Start-Up Tips (special guest: Philippe von Borries)
We're going to jump into a conversation with a friend of mine who's extremely impressive and has built something extremely huge that many people haven't heard of they will certainly be hearing of it and his name is philip von boys it's like the best name ever like is he royalty is here is he a doctor? Evil no he's the founder of refinery twenty nine philip please come on out I was just having too much fun backstage yeah really really taking advantage of the facility said uh what a facility right? This is great so uh I'm really excited we've obviously spent some time together and uh I I love your company I think more people should know that so let's start with let's start at the beginning which finally twenty nine what's the what's the origin story I mean, where did it where did you how did it come to me? We'll just today just to sort of frame what what we really are were daily destination for millions of women some guys who come to be inspired and so get the latest in best and fashion ...
and shopping and wellness and beauty on dh essentially we've created sort of a next generation digital media company in and around fashion and really from a business model sort of reinventing what a media company from the ground up should be by essentially getting rid of the sort of traditional barriers right off off advertising and content and commerce. And how does all interrelated right? And we launched five cents seven years ago. How many unique would you say so today? Word about, uh, five million makes about ten million visitors every month. About one point, five million people that received a new center from us every day were larger than yeah, voke, lucky glamour of cosmo out any title online on. And we've gotten to the grill's entirely organically, actually, without ever having invested a single single dollar, really, in customer acquisition, on dh, in the story of that it's really sort of authentic engage incredible content, right? That has been sort of the the the holy grail of all business, but to the origin yeah, the idea. How do you know? So? So the idea was that so I come from a family of entrepreneurs always knew I wanted to start my own thing from germany. Originally, I had a good a good friend, you know, that the story of the co founders o was so important of having like you're, you're like the guy that you can sort of like goto and commiserated with you. No one thinks you are, like not going that well, but but we came up with an idea to really, essentially create this platform for discovery and filtering, sort of the best, most incredible independent businesses, artisans, people that really had a story to tell people that we're creating something really special and really engaging the type of product that you'd come home about me, like, I just went to that city, and I just I found a store, and it was so incredible. I wish I could go there again, right? And so on. And so we built this destination, this essentially just sort of, like mall of your dreams, for, for independent brands, for independent designers, actually, not just in fashion today, we're sort of, like, very much framework in around fashion, but it was other categories, it was music, it was it was food that really focused on sort of that independent spirit called refinery twenty nine. It was called refining twenty nine and the whole that the name came about because it was all about filtering and refining and distilling the sort of best of the best out there into one platform. And so and so for for these brands, and this vendors actually became highly effective marketing platform, right to be sort of like a little store down on in a street in nolita and in new york, that just, you know, otherwise had, you know, besides foot traffic, there was really no a way for them to market themselves affected what's the twenty nine, twenty, nine hundred thirty was taken it's just you know it's like it's like it's like once it was actually said it was supposed to represent sort of a limited number of things but really you know, we're finally twenty nine came about because we're finally dot com was taken through these stories that you have to have to improvise and when the idea first came about I mean it was you experiencing something were you actually sitting down with the co founder like brainstorming what to do together? We should really do something together what was like the moment you like, huh? This is what we should do well, it was like after having like, eight beers at a local bar all the best idea and thin idea literally an idea on a napkin, right? But it came about because we're really sort of attracted to this notion ofthe haters all these incredible small businesses right in my trade this is like six, seven years ago so the digital landscape was completely different back then, right on dh how could we build sort of a destination like truly like you go into a mall right? And you see the same stories over and over again, right? But there isn't really a sense of discovery when you write and so how could we mirror that essentially the same that same experience that you would have walking into a into a mall being inspired by something but obviously in digital setting and in highlighting people that were producing manufacturing, creating really, really awesome product. So so that was that was the origin and and fashion was just one of those things that really stuck rights. We build this destination, this discovery platform for users in the marketing part from for brands, and obviously we needed content around it, right? So we brought on some incredibly talented, essentially co founders who who build out the sort of voice and an authority right and is actually a thing. This was when your bootstrapping this was we we like literally it was like, fact thousand dollars that we had to like well with and he did raise money for a long yeah, this is what we'll talk about this but part of the reason I was excited that philip on because we'll be talking to know about a lot of his analytics and testing whatnot. But I get questions a lot about raising money should I raise money? Should I not raise money? And so you guys have done both right boot straps for a long period of time, right? And then raised money uh, when you were bootstrapping in the very beginning uh, I mean, how did you make that that five thousand dollars right how did you kind of stretch are there any examples we like what you guys did to make the most out of the least with that kind of capital how did you like grant's? You have people making cold calls I mean like what it's like it's phenomenal I think when you when you they're still much in your question but there's you know when you forced teo really gil with very little right all you have this you know you're betting sort of like you know at the time was like twenty five was like betting my like savings whatever hat on just one thing right when you raise a little bit of money maybe from you from the family we're just like a horrible thing and makes me feel shitty about yourself that you're like ok, I'm good I'm committing to myself did this is a really big idea right? But as he building something that you really believe in that really um like that other people start to recognize this something great, right? I think it really becomes like it's one of those things where you you do call in a lot of