How to Acquire Venture Capital Funding with Paul Jarrett

0:02Who's ready to rock today, Fire Nation? JLD here and welcome to Entrepreneurs on Fire. I'm brought to you by the HubSpot Podcast Network, the audio destination for business professionals with great shows like Gold Digger Podcast. Today, we'll be breaking down how to acquire venture capital funding. To drop these value bombs, I'm brought to Paul Jarrett in the EO Fire Studios. Paul artfully blends difficult tales of entrepreneurship, logistics, and venture capital with his own real experiences, captivating audiences beyond just bullet points on a slide. His storytelling transforms complex topics into relatable narratives that go beyond insights and into concrete, actionable items.

0:38In today's foundation, we'll talk about bootstrapping versus venture capital. We'll talk about finding venture capital. We'll talk about the biggest mistakes that people make when seeking VC, venture capital, and so much more. And a big thank you for sponsoring today's episode goes to Paul and our sponsors. Nudge, hosted by Phil Agnew, is brought to you by the HubSpot Podcast Network, the audio destination for business professionals. Ever notice how the smallest changes can have the biggest impact? On Nudge, you learn simple evidence back tips to help you kick bad habits, get a raise and grow a business.

1:09Oh, and it's the UK's fast growing business podcast. A recent episode on how to win any argument shares decade long research into persuasion from a world leading neuroscientist. Listen to Nudge wherever you get your podcasts. Are you looking to start or grow a successful business? Attend the world's highest rated and most reviewed business growth workshop taught personally by Clay Clark and football great Tim Tebow at thrivetimeshow.com slash EO fire. Again, request life changing tickets today at thrivetimeshow.com slash EO fire. Paul say what's up to fire nation and share something that you believe about becoming successful that most people disagree with.

1:52What's up fire nation? I would say, what should I show up? Most people disagree with. I think a lot of this is about tolerating pain. Fire Nation, no pain, no gain. Are you willing to suffer? Are you willing to struggle? I mean, literally though, think about everything that's worthwhile in this world. Can you get into great shape without a little bit of suffering? I co-plunge every day. I'm in my infrared sauna. I'm walking my dog six miles a day up hills. Let's go Fire Nation. Embrace the pain. So how can we acquire venture capital funding? I mean, bootstrapping and venture capital, They're two completely different paths.

2:32We have people that are listening right now, Paul. They've gone the boost strapping route. We have other people listening who have gone the venture capital route. We have people that are listening that have gone neither route, are trying to decide between the two. So what are the key differences? I think that the key differences that most people overlook is, one, kind of going back to the first thing I said, there's a different sort of pain. And it's probably double whatever the pain is that you think. So there's pros and cons to both of those. What I would say is if you kind of are closer, and I'm going to give extremes so that people can kind of have their own scale of high and low and where they land on it.

3:09I would say if your plans are to create something that is closer to take over the world, venture capital is probably it. And I'd say take over the world quickly. I would say that if you want to go at your own pace and maybe potentially in a longer period of time take over the world, then I would probably head towards more of the bootstrapping. But a lot of pros and cons. And I think the thing that people miss and what I honestly wish I could go back and tell myself, you know, 12 years ago, hop in a time machine, go back, grab me, shake me a little bit. I would say, Paul, the choice between venture capital and bootstrapping, the answer is probably how do you visualize your life in 10, 20, 30 years?

4:03Think about that part first and let that help guide you to what is the best path for you. So, and then I always, I do like to throw in this analogy, venture capital feels like a can of gasoline, right? And you can properly use that or if you're foolish with it, it might blow up in your face. So that probably is the one thing that I think about most when I get this question from entrepreneurs, et cetera. Well, Paul, this is Entrepreneurs on Fire. This isn't Entrepreneurs on a Wet Rotting Log. So let's talk about getting the C. Because where the heck does one begin when it comes to finding venture capital?

4:49As all good things, and as I myself did, I started on the Googles, the Reddits, and the Quoras, and the interwebernets as a mashup. But what I found was there are a lot of angel groups locally, probably in your city, in your state, or whatever. And that was always actually the best route to get intros and to find venture capital. So some folks go raise capital first with angel investors is typically local or regional. But some people, you know, like as in our case, we completely skipped that round and we went straight into venture capital because we had a product market solution. Then we had some numbers to show for it.

