The Best Financial Advice From Our Guests

0:06Hey there, entrepreneurs. Benjamin Gottlieb here with another edition of Shopify Masters, your companion for starting and building a business. It's hard to believe that 2024 is halfway through, but regardless of what time of year it is, having a strong financial foundation, well, that's key to building a healthy business. So to help you prepare for the rest of the year, we wanted to bring you some of the best financial advice from our guests. You're going to hear from money expert Tori Dunlop on the basics of pricing. Noah Kagan, the veteran entrepreneur, stops by to share how to find and validate a business idea on a budget.

0:41And investors, Ellie Trues-Dell and Maggie Sellers on how to make your business attractive to investors.

0:54Is money holding you back from starting a business? Well, Noah Kagan, the founder of AppSumo says it's possible to start a business without tons of capital. In fact, he wrote a book about it and it's called Million Dollar Weekend. You don't need any money. And I know that might surprise people, but I've started AppSumo.com, which today does$80 million a year in revenue, which is unbelievable for software deals. And I started it for$48. And I could have probably just started it for less. And so people believe they need more time, they need a better idea, they need a founder, or they need some more stuff, and they really just don't.

1:30I think that's the part I've really, we really diagnosed, I think solved and cracked in Million Dollar Weekend, which was before you worried about the idea before you even worried about the money, like what's the thing that's held everyone back from getting going? And so the two things we've, we've identified and recognized is really about how do they get going today? Like right now, I was showing this example. My friend has had this idea to have weekly date nights. He's got kids. So he's like, I just want to babysitter every Tuesday coming over and I'll pay 400 bucks a month. So a hundred dollars a week.

1:58I'm like, okay. I always think validation, which means seeing if other people want it. Can you get three other customers in 48 hours? He's like, yeah, I have other friends who have kids that probably want day night. I was like, all right, let's call them right now. And there's other ways of validating. So, but number one, it's how do you get going right now? And you worry less about the how, like, how am I going to find a babysitter? Don't worry about that. Let's see if people want it. Because those are the excuses that hold you back from ever getting started. And so if you can just practice becoming a starter and getting good at starting and you keep swinging at things, eventually, yes, those things will lead you to the right destination.

2:29Tori Dunlop is the founder of her first 100K, and she recommends creating content to help grow your business. Yeah, I'm very proud to run a very scrappy business, especially in the early days. I think that we're self-funded. I've never taken a loan. I've never taken outside investment. And so that's something that I'm also really proud of is that we built this organically from scratch, also with no paid ads. And so I think that even organic marketing, if you do have the time and energy to do that. In my previous life as a social media marketer, in my nine to five, I was working for companies who were completely financially dependent on running something like Facebook ads and they would spend 300 ,000, 500 ,000 a month on ads.

3:14And if the ads didn't perform well for two days, it completely changed the trajectory of their business. So that's one thing is like, if you can create an organic content creation machine, I'm still creating the majority of the content that we do at her first under K, even as the CEO, like it's still my face. So I'm in there creating a lot of that content. There's strategic ways to shoot that content that is low lift. So I think that that's one really cost saving strategy is actually still working to grow organically. Tori also says that it's important to price your business properly and to know how to advocate for yourself.

3:53Those two things are key to the financial success of your business. I literally was just talking to my friend the other day about this. She's like a travel content creator. And I was literally on the phone with her and she told me how much she's charging for like a one-on-one like consulting call for an hour. And I was like, double your rates right now. And I was like, I'm going to watch you do it. I'm going to literally sit here and keep you accountable and watch you go do it. And it's like, I think that we just are so scared of charging for our services. A lot of us are scared of selling. And then just money in general has just so much emotional weight to it.

4:25One, you as a business owner have value always, but also you're providing value to people. And this is where, you know, the serve before you sell mindset comes in is you always want to give somebody an accessible option to you or to your business. So if they're, if you're a values-based business and really want to do good in the world, great, provide some sort of free or at least low cost resource for people. Then also offer, you know, the higher priced option for people who can or are willing to invest that amount. And that helps, I think, people who are just like, I feel bad about charging. I feel bad about selling.

4:59Well, there's always going to be an accessible option for people. And also, you are worthy of compensation. You are worthy of getting paid for your services and for your expertise. And people need it. You denying the world what you have to say or what you have to offer only hurts you and only hurts the entire world around you for denying people that. Angel investor and content creator Maggie Sellers has a rule to help manage your personal finances and your investments. I think the 50-30-20 rule is incredible. I think it just developed discipline, but I do think it needs an upgrade. And I think this is why I am so excited about what I'm doing, because I really am democratizing knowledge of the rich.

