lists. One of the things on our roadmap is using our data to build something like an Amazon recommendation engine. It says, “People who viewed this book also looked at this book.” You could also do something similar with investors. You could say, “People who pitched Mark Andreessen also pitched Jim Bray.”

You could cross reference. You can do a lot of other interesting things. There are a lot of signals that are thrown off by any CRM. They are things like how quickly an investor moves along someone’s board from contact to pitch to due diligence. You could almost score investors based on how fast they move through founders’ funnels. There is a lot of interesting data.

Patrick: Are there any other key things on FounderSuite that you want to talk about? What’s next? Is there anything exciting on the horizon?

Nathan: There’s nothing breakthrough. We raised that seed round. We spent the better part of the next 18 months rebuilding the platform from the ground up. We came out with the CRM, the database and the investor updater tool. Our most recent thing is a portfolio portal.

If you’re an accelerator, a seed fund or an angel investor that has multiple companies, it’s a visual dashboard of all of your companies. You can see their funding status and progress updates. There is some potential that we’ll build out. When I’m talking to startup accelerators as a marketing channel, I learned that more than half of them have a real pain point in keeping track of their startups. They have 50 startups come in twice a year. They graduate. They do demo day. They’re gone. Then they have no idea what’s going on with those companies anymore. I think that’s a pain point that we’ll tackle.

Patrick: Do you have any key tips or advice for the entrepreneur audience, from someone who has done a few startups and been in the trenches?

Nathan: This is a statement but there’s advice in it. It’s so much harder than it looks to build these startups. It’s deceptive to many startups when they read in the press about things like Snapchat. Those are extreme exceptions. Everyone else is hunkered down, worried about staying alive every week and slugging it out for years.

The advice is to recognize that it’s going to be a much harder slog than you probably start off with. There is advice that gets thrown around, like “fail fast.” It’s good advice, but I think people give up too quickly. To really survive, you need to have a little bit of cockroach DNA in you. You’re going to make this thing happen no matter what.

Patrick: I think that’s great advice. It gives perspective. You’re right. A lot of people expect overnight successes. You don’t give birth to adults. It’s a grind and a slog. Especially in the B-to-B world, most of your target customers don’t want to work with startups. You need to have something that’s highly differentiated and interesting to get them interested in talking to you.

Even then, it’s a real slog. There is so much patience and perseverance required to get these things off the ground, and the vast majority don’t. I think that’s exceptional advice and I appreciate it. Thank you for being on the show today, Nathan. This was awesome. This is Patrick Henry, the CEO of QuestFusion, with the Real Deal…What Matters.

 

This is Patrick Henry, CEO of QuestFusion, with The Real Deal…What Matters.

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