5:32And I found that in my experience, yeah, sure, you can reach directly out to venture capital websites. You're going to go through a process. You can kind of go through multiple directions. But what I found was a lot of those angel investors know the venture capitalists and or they might be LPs in the venture fund. And simply by going out with those angels or those local smaller investors and just seeking advice, not capital, and asking for some of those intros, I think it's really a lost art where if I were raising today, that would be the first thing that I do. is really figure out locally who around me and leveraging those relationships and contacts to just say, I want to get more advice about venture capital.

6:19Who should I talk to? And that is, in my opinion, the very fastest way to get kind of the best identified potential investors. And then one really important part is ensuring that those venture capitalists or investors have experience in your industry. I think, you know, all too many times somebody might bypass like going with, oh, I have a relationship or a friendship, like, no, no, no, like, you know, use those contacts to ensure that you find people that can bring more than money with them, right? They can bring a Rolodex, they can bring industry ties, maybe they have some manufacturing or server access or something.

6:58But that I think is, you know, it's finding the connection is just your racing bib towards the finish line. And I think a lot of people think getting the capital is, or finding the investor is the finish line. And it's like, no, you are just getting started and make sure that that team that you work with has the support for the type of race that you're in to help grow your company. So Paul, I love talking about mistakes. I love talking about disasters. In fact, the first 2000 episodes of Entrepreneurs on Fire, and I mean, that's six and a half years of a daily show. The first question I asked my guest is what was your worst entrepreneurial mistake?

7:40What was the biggest failure you had? My audience, they love it. So I want to talk about mistakes because now my listeners can actually avoid these mistakes when they hear about other people making them and maybe get entertained by them as well. Because let's be honest, that's a little bit happening there. So what are the biggest mistakes that you are consistently seeing people make when it comes to seeking venture capital? I'm going to share probably one of the most ridiculous, outrageous mistakes that I've made and I have since then done to other entrepreneurs. But the whole thing of it is like you have to follow through or it really doesn't sink in for people.

8:18So real quick story, and I see the same mistake being made. Um, I had a friend who I did not know was a very wealthy individual who had a very popular company. I should have known all of that. Um, and I was just hanging out talking with him and we had grown to be friends over years. And, uh, he said, so, you know, are you going to start this idea of yours? And I said, uh, yeah, well, you know, if I had a little bit of money and he was frustrated cause he could tell like, you know, him and I kind of agree the fear of embarrassment, holds a lot of people back from entrepreneurship, et cetera. So he basically said, put together a plan and tell me how much you need.

8:55I was living in San Francisco at the time, you know, really didn't know much about this world, this venture capital investor world. Well, I came up with this massive plan for a huge company and it took$30 ,000, which was basically my rent for three months. So I presented this whole, you know, pretty much million dollar deck, right to this gentleman and he looked at me and he said okay go ahead and wire me your banking instructions and and i was just kind of in yes sir mode because that i found out who this person was and why they were important and um did that next thing i know five minutes after i present i have thirty thousand dollars in my bank account i'm freaking out because now i'm questioning everything right and the gentleman said uh okay paul you made two massive mistakes he said number one And you have my money and there's no contract between us, but don't worry, we're going to fix that right now.

9:51Open your inbox. So we took care of that part. Basically, never take the money unless you go through a process on a contract. The second one was he said, you should ask me for a million. To which I said, I'm sorry, what? He said, you should ask me for a million. And I said, a million what? And he said, a million dollars in funding. What you just did was you covered your expenses. You didn't think about anything, how to grow this. You didn't think about what the cost of as a customer, what the lifetime value is. Here, here's your lesson to study. Here's these books, do these things. But I can contact you with other people to get you.

10:37You're probably going to need a million and a million and a half to start because you're going after metrics. You're not going after a specific profitable business. And I said, okay, well, I would like to have that million now. And he said, deadpan, looked me in the eye and said, if I give you that million, will you ever learn? I don't know. You don't know. if I do not give you the million and you think about the rest of your life, only asking for that 30 ,000, I guarantee you when you are in the room for an important decision, you are not going to ask for exactly what you need. And you have done your homework and you'll have the correct contract in place.

11:19And I'll tell you what, that is probably the most, but I would pay a million dollars for that lesson for day one now. And you know, I do kind of a similar thing to entrepreneurs, but I don't do it necessarily with investing. It might be something like, I just had a call with an entrepreneur, talked for a very long time. We got done. They kept talking. I finally looked at him and I said, man, we've met three times. When are you going to ask me? He said, ask you what? I go, ask me the thing. Why are we meeting? And he said, well, I would like you to be my mentor. And I said, no. And I basically went through the whole thing.