5:45And the secret is that people invest in themselves, especially when you are trying to build something from the ground up. So having this mechanicalness of like, you can only put money towards savings in the traditional stock market. Then you have like your splurge that people are spending on that Sephora purchase every single week or travel. And then you have what you're putting towards like your needs. So your housing, your food, your transportation, daycare. I felt like there was this missing piece to invest in yourself. And every single piece of advice that we hear from entrepreneurs is bet on yourself, invest in yourself, risk everything that you have.

6:27Okay, don't risk everything that you have. But if there are things that you can do over a period of time that are going to be investing in yourself, whether that is angel investing, because it's going to broaden your network. We know most startups fail. But if you just allocate as an accredited investor a small piece of your income on a monthly basis towards angel investing, you would be surprised how far your network will grow. Maybe you're not an accredited investor and you've been debating joining a membership club in New York. Business is around knowing the right people. It's around creating opportunities for yourself.

7:03This is what rich people do. They invest in themselves, whether it's being at the right membership or golf club, it's meeting the right people to get to be investors in their company, or it's investing in businesses that are going to go public one day. I don't look at a membership club or an angel investment as a splurge. That to me is actually an investment in myself, whether it's in my network, it's in actually something tangible, but it's really an investment into your growth and development. And I think that's really critical for people that are looking to accumulate wealth and really try to take themselves out of how hard it is for this generation to actually get ahead because it is a lot harder.

7:45It's kind of shocking to me that that hasn't been democratized further, but obviously exciting for me because now we've really been able to own that. And it's something we have a lot more stuff coming out about. Maggie has experience as both an advisor and an investor herself. And so we asked her, what are some things that founders need to think about when looking for those investors? That's obviously a dream state scenario. So I would just say shout out to all the founders that are trying to raise capital right now because the market has turned. It's really hard. And I think, you know, you are going to want to just take whatever comes along in terms of money.

8:19But I would say, like, try to get creative before you take any money because you really do want to make sure that you're in business with the right people and the right investors. And some of the biggest questions that I would be asking is just like, what is the vision that they have for the company? really trying to understand that their vision and your vision are totally aligned. Being on the same page about like expectations, even down to the involvement. How often are you going to be expecting decks and models we made? There is nothing worse than getting an investor that you think is going to just want an investor update once a quarter.

8:55And then they're pestering you every single week to be like giving them access almost to your Shopify in a way, like just by how many models they want. And then I also think, especially if you get into more of like the fun side is really understanding like how big their checks are. That's something you should definitely ask on every single call. Don't be embarrassed to ask that. I also think if it's a fund is, do you have allocation for follow on investment so that you can kind of get an understanding? It is a tough position when you take on, let's say a lead investor, they maybe even have a board seat or a board observer, but they don't have any money left in their fund to allocate for follow on.

9:31So you know that like you are absolutely going to have to find another lead investor down the line, which I would recommend if you have the opportunity to just to have more eggs in one basket. But you also kind of do want to know that if there was ever a situation that you needed a bailout, or you needed somebody to put in more money, there's an option for that. So I think it's just about like, being able to feel comfortable even to ask them questions like that. Like if you feel you can't ask direct questions to a potential investor, that is not a good sign. So I would not be ashamed to ask check size, if they have allocations to follow on how easily they'll be able to reach and then what's their value add?

10:15How are they going to help you add value? What are tangible ways that they've done that in the past and everybody's value add will be different. And I'll give you a great example. The last deal that I just did, I really had tried to advocate for a fund that I work really well with to also invest in the deal. It was a highly oversubscribed company. And my value-add is completely different from the fund that I knew I really wanted to get in. They are more like amazing at board updates and helping with putting memos together and board decks and models. And that is not something that I am an expert in.

10:50And, you know, the founder after her first board meeting texted me and was like, thank you so much for advocating that they get in because the board deck went so well. The meeting went amazing. And it's just having your investors even work together. Those are all things that I think, especially as you're starting out, you don't understand how this all fits together, but it really is a puzzle. And you're trying to put pieces together that are going to make sense. And some people will be really good at this and others at this, and you don't want everybody to be the same. So you want to make sure you put in your corner an unfair advantage.

11:23So think of it like a sports team. You don't just want people that can shoot the basketball. You want different players that are going to add value. You want a coach and you just want it to be all rounded.

