Mike Lingle:
And then they would offer you a term sheet, and the term sheet says, “We’ll invest. Here’s what the deal is going to look like.”
It’s not a contract, but it’s usually binding for 30 days.
During those 30 days, you’re going to have lots of conversations with them.
They’re going to do due diligence.
They’re going to want to look at every financial document, every contract, to make sure you’re telling the truth.
They’re going to want to talk to customers, right?
So, even after they’ve made an investment decision, there’s a whole 30-day diligence and discovery process and, you know, “Let’s really get into the information here,” and then they write the check.
So, working backwards, the thing you do not want to do in the first meeting, knowing that you’re going to have all these meetings, is try to get across every piece of information because you have lots of time.
For someone who’s going to invest, you’re going to have all the time in the world to give them the whole 65 pages.
You need to get it down to the core pieces that are going to get you into that next meeting, that are going to get you into that due diligence.
And you shoot yourself in the foot if you try to present too much information.
People can’t remember it all.
You just overwhelm them with info.
Sabrina Chevannes:
Absolutely.
I think what is definitely true is that eventually you do need all that information.
Like you said, that 65 pages is good for yourself, and you need to actually know that business inside out.
And you mentioned financial projections, and there’s a lot more that you need to know in order to become successful at getting funding.
So, at Rocket Pro Forma, you don’t just obviously have a pitch deck.
You do all the other stuff that goes alongside with it.
So, what else do you do?
What else is absolutely necessary for startups to think about if they want to try and get funding, and how can you guys help with that?
Mike Lingle:
Yes.
So, look, I’m a software developer, right?
I have built software for a long time.
I love technology.
I think technology creates a lot of opportunities.
I think it solves a lot of problems.
I think technology’s amazing.
And in the startup world, we hear this narrative of like, “Tech is tech, solves everything, and if you have the right tech, you’re going to succeed,” right?
In real life, in my experience, the first time I did this, I did it without funding, and all of a sudden I turned from a developer into a person who was running a room full of guys, running a company, right?
So, 12 people in a room, I’m making decisions about running the company.
I’m a developer.
I didn’t understand the financials, and I almost broke the business.
I almost crashed the Ferrari, right?
And we ended up in debt.
We ended up having to lay people off because I had messed up as a business owner, right?
In the process of rebuilding it, I learned the financials piece, and I put a lot of work into that.
So, the next time around, which turned into being a venture-funded company, I understood much better how to drive the Ferrari, right?
And when we were pitching the VCs, I had built a lot of the financial model, and I was making the changes.
They were my projections.
When we raised the money, we based the company on the plan, right?
It wasn’t like we had a secret plan in the back room.
We used the plan.
Now, things didn’t go to plan, but we had built a hiring plan, we’d built projections, and that’s what we used to run the business.
And then we had an exit, and then I’ve worked with a million other startups, and I realized a lot of people are the same, right?
We’re builders.
We’re not finance people.
We don’t really understand the numbers.
But two things — one is the number one thing that founders can do to improve our chances of success is to understand the numbers, right?
Like, there is nothing else.
There is nothing we can do with technology that will improve our chances of success more than spending a couple hours understanding the finances and understanding how to drive the business’s numbers, right?
Like, if we’re not doing it for money, it’s not a business.
It’s a charity or it’s a hobby or there’s another word for it.
Businesses are about numbers.
They are about finance, and we have to agree as founders, right — this is part of the coachability piece — we’re going to have to understand the numbers in order to successfully run a business.
When we do that, our chances of success improve dramatically.
So, that’s been the key discovery for me over my career.
Like, I don’t have to spend all my time on the finances, but I have to understand them well enough that I can run the business.
Sabrina Chevannes:
But what if those kind of listeners are saying, “Oh my God, I hated maths at school. I hate finance. I just don’t want the numbers.”
They’re probably panicking right now, like, “Okay, I kind of want funding, but I don’t want to have to do all this.”
What would you recommend to those guys?
Mike Lingle:
So, that’s the whole point of Rocket Pro Forma, right?
And I’ve tried this a couple different ways.
I have built really complicated spreadsheets where I’m in there with all these little boxes changing things.
And not only do I have to understand the assumptions, but I have to understand how to make spreadsheets, right?
So, that’s two skills that are pretty complicated that no one wants to learn.
Some people want to learn, but usually startup founders don’t want to learn to do it.
So, I tried that.
That takes a long time.
Then I tried building financial models for founders, right?
So, they pay me, I build the model.
That doesn’t work either because I hand them a fancy model, but they have no idea how to drive the car, right?
So, we’re back to here’s the fancy car, they get behind the wheel, they crash the car.
So, that doesn’t work either because they don’t understand anything.
And what that leads to is like, “I don’t know how to run the business,” but it also leads to I’m in a room with an investor and they’re like, “What are the assumptions behind this projection?” or “Can we change the price?”
And the founder is like, “No, I have to go back to my spreadsheet person,” right?
So, that leads to not getting invested.
So, the middle ground for Rocket Pro Forma is a simple interface where I can enter pricing year one, pricing year two, pricing year three, prices, right, or year one sales projections, year two growth percentage, year three growth percentage, and that creates in the background all of the math and the model and whatever.
And I just get a chart that I can put in my pitch deck that’s formatted right, that investors want to see.
But if I get into a conversation about what’s the assumption, well here’s the pricing for year one, year two, year three.
And if I need to change something, I can change year one pricing, year two pricing, year three pricing, right?
So, that’s where we’ve ended up, is using tech to put all the complicated stuff in the background and just put the simple stuff in the foreground so that anyone can now drive the car.
Sabrina Chevannes:
That’s funny, and I think that’s something that every startup is going to need.
I mean, it sounds like a really useful tool to have, and I think that’s brilliant.
I think everything today has been so useful when it comes to startups because we deal with a lot of clients who are thinking about having funding and whether they go down an angel investor route or whether they’re going to have a high enough growth sort of startup that a tech VC would be interested.
I don’t know, but I think it’s been so helpful to hear all this.
So, where can people get in touch with you to say they wanted to ask you a question, like they wanted to just kind of pick your brain or get some advice on pitch decks?
Where can people get in touch with you?
Mike Lingle:
I’m just at RocketProForma.com.
Then you can go to the website.
Also just Rocket Pro Forma — R-O-C-K-E-T P-R-O F-O-R-M-A dot com.
There’s a spreadsheet there.
We also offer coaching sessions, so if you want to hop onto a coaching session, we can do that.
You can email me.
I also make a bunch of free resources available, so it’s all kinds of stuff.
There’s like a resources tab and the blog, both of which have all kinds of free downloadable content, both around financial projections and pitch decks.
And just the last thing I would say — if you are raising money or think you want to raise money, go talk to a couple investors, right?
And not even because you want to get invested, but just because you want to learn how they think and just see what the process is like, right?
You’re not going to break anything.
You’re not going to offend anyone, right?
Investors always want to hear about cool new stuff, but that gives you a chance to kind of test the waters, hear how they think, hear what they would want to see in order to invest, right?
And from there, you can decide how you want to proceed.
But it’s worth having those conversations just to kick the tires.
And the last thing I would say is —