favors like all of a sudden you guess you go to people and you like I don't even ever know money teo like help me help you help you with this one thing I'll have you help me with that right and um but but you but you make it working people really powerful passion about that right? I think people really feel at the end of today really passionate about helping others when they see something come to alive doesn't feel special that has a point of view that feels unique on dh and that's where your own sort of passion is an entrepreneur come isn't right you mentioned at the beginning about creating things right like getting things done right and I think people really respect that so you can you can really you khun gets so far I mean our own story you know we had that five thousand dollars to start with very early on and that was like literally someone that lasted us like you know we like got something off the ground that was enough you know and andi think think progress we're really forced to you know, to think about how we're making money you know way raised a little bit of money but just like so so little and it's sort of like comparative space of what like vc money is today it's it's crazy well you guess so when did you when did you decide to raise money and why did you decide to raise my right right so so eventually I think what happened is there sort of like there's appointed which you build up enough audience in moment I'm right and I think one of the most critical things to anyone who's starting business to me has always been like that first thousand people right like that first thousand people thatyou go after and you say like those people that you that you that in a thousand people it's sort of like comparatively very little it's also like not that it's not trivial right? And those like and focusing on that group of people and say hey want those people to tune in to start spreading the word all right? I'm just pausing and once I because this so this's not plan it all, but when people ask me, what should I read on market air when I'm talking to start ups that I work with uber? Whomever I mean over doesn't even help anymore but uh the first thousand the one thousand true fans is actually the name of an article by kevin kelly is one of the founding editors. Wired is such a critical concept because if you don't know who this is one thousand true like early evangelists alright it's also really hard to decide what kind of constantly put up right what kind of product we're gonna create in the first place, right? So not to interrupt but that is well actually want to tell a quick story on that because that's such a important constant tow what happened out on evolution and building sort of like that early credibility that allowed us to call in favors and built the brand so that we could eventually raise money. But, you know, early on the people that would tune in to refine between and we're so that the people that were buying merchandise put a neiman marcus and barneys and broke down goodman's in the world. And all of a sudden there was this, like this really incredible, powerful woman in new york at a branch that it will not mention. But she accidentally afford an email that you meant the center staff to refine a twenty nine. Gotta tune into this place every day to find out, like, like what we should be paying attention to her right, and so it was that incredibly like telling moment. How did you identify that these buyers were coming and kind of scouting on your site, where you like looking at people who registered like googling names or like that's, what restaurants do you like it? If they like the top restaurants, they get their guest list? First thing I do know, they google every single name. Totally I mean we started like like to us like our business has been built I want to go back to the front of isn't question but all business has been built around like building really effective distribution channels to really really just like focus on to sort of like satellite audiences around you that's it's incredibly hard to build a consumer destination it's just epic you have to focus on like just that the the way people consume content in different places but so you know email actually back then was like a critical driver for us right so we would like it every step of the way will be like you know become a member come remember become a member right and so like we just like which is like little every like every person that like came and like watched with you know we researched them and find out who they are and that was incredibly important but to that question about fundraising just very quickly you know so we so we build a brand you know we built we were really focused on building a community right in an hour space like media this is like we're in a space with traditional you have to like hearse and kind of mass and timings of the world right and it's sort of a very dictatorial approach like we tell you like what two d'oh right we built this community we're really build this dialogue and conversation and and we got we got momentum and we had a branch that start to resonate out in the marketplace where she started making money and so we raise the seasoned just because I'm this is interested in this as anybody else when you say start to make money was that predominantly from sales to consumers from advertising like how did that break down? It was percentages so it was very much focused on branded advertising and and, you know, and we've essentially sort of reinvented what advertising can be before I think that's when you guys were predominantly content exactly because an experiences for brands that really connect to consumers and so we were forced to like, go out there and like build the sales organisation ourselves and so we risk five hundred thousand dollars in a seed round from a few new york based angels dead were, you know, had recognition and I think you saw something in a business model that usually people are a little afraid about which that easy to raise money was it like one minute it's grand it's the worst thing in the world like there's no there's, no there's, no crap, your problems with money anyone who would like to tell you that it's like a oh like it was a priest it doesn't it doesn't exist like there's maybe like two businesses for him that's like it's a breeze right since always and it's like an emotional rollercoaster or write to so many things to consider and all of it. But we rested a small seat around and that money it was just that was, you know, there is that point where it's really important to tell teo, sort of look yourself in the eye and say, ok, really do we need to, like, prove this concept and see if we can raise money because it just has potential to light things on fire, right? So at that point, just out business started growing crazy with that little with that little bit of cash, right? Like people raise, you know, ten, twenty million dollars today, and it was nothing compared with his five thousand dollars. But we're it was like, at that moment, it was just exactly what we needed. Why did you end up with five hundred k was how did you either decide was that the most you could raise or daisy? Was that a deliberate choices? So this is what's called, you know, a seed round was actually convertible? No, yeah, eso actually, people they're sort of, you know, people invest very early on before you