11:53So we're working on a plan. and I got him some better mentors actually in his industry. But the whole point is if you don't ask and you don't know what you need and you're not prepared for the next step, you're never really gonna get what you want. So make sure you do those steps and make sure you don't miss out on a million bucks like I did. And if it's uncomfortable, Fire Nation, guess what? All the magic happens outside of your comfort zone and that's okay. Absolutely. And we have a lot of great conversations happening around this topic when we get back from thinking hours. sponsors. Welcome to the world of entrepreneurship.

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15:26Become the next success story. Schedule a free consultation and request tickets to join Tim Tebow and Clay Clark at the next business conference today at thrivetimeshow.com slash EO fire. Paul, we're back. And let's be honest, all we're hearing about today is high interest rates and tough macroeconomic and wars here, wars there. Is it possible to raise venture capital in today's economic climate? I'm trying to think of a year where somebody told somebody had all the reasons to raise. And the answer to your question is, yes, absolutely. Now, are you going to hear everything else? Yes, absolutely.

16:10Are you always going to hear choppers, people trying to put out your spark, put out your fire, right? Absolutely. So what are the things that you actually kind of should consider in today's climate with venture capital, Right. That's what I think the important thing is, you know, when we when we started, nobody wanted us to do a physical consumer package good. That is actually the thing that was the opportunity long term. And so I think it's really important to understand where your strengths are, where your industry experience is, what you're interested in, because here is one thing that I do know.

16:52if you present the right information to the right people and they can feel your passion and they can feel your excitement there is a moment in a room where it becomes undeniable that a deal is going to happen and then it kind of like you can you can feel the tables turn and so things right now you know ai there's a lot of things that are hot but one as for example is supply chain it's something that is super boring. We're in that industry, right? Everybody thinks it's boring. I am thrilled because it is a space that is super interesting. Ever since the pandemic, there's been a lot of eyeballs on the industry and there's a lot of opportunity.

17:34And I would say that, you know, I don't know the numbers off the top of my head, but there are specific industries where yes, there's more of an opportunity, but even if there isn't a lot of venture capital going into that space, if you have the information and you have everything hitting on all cylinders, it becomes undeniable. And the question is, it's actually a conversion rate question, right? So I think that is where ultimately you have to think about is if I ask 100 people in this industry right now, what is kind of the conversion rate that they might say yes? What's about this industry?

18:11Is it hot or not? What's the conversion rate from first conversation to a potential yes? and if the thing where you are best and you best align in and you can solve a problem and you're passionate about it but it's not really a hot industry usually the answer is you just have to double the amount of people you talk to you just have to triple it and now you're maybe looking at 300 pitches versus 100 right so absolutely i think anytime everything makes sense and honestly a lot of probably the economic issues that we're facing right now are just great opportunities in businesses disguised as problems.

18:51So I want to harken back to something you said earlier, which was like, you were so excited to get that$30 ,000 into your bank account. I mean, you were stoked. I mean, that's awesome. That's a good chunk of money. Boom. It felt like it was kind of easy. You asked for it. It came. It was there. So to that point, can we take just any and all venture capital money that comes our way? Or does the actual type of venture capital and investors matter? Oh, man, I feel like I'm going to have some fighting words here. I would say that, you know, and this was something that was told to me by a very well-respected venture capital capitalist, and I kind of stole it from them.

19:32But it feels like what they're kind of talking about behind closed doors. I would say, and the thing that was told to me, which I understand their point, but it was a little shocking up front. The VC looked at me and said, there's only one type of money and it's dumb. And I was like, well, okay. So like you're dumb money? He's like, yeah, we're dumb money. Everybody is dumb money. But ultimately to kind of fast forward to his point of the story at the end, what he described was there's no magic bullet with venture capital, right? The best thing you can do is get people in the industry, get people that can bring something to the table.

20:10But this whole idea of smart versus dumb money with investing, yes, that's true. But also, you're probably never going to find the perfect investor. And the point ultimately was, don't forget it's on you as the entrepreneur, as the CEO, as the leader of the tribe, as the captain of the ship. right? That is you. And so all the other money that you take should be done because you should be the industry expert. And nothing is ever going to probably fulfill the expectations, even for some of the biggest venture capitalists in the world. So it's a cool conversation that I had with this guy. And I love the fact that he kind of called it for what it was.