11:36Ellie Truesdale took a similar approach. She's the founder of the cat food brand made by Nacho with celebrity chef Bobby Flay. Ellie also runs her own VC firm, and she says she looks for complimentary partners to help her round out her team's skillset, be it employees or, you guessed it, even investors. Never look at an opportunity and think about all the things that you don't know yet, but rather, okay, what am I bringing to the table here that's gonna be really unique and differentiated and that I've built my particular strength and influence in? I can come in and nail that part and then learn as much as I can from the people around me.

12:14Hire the talent and recruit the right people around me to fill in where I know I'm gonna have some gaps and then learn as much as you can from those people. What I needed to do was find investors who were particularly motivated by or cared about food. We're food specialists, we exclusively invest in food. And so there needed to be that emotional connection. There needed to be a personal tie to either the food world or to my personal story or to something about me. So I think that that's just one sort of qualifier for how you could think about going out and fundraising is finding people who have a connection that's beyond just wanting to see an investment return.

12:53And then beyond that, it's really doing some research, knowing if you're going out and pitching a fund that has never invested in a SaaS company before ever in your SaaS business, that's probably not the right people to be in touch with. If you know that they're solely a growth fund and you're pre-revenue, pre-launch and raising a seed, not worth your time or theirs. So just doing that research and really trying to set yourself up for success. And then more than anything, I mean, just be ready to be resilient. Don't take rejection as any sort of personal affront to you. There are so many reasons people don't come in, don't invest, and honestly could come back to it.

13:31If someone tells you, listen, it's too early or it's not the right time, take that for what it is and don't get discouraged and say, listen, I'd love to build the relationship and come back to you when you are ready. I mean, it's so important for me as an investor to understand the motivation of why a person has gone out and put hopefully their life on the line to be building a business. There needs to be a real founder story, not just them chasing an opportunity. So if there is that quick distilled story that you can lead with, that initially is going to get me excited, interested beyond just, again, with every single one of these investment opportunities, there should be a built in expectation.

14:09There's room to make money here. That should be the understanding with anytime you're pitching anyone, any business. So you really do need to think about what is going to tie that angel, that fund, that high net worth person to your business with a story, with something that feels tangible and a little bit more personal to you. Much like any discipline, pitching investors requires practice. And it's something Ellie still does to ensure that her pitches land. In my early days of going out and pitching Made by Nacho when it was our first raise and we were still kind of coming together as a team, We had a couple sample pitches or opportunities to get on Zoom calls with funds or people that we knew either wouldn't invest or were not people that we really wanted to invest just to practice.

14:55So I think there's real benefit to sometimes if you just have like a family member come on or a friend to do a trial pitch, you're not really going to nail it the way that you would. You're going to feel self-conscious or it's not going to be as realistic without wasting anybody's time. But if you can engage someone who maybe you do know is a growth stage investor, they're not interested in coming in on this round, but you say, hey, would you ever be willing to just let us practice pitch on you, get some feedback and go from there? And I think having done that a few times is really important, particularly if you have other people that you're raising with and there needs to be a little bit of a choreography.

15:30It's so important for me when I'm receiving pitches to watch that two founders or a team really knows who's picking up the conversation when or who's answering what question when because everyone has ownership over their own parts of the business. I think it's proactively communicating with your investor base. I'm so thrilled when our founders have at least a quarterly update, but it's great if they love to do a period or monthly update. Just with the quick highlights, right? We want to know how the business is going, the wins, the struggles and challenges, where we can be helpful. A lot of our founders will send asks in every one of their monthly updates of their investor base, which what I love about that is it's efficient.

16:14It doesn't mean that they have to call all 10, 20 people on their cap table and say, here's what's going on and here's where we can use their help. It's a monthly or a quarterly update where we're all getting the same information and can come back to you. And then if you're doing that regularly beyond the email correspondence and those newsletter updates, just knowing enough about each of your investors to say, we're having an issue in and with our 3PL and logistics. I need to call my investor who I know has done supply chain before, or I need to call someone who's on my cap table, who's a founder and might know another person that I should be calling about this.

16:55So I think really being prepared to utilize your investor base, knowing that they might not be actively reaching out to you and then maintaining the communication outwardly and consistently is just so important. It helps everyone. Thanks for listening to this episode of Shopify Masters on finance. Our show is produced by Megan Coyle and Gogo Zoger. Engineers are Matt Schwartz and Miku Betlam. Schweng Esther Shan is our host and I'm Benjamin Gottlieb. Come join us next time. Same time, same place right here on Shopify Masters.

17:36Thank you.