siri is a on the promise off taking these guys deliver. Right, like we're putting money in too because we see we have faith in this in this idea but it's still very verily early on so we're going to put in a hundred thousand dollars and fifty thousand dollars you know you raise from ten people are so you raise five thousand total and eventually there is no evaluation at that point eventually when the business actually does proof its concept and goes out to race an institutional round of financing from institutional investors that that know it this convertible note then convert into that that round at that valuation and suits to explain to these yeah, the audience just and you may already know this but and the reason we're talking about fundraising and stuff like not everyone needs to be a business owner you can you can do a lot of amazing faces an employee as an interpreter inside your own business you could be somewhere between where you have your own let's say side business but also have full time employment in this protecting this particular case we're talking about fundraising if you if you want to understand the startup game so in this particular case like like uh like phil was saying you're, uh you're getting money from investors that is debt right? So let's say it's whenever six percent interest rate per year its debt realistically there like it's gonna work it's not so like whatever but that's that's a way to accelerate fundraising also because you don't have to agree on evaluation right now you have to have that haggling it's like look you're gonna put money into my business and then when I raise more money later because ostensibly it's growing and succeeding when we get more money later let's say that round is priced but that round determines the value of the company is ten million dollars before financing and then we get two million dollars finances with twelve million afterwards that ten million valuation or twelve million you'll get a discount on that so you will get shares as if the company's worth eight right which rewards you for taking that early risk uh what did people respond? Well, such a good teacher professorial the what sold? Did you have a lead? And I mean someone considered a lead investor lead investor sort of the big the biggest investor and around and a lot of the other people it's like anything else nobody wants to be first god yeah it's the worst so you're like, well, we have so and so soft circles they might its second big game they have to play but uh like how did you get the lead investor to commit? Like what? What did they respond to great breaking kneecaps tonya harding style like we have to do it's actually like they're just understand it's funny you say that there is such a there's a little bit of smoke mirrors associated with it where you're like oh yeah like two people committed yeah, come on, jump in and it's such like, you know, takes a little bit of practice because you like, well, you know, it's like people, people meeting to feel that that first person is in right? Who is the person who's committed, right? But sometimes we just found one guy who is like, it was just an incredible entrepreneur who just walked in and I was like, you know what? I trust these guys have done something and you mentioned his name is thomas lieberman and he's, an incredible entrepreneur on dh he backs a lot of businesses in new york and I couldn't be that comptel better thinks about this guy because he just walked in, he was like, you know what? Like I invested a lot of companies one hundred thousand dollars isn't that much money for me, you know, and it's a bet I like taking because I love you being like I love supporting entrepreneurs who feel passionate about something right and that's just that's just what you need, you know, it's like it's been people start wasting the time and it's like, you know, theo at the end of the day to people that you doing with these a small sums of money are we talking about fifty thousand hundred thousand dollars? But he was an entrepreneur at that time that's huge yeah, right so if somebody waste your time, you know, just say like you you and you know the disease were like maybe like we won't say now yeah, but you know, it's the it's the slow no that kills you if your fundraising uh also I should just point out from the investor's standpoint, I get asked a lot, you know, how do I start? Angel investing? First of all, I'd say don't be in a rush it's a great way to lose all your money but unless you have an informational advantage of sometime, all right it's like living in silicon valley may be living in new york like you need to have an advantage over everyone else may also wants to play in that game, but the best some of the best entre entrepreneurs end investors. They usually go together at least the guys I know invest in founders mohr than the business they may invest in the founder even though they have doubts about the business because they're like, you know what? This isn't a ton of money and I'm putting in and I want to make an impression on this founder so that if this doesn't work and they start something else the first person they call totally all right what things people should and by the way just isn't a continuation of that as you've built your business it's all about people right? The only reason why you in the end raising money is because I'm trying to find the best people out there, right? So it's really just at that moment so critical what are the things people really need to watch out for if there is money right? Well, there is there's you know, things that can go wrong like anything anything that comes to mind, you know there's there's there's so many variables, right? But you know, ultimately you want to make sure that you have the very first things that you just have a great lawyer, right? That's the most important thing you just need to have somebody on your side you know, you often often going into entering area that you know, a lot of people haven't dealt with sort of institutional terms of investment, right? It's my institutionally just mean like a fund or a larger entity as opposed to an individual angel lester right? Right it's a question of like, how much control obviously how much control the someone take right the devolution that you take on when you walk in percentage of the company they buy how your percentage than shrinks dilution? I mean simply speaking, you like doubling my it's? That sometimes really close caption provided by tim farriss hurry last week when it was that that silent language instructor sorry. So so a mention delusion obviously control, you know, the amount of people all of a sudden you have other people sitting at the table with you right at your board, right? Meeting and decisions that you were previously making all the sudden somebody has a can can chime in and us, right? And so it's really important to obviously think about you no voting rights for example, like, what are the important decisions? It's probably one of the most important things when you raise money, right? The important decisions that somebody else gets to weigh in on with you right is that the somebody like gets to weigh in on hiring people that's a really bad thing, obviously it's going to be really hard for you to to not get someone included in decisions around the cell of a company, the sale of your company, right? Because, you know, you