20:53And I think at the end of the day, a lot of investment and a lot of money and a lot of the investors, there's a time and place where they can be critical to your company or they can be advisors and mentors. But don't be afraid to quote unquote upgrade or find a new Rolodex and have that difficult conversation if you need to. So I tend to think there's industry experts in Rolodexes, and that's a little bit more of smart money. But I do like the gentleman, the venture capitalist point about it all is essentially dumb money in the end because it's on you and you need to become the expert. Them are some fighting words, and I like the words coming out of the mouth.

21:31Now, I want to talk directly to Fire Nation because it's very important for us to speak to our listeners here today. What are your biggest tips for our listeners, for Fire Nation, if they're trying to decide whether to take venture capital, get a loan, or just use their own money? We have raised two rounds of venture capital at our company. We recently, in October of 2023, bought out all of our venture capitalists. So we're kind of, oddly enough, 12 years in. We're new independent business owners. And we are loving every minute of it because it feels new. And I bring all that up because there's so many things that I would want to share.

22:14But if I really drill it down and I really – I think about this a lot. I'm actually presenting to a group of a couple thousand entrepreneurs here tomorrow. And this has been on my mind a lot. And it kind of hit me when I was speaking with my co-founder and I was speaking with our CFO who actually had left the company, went somewhere else and came back. So they have like a great perspective. I think that it's important to ask the five to six people that you're closest with what their opinion is if you were to raise capital or if you were to bootstrap. I think a lot of us are looking for the answer from somewhere or something else.

22:55And I think a lot of self-examination and a lot of actually talking to, it's funny as it sounds like, talk to your mother, talk to your father, talk to your friends, say, here's a situation. What does my life look like in 10 years this route? What does it look like in 10 years, kind of this bootstrapping route, right? What's your opinion? What do you think? And some of the most interesting answers will come back, right? I wish I would have asked that question early on. And I would say that now that I do ask those questions, one thing, you know, I go back and I've asked people since. They kind of look at me and say, oh, your whole point of like all of this is so you don't have to answer to anybody.

23:36Like you're not an investor type person. It's like, man, that information would have been useful 12 years ago, right? But I think that's important. And I think it's like a crucial, simple thing that a lot of people don't do is they don't pose the scenario and ask the actual people that are closest to them. They tend to go to business people. Yes, those are great. Do that. But ask the people that really know you and kind of grew up with you and ask them, what does that look like to them if they're me in 10 years? And I love the answers that you'll get back. And hopefully you learn something about yourself beyond just business and venture capital and whatever.

24:14Um, it's, you'll never get those perspectives from anyone else other than the people you kind of spend the most time with. So Paul, you dropped countless value bombs today around venture capital mistakes, bootstrapping, et cetera. It's a lot of great stuff. So I mean, the fire nation is like, I need to learn more from this guy. I need to consume more content. I need to connect with him. What is your call to action for fire nation today? You know, here's the thing. If you've made it this far. One, I appreciate you, John. I appreciate you. It's so fun being on a second time. It's like, it's surreal.

24:49It's cool. It's cool. Um, I would say if you made it this far, as crazy as it sounds, I'm not hard to find. I'm not hard to get at. Just drop me an email. It's just Paul at Bulu group. Um, and you know, maybe toss an emoji in there. So I know it's from a fire emoji. Just do a fire emoji. Yeah. There you go. Yeah. Fire in a microphone. Spell that Bulu Group for him. It's like Hulu with a B, B-U-L-U-G-R-O-U-P.com. It's just Paul at Bulu Group. And you want to chat about business, you want to talk about logistics, you want to talk about startups or whatever it is. I love to be that person and just forgive me if it takes me a while to get back to you.

25:29But usually some interesting things will always come if I come on a show like this and have a conversation. of course websites Bulu Group but yeah just drop me an email we're all humans we can talk Fire Nation you're the average of the five people you spend the most time with you've been hanging out with PJ and JLD today so keep up that heat for links to everything we talked about visit eofire.com type Paul in the search bar the show notes page will pop right up Paul thank you for sharing your truth your knowledge your value with Fire Nation for that we salute your brother and we'll catch you on the flippity flip side Thank you so much.

26:31need, Fire Nation, to achieve the lifestyle of your dreams, visit UncommonSuccessBook.com. I will catch you there or on the flip side. Nudge, hosted by Phil Agnew, is brought to you by the HubSpot Podcast Network, the audio destination for business professionals. Ever notice how the smallest changes can have the biggest impact? On Nudge, you learn simple evidence-backed tips to help you kick bad habits, get a raise, and grow a business. Oh, and it's the UK's fast-growing business podcast. A recent episode on how to win any argument shares decade-long research into persuasion from a world-leading neuroscientist.