want to make sure that if somebody invested in your company a twenty million dollars, you know, you don't go around the next day and sell the company for fifteen, right? So so that's really important voting rights incredibly important, the board set up is incredibly important can't emphasize enough how critical it is to get to get a good lawyer which if you comfortable which law firm do use cylinders it from that we use in new york called gunderson that it's sort of like one of the standard go to the heavyweight law firm in this in this something saved gunderson cooley wilson sonsini another problem missing a bunch a fenwick and west in west fenwick these air all law firms and sort of go to start up law firms now do you go to do you go to the lawyer how do you pay the retainer or the hourly before you get the funding or or how do you arrange is first of all one more thing I want to say it's incredible ported to sort of like do your own diligence and lauren these things before you go on like just there do so many there's so many interesting blocks like fred wilson a b c yeah fred wilson union square ventures he's like you know the godfather of new york city venture capital right away that's right abc abc rate you're the resource is brad feld so at a foundry group in boulder so he's he's one of the one of the guys who really believed in the people behind harmonics and like blood money blood money blood money until guitar hero you did pretty well uh hey also has a great long brad feld he also has a book that he wrote with a friend of his who's a lawyer on also his partner in his vc firm called venture deals, which is like one of few books out there on actual deal making the terms and all of that related to financing that is worth looking at even if you never plan on taking money because it teaches you how to think about structuring deals right whether you want to be what I teach you in the high tech entrepreneurship class at princeton, which I still try to do twice years just a daylong class but in the very beginning like all right and keep in mind he's a princeton students right like no offense princeton black they're like investment bank's management consulting like theywant high paying jobs right out of school right? So like how many people here want to be sales people and they're like all right, how many people here want to be, you know, like boiler room banging on the phone so maybe one or two and then I'm like, all right, well, the good news is you don't have to call yourself a sales person. The bad news is you're going to be a sales person whether you want to hear now and what I should better say is a dealmaker like you have to learn whether it's pitching your ideas internally pitching creative solutions when everyone says no you have to learn that kind of stuff there's also really good but called getting past no which is a lot more realistic than getting too yes you really you really have got to know like one on wanting yourself it's like you want to be in a room with someone who's goingto you know one an answer from you at that moment in specific terms and your future is at stake the future of the people that you started a company with you know and so getting sort of like the one on one and teaching yourself does essence and the great thing is like there's so many resource is but there's also like a lot of people that are just so the network is just so strong of people that are like out there it's a hill cap give me give me twenty minutes even like those bills law firms that you mentioned you're talking about a retainer how do you pay for that right most of those most of those companies understand that the nature of this actually evolves around like when you first walk into a room you don't have anything right it's like they go out there on the problems of like off committing themselves to you all something okay like we're gonna get behind this you know I'm gonna work with you and represent you well so yes a couple of resource is also in addition to what we just talked about venture hacks dot com really good that's authored by among other people in the volvo avocado and navy who are also behind something called angel list angel dot ceo which is how a lot of people are raising money from angels um and you don't have to do that so let's uh let's talk for a second or two questions I have one just can't mind which is so you have co founder who who do you start with the company with originally my co founder just enjoy know each other like all the way back which is which is great yeah because like you're marrying a cofounder make no mistake about it like you may end up seeing them more than your real special for a long time uh the now when you got your first content creators what were they doing at the time and had how did you sell the dream like how did you get them to stop doing whatever they were doing to focus on this like so it's just a little shine I mean you know you're as anyone starting a business like you I think anyone starting a business fields passion and like inspiration but what they're doing right and so you number one job every day is convincing other people that what you're doing is great come what did you say that like I mean like steve jobs when he got blanking scully I guess itwas who's then ceo of pepsi all right at the end of the day he's like all right, you want to sell sugar water for the street ah and then of course he proceeded to screw apple of horribly but uh the how did you like what was it like when today, like I think I think way you sell you sell a dream at that specific point you're very little to show for yourself but you say, look, we're creating our specific instance something I want to know about here's creating different I don't want to hear what I hear we're creating a next generation like digital media titan right? Like this is the world like dominated but like publishing companies, media companies that have been around for a long time, right? Huge companies, right billion dollar companies but we're creating something that has the opportunity to go up against you could get up against that because off off the power of the brand that were created together right the community that we're building the waiter engaging with with us right in the fact that we're nimble right and the fact that you and I are a specific case again we're looking at a business model it's been very interesting straight where you know where advertised, where salespeople aren't talking to a content creators aren't talking to technology and product people right? And hey that's crazy right? So so come on board and and that could commit to this like journey with us right? And you know what one thing for any entrepreneur like everyone thinks that this is like oh it's an overnight success man it's always a long journey like it's always along with journey, right? I mean because you like sell a dream like, you know, we sold that you know, we had that conversation with be specific people like five years ago, right? And at this point like they're korea's air changed her life had changed you know, to do it like there recognized in the industry is like spokespeople for like what media with new media can really mean an hour an hour niche um and so that dream is coming is coming together you saw that right? I just want everybody to realize that you have to get good number one you have to be so excited about where you're doing that you can face all roadblocks you're gonna hit that that's true whether you're doing lifestyle, business, venture back business tackling something like let's say saving money and trying teo allocate time let's say trip to let's say toledo versus like trip to the greek islands to get on a catamaran sail around for two weeks like you think of the latter is harder but in many cases like aiming for the quote unquote realistic is harder because you're going to give up a soon as you hit wanted to roadblocks I love that that's a that's a really great lesson because it's like I think that's really and you know this when you go in to meet with like bc is if you if you if you if you actually give them a realistic picture where you're like like with like eighty percent confident we could do this in two years you'll never get my december the single worst thing ever when you walk in tow vc meeting is when you actually already making money because of all this sun people looking at me that way it's like wait you making money yeah along with oh ha calm but the so let's let's come back let's look at the dark side so what what are the not every company she necessarily raise money right uh by all means but you under so many different types of businesses right like it's great to start a lifestyle business and like you don't need to go down that path you can you can take people forget about the fact that you can actually like then you can get a loan to like start a business so there's different there's different avenues but why did you choose then you know venture capital money is close to getting looks like five, five hundred k like you wanna get twenty million dollars forget it you got to go to the venture capitalist sometimes nicknamed vulture capitalists by the way not always fair but often there uh why did you choose for that amount of money to go to angels are supposed to go to a bank because the problem with actually getting alone particularly this's, you know, this's right around to, like two thousand eight time frame but this also is just today, you know, I mean, you I think you know, today in the business of creating and wei have a very, very healthy revenue stream, I think I could go to any of the big banks and they would tell me I could get, you know, twenty five thousand all alone, you know? And you know it just like it hasn't the system hasn't caught up with that, right? So there's a few venture banks actually there's silicon valley bank square one bank that are actually like that they have essentially build facilities to back not vc money actually like, like, delicate little bank, which will square one back to square one again, not not vc money, but essentially debt, right? Teo to say, hey, you know, in our in our case, we have, you know, accounts receivable we have, you know, three, four months out what we call like money, right, a lot of money, right? But oftentimes you don't see that money for five months, so they financed that right, the traditional banks often aren't equipped so are they doing basically like factoring like that's, right? Yeah so this is kind of a cool concept there's actually a book I think that it's out of print and a lot of it is questionable but they're called gorilla financing actually not gorilla like girl a g gorilla and one of the approach of the target is this factoring in voice factoring meaning if you have people are going to pay you like people think it be a dream come true to sell on like qvc or sell the walmart guess what? You're not getting paid for nine to twelve months so I hope you have a lot of money to pay for inventory and I hope you have a good return policy er and so now you're like, wow, I have no money I can't even pay myself let alone these employees but I have wal mart who's made this promise and they will make good on it but it's nine months later right? So then you can go to a bank and they'll basically give you an advance on that payment in exchange for obviously a cut of the action that's right? So we should we should address your your question about the dark side yeah if that if you want to call if you want to call it you know darth vader was right but you know, it's um it's funny because there's been such a you know, such an environment created of sort of celebrating raising financing in the central capital right really an affect you like your you're happy all of a sudden you have debt in your balance sheet, right? Like so it's the the stakes rise tremendously of other people that trymon and your decisions and I think the biggest thing is just the dark side can really be if you were just solely focused on raising money for the sake of raising money and you don't think about the person that's sitting at the table with you for maybe the next ten years you know, like you must feel comfortable to like, go away with that person for three days and say hey like you no thanks I'm not going well, what are we doing together? You know, um and and and having that and having somebody I think the biggest risk having somebody who sort of in particular is that when you first time entrepreneur takes you down a path where all of a sudden they suggest things or directions for the company or pivots, that really might not be right but you feel sort of pressured into them because all of a sudden here's somebody like new is sitting at the table with you that's probably one of the biggest dangerous right because at the end of the day you know, best what you've created and what you're creating for the future it's great to get strong, strong good advice, right? But it can can really derail you a time, so I think that's really probably the biggest, the biggest dark side and so thinking about fit of who you few you're working with and not just having sort of like, you know, single minded pursuit of just, you know, we need to raise cash to make this happen. It's really important? Take that extra, like, three, four months to, like, find someone you know what? Speaking of this board situation, so the board is like the the tribe of elders will decide the future of the village that is this company it's a big deal, and so if you end up let's, say outnumbered, right? If mohr investors, the founders, you're s o l you're in bad times and, uh, can you give an example? You have I mean, I haven't you know, a number of your investors, we have some great investors can you think of they're also dealing with let's say, ten when companies at the time ofthe time yeah, so they're not going to know your business necessarily as well as you do can you think of without naming names like a suggestion let's say, that was made that you didn't want to take and how you responded to that sure and actually really clarified that, you know, after that five thousand dollars we did eventually go out raised proper institution around from from first round capital very prominent found in new york floodgate great out in silicon valley and another fund in new york called eastern advisors, so so we went through that that formal process re very good investors yeah, so so about those decisions you know, to to us I'll give a very specific example, you know, we're we're we're out there essentially trying to create a very new distributed media model, right? Well, you don't just create a business that rest on just one revenue stream that sales and advertising, right? We were looking out there were trying to build just a strong business to commerce, right? In fact, what could eventually be a stronger business, right and even bigger business for us, but you also really need to get people who understand like an orchestra, they're sort of like there's technicalities of both of those businesses, they're very, very different, right? So if somebody just comes on board and say, hey, I just want you to, like, just make this commerce model happened right to us in this case, it's like, how do we take entertainment and inspiration and create sort of purchasing desire with that, right? But at the same time, like, we have a very technical sales business, right? And we need somebody who, like, who knows that that needs a lot of attention and love and it's an incredibly important so it's it's really it's really just critical that you vet those questions early on, and you you think through all the different facets elf hey, when we sit with do they understand our core business? Right? Like that's? The most important thing we're going to act, tripp serious insects, particularly in the sort of frothy market of, like a seat investing you can get around the meaning like it's like a feeding frenzy. People get really excited. Yeah, and they start biting with their eyes closed and always shorten everyone's an investor, you know, you know, it's like everybody, every like b list celebrity in there, grandma, right list celebrity, right? Not my grandma. Uh, eyes isn't the reason why you eventually want, like, why it's, great to raise money from from great knowledgable be ceases to do actually do off a great perspective that you might not have. You know, they see a lot of deals to see a lot of different business models, right, and is an entrepreneur you're like. Focus focus focus focus focus you know and getting that perspective on sort of like the wider landscape hey, how can a tweak a business model a little bit right teo just get more users out of it get more cash out of it that's the perspective that you really want out of a vc and a couple of things that I've heard over the last two years I've been investing and advising startup since two thousand seven and as you know the person who introduced me to that wass mike maples junior who is one of the founders of floodgate that's right and mike is gravy see for a lot of reasons but he was an operator he built companies motive, communications tivoli and he's also not uh he's not not saying this is the only way he's not much of a showman, right? I mean he's really like pretty reserved focuses on picking his shots but here's your a few a few things you can apply to let's say partnering with people long term relationships with other companies doesn't have to just be a venture capitalist uh, one of them was I've heard two rules that very successful investors use and entrepreneurs so one is the mall test come to that in a second the other is the phone test it's the mall testes if you're like walking down the street or through a mall or something and you see this person whether it's an employee that you just hired vc are you like hey what's up man like we should totally got beer are you like a uh or you just like uh you should on lee choose teo partner if it's up to you with people in the first category no matter how attractive the deal's off for the terms or get the other one is phone test very similar like when you see that person's name pop up on your caller I d like uh go to voicemail please don't leave a voicemail or or is it like whatever you're doing right like I'm talking to fill up like somebody calls and touched a star like you want to be in the in the in the excited category and if you don't start their manager in trouble any books that really hugely influenced you or inspired you early on yeah is it related to the business just choosing this path and the second is when you are like in the pit of despair just on those days at least every most startup folks I talked to have those days and they're just like you want to get out of bed I don't want just like man oh my god I just do not want to deal with any of this deal with all the pain you know like what do you what do you do in there so that the early like inspiration books, resource is anything that people could actually find on their own and then things that you do when you're in that sort of pit of despair, right? Uh just two books, one big picture, one very process oriented, the lean startup it was just, you know, for people probably know it here too, but just on sort of you know that that first product that you go to market with and how to prove that you're in greece it's right? Eric grease the lean startup it's just, you know, probably one of the most inspiring books when it comes to actually how to get it done right, how to like and how to get it done right? And sort of like them minimal in the minimal best fashion, probably one of the most inspiring books, particularly for entrepreneurs who might not be or like in a product or technology people so great book another book that I I wish you'd ask me this question before because now I know I will actually like tell you later on, but it was a book about the power of, like the essence of meetings actually write because that's your company grows and you start having like more moment is more more people in your company it's like all of a sudden you have meetings and it's like crazy because, like meeting looks like you need to really be able azan operator and as a ceo that contain a meeting and like leaf, people empowered, inspired and get them in and out as quickly as possible. So that was a really inspiring book to me because that's, the thing I like, well, like you're sitting here like this, this thing, okay? I know where that will be, that they'll be coming. We'll get that to you guys. It's nature onto this show, I will come back a little, treat it let's read it, auntie, I got was this oh, the pit of despair. Like, how do you get yourself out of bed in the morning? Oh, my god, when it's like when, like when you're on the ward, shoelaces are like routines or things, you go to anything. Oh, my god, like, you know, I actually just, like like for myself, I just constantly need to, like, motivated myself and get out in the world and, like, do, like, be active that's, the biggest physical, a good general people like absolute absolutely like that. Mornings when you I run in the morning so like look on this track it like in brooklyn where like go running in the mornings and that to me it's just that critically important piece is just like you need to like like blow off steam do you do you think when you do that or is it to get out of your head like you have an internal dialogue? This is really important I mean like is there any self talk that you have when you're doing that or is it just to get yourself out of your head? So it's actually really funny besides running actually have been like working out with with with like a trainer for the last two years who actually comes to my house in the mornings and he's like he's basically like a like he's like my leg psychologists like it's like really funny I like talk about life with him and he was like the best advice about things it's really interesting because I don't just like think about work but I get sort of like perspective and to meet it's actually it's really really wasn't expecting to tell this story but it sze to me it's like it's a critical thing because he just like you need to like you need to blow off steam like things can get so intense get out of the business you know we have people like constantly you know that there's a lot of things going on just a lot of responsibility that you have to deal with right and so and and then just like you know, I think just like getting out and taking time for yourself like everyone to know well, you know it's just really important to to think big picture because you can get just like, super down in the windy this is my pit of despair one of my pit of despair things we'll talk about that later uh let's take some questions I'm curious talk about later way not my canoes at eleven thirty so a car yuki and about six other people at least have all ask the same question philip how did you get your initial evangelists those first thousand people your tribe how did you get those first thousand? Great? Great question because when you start you know you look at like, I mean, when outkast started consumer business and you look at like, you're like traffic charts and you're like twenty people you like yes that's a cute way today it's huge, you know? But to us it was really about, like sort of like building relationships to people that you thought were sort of like the first best entry point to start spreading the the word about your business right like what's the business that sort of like the block that you love or the like the the person on pinterest or like someone someone like some, some person that you can get teo like the closest person that you can get, teo, that can sort of spread news about you right into us. I think we just, like, very aggressively went out there and said who it was like twenty people from from bloggers, too, two designers to people that just have communities and get a meeting with them, right? And tell them about the business. How did you get the meanings? What's the process like what? Like literally email look like for the phone call, I mean, as short as possible, like two sentences because people hate getting, like, deep paragraph in their in box that's like, hey, I just lost their business. Let me tell you about it and email, let me let me get my life story, right? Yeah, because like, like, I see in the male like that answer terrible now because I'm like, I can't read that, I have to delete it like I'm sorry, like I just, like just sent me like, two cents with what's in this. So in two sentences was like no it's similar to destroyed I was telling about, you know, convincing the first couple people to come on board, right it's like we're building something like really exciting that we think has the feud has the potential to really shift the future and given business model. And we care passionately about you into following the brand that you have one would love to just tell you about it, you know, not about like it's, not like, hey, we write about us so we feature us, right? Let us just, like, tell you comes out and it's about building those doctoring those relationships, you know, as you grow your company and your start thinking about, like, getting sort of like that big feature and that magazine or newspaper that you think it's life changing that doesn't come around because somebody because they feel like, go to someone say like, hey, we read a story about me. I have a great idea for a story. And now it's, like, you know, you probably will have had twenty meetings beforehand, right? Like, over breakfast. And I was really impressed the wine they have to trust the mess, the messenger before they trust the message, right? And so was the clothes I hate knots like obsessing this. But this is what I do. So the with the emails, it was the clothes like, can we tell you more would love to tell you more about it. Yeah it was like a question or like what like you will you will you give us fifteen minutes teo like get a coffee and just tell it tell you about the business you know like I think the success rate is like literally four times out of five somebody it's like yes you know because people people want to be helpful and like everyone wants to be helpful and I think for the most part that's the that's the you know celebrities exists so to us those over early evangelists for people that they picked up that message that's awesome that were created something that looked cool is functional it was it was actually driving results to vendors who was great for consumers and uh and word started to spread yeah how did you choose those people the target like pinterest people in whatever was it all in in fashion at that point and were they in different verticals different industries now I am I sort of like like that have like you know you certainly go after people that you think these are people that you want do you want them to write about you right and you want him to feature you somehow but you also go to the people that are like great sector conversation we're having now we're great business people write great on preneurs who already proved them all right and I can't emphasize enough to me this lesson has been so import probably like when I sort of did a list of like, you know, my top lessons for any entrepreneur is like seek advice like to me at those moments where you have a difficult decision to make right? You don't want to go to your board because oftentimes do is a different temporal ation ship there you just want to go to a trusted advisor somebody who's done it before you, right? You want to build a small circle of people and that takes a lot of convincing because he want those people to be there when you grabbed the phone to I am and you say, you know, shit, like, I really, really, really need you to help me with this, right? And so seeking, seeking advice from the right people, single hands down for me most important, most important lesson on the one of the purchase that I found really helpful for that is if you send someone else so you don't know what you're asking for advice any bill number one, short number two no hard sell on my part at least it sounds like you guys had a very like kind of approach is, well, it's like if it's not a fit and you make it a hard sell there just gonna hate you more, all right, so the what I would do oftentimes that send somebody an email try to establish some either like common ground read your piece on this loved it I know you don't know me it's out of left field uh, I would love if you could help me just answer this one question and then question at the end this is how I tend to close it just really specifically I'd say I totally understand if you don't have any time to respond, but like even a sentence, that would mean the world to me and one more thing, if you don't get a response to do right back, like three day sale because people are busy stuff falls through the cracks, it's probably not because they didn't respond to you didn't see it sex or success rate the second time will be better. Yeah, so definitely and when you follow up, if you do that so the clothes for me would be something I told your staff you don't have time to respond, but even a sentence would really mean the world to me sincerely, such and such, right, they know and they get don't get you could use nudge male like alice give a tip in the bcc three days like just type it out at nudge mil dot com you can put any amount of time before that, and it will ping back to you and remind you in three days that you sometimes that's good you have to worry about remembering follow up and then you could if you if you sent to follow and do like I didn't hear back from you so just making sure did you receive this like the stern dad don't do that it's so lame don't do that so just be like hey, I realized everyone's busy I'm not sure if it was an e mail probably email this sometimes wonky just resetting this in case you didn't see it like soft, soft soft remember you're going to them for a favor they don't owe you anything cool other questions we do we have so many questions way have a couple of questions from our audience members studio so I think tracy is going to start hey philip I was wondering how with the seed round and also the venture round how did you deploy those funds and then particularly the venture around if you've gotten the results we expected yeah, totally so one so any time you raise money the first question is like use of proceeds it's right? That's the big question is like how you actually going out there you want us to put in, you know, x amount of money how you actually going to spend that money you know to us in our in our seat around was actually very much target around building sales staff right. It was about, you know, we were at that point where we had a brand had an audience with recognition in the marketplace, right? And we needed to find, like, like, we need to build a great cells group and essentially spent, like, three quarters of that money on building a sales grew because it takes time. You know, the first year, you know, you need to get traction, right? It's not like you hire someone in three months later, he likey closing business of the business of the business, you know, and so that specifically in that seed round that was focused for us on building a great sale ult sale stuff. And I think was probably our biggest, biggest success was hiring really great people in general. We've probably sometimes taking too much time have waited too long to close ah, higher or find that person. But we we always go that extra lengths to make sure that person fits culturally. That person really makes sense. You know, I think, like, sometimes may be away too long. But most of the time, like, hey, that that person is going to work with for you what they need to fit, you know, particular first us important people and and and follower serious, eh? We which appears much larger around, right different things are at stake, right? Nobody wants to tell you, no, no vc wants to wants to, like, give you money and for you to put that money in the bank and be like, okay, I wonder, supported here, like that time, we're going to save it over here, right? But they're actually like, let me tell you, as an entrepreneur, that actually is, like, pretty good thinking, right? Because clearly it comes down a little bit too do you have a business that makes money right? So in our case, like we actually we actually profitable business, we actually generate a fair amount of revenue. And so yes, to us that actually like the notion of, like, raising money and like, you know, the being very sort of diligent with how we spend it is really important. I'm like just such a firm believer of not just, like, not overspending or such a, you know, particular first time entrepreneur, such a tendency to just like that easy money, right? Like, hey, let's, go spend a lot of money customer acquisition haiti needs spent that much money, a customer acquisition, maybe you should look at your business and see if it's like actually like like a great business. You know it's got me twenty dollars to get a customer and then you're running five dollars for like maybe there's another probably exactly sells hope that answers your question just to add to that uh to to your last point uh it's always good to have a little cushion uh so you see businesses right now two things real fast cos that raise it really high evaluation because they view that is winning when it's just the starting point can cause a lot of problems if there is if if the market from raising funds cools down really dramatically meaning people are spending less money or they get scared off because of stock does really poorly or something and then you got to raise another round and people like no, we're not going to give you a higher price we're not going to give you a higher valuation the worst things called up down round and that is basically like stake in the heart uh because then everybody backs off and you're pretty much dead in the water. So if you spend all your money on let's say for instance, you know, involved with a number of different companies ever known is one that I was like a diehard razors and then great business they have millions of paying customers they still have a huge war chest of financing they have raised because as the answer that phil living is given his we don't want to have to have somebody asked him what do you think the macroeconomic climates have like what facebook and this this is like honestly, I don't care he's like I have raised enough money and I have a strong enough business that if there's a nuclear winter when it comes to finance saying like I'm going to survive totally and you know what actually did so interesting you say that because there's already a sort of less mo mentum in the marketplace spending why so investment wise and that maybe it was six months ago because people always will invest in great businesses think good investors will yeah exactly like you don't want fairweather investors you don't fairweather partners either on dh just to make another point this is true but hires true about business development sales whatever but certainly true of investors is that adversity doesn't really build character it reveals character like every vc is great when things were going great like yeah, good job yeah, you get to see what they're really made of when things were not going well. Yeah, and if they don't have the experience of having been in the pit of despair, they're going to freak out and it's going to get out it's like that with anything in life it's like, yeah, yeah so I'm excited to hear the story about the o r I'll told listen, you know fast and then way have to move on a second. So this things have been really tough for me the last few months with very fun and exciting. But the book is the new book, which I put two years into putting, like mohr effort spent more thought on this in just about anything I've ever done, right it's being been but, like almost every books from the country, uh, and, uh, this this right here and there's a there's, a brief story behind it, winston churchill. So I have a lot of ah lot of respect for winston churchill. Fascinating character, like, despite all his flaws, was able to be this incredible leader. And I were here, right, despite his flaws, this is important. And, ah, he was hired at one point, I recruited to do a commencement speech. E I think they like two hours allocated for his amazing speech. So they gave him this incredible, laudatory, like, twenty minute untrue. And then he got up waddled over and he said, never, never, never give up when he sat down. That was the end of his speech. And so that's what it says on this dog tag that's awesome and when I get up in the morning it's sitting there like right on top of my laptop I have to look at it before I put it on when I go to bed taking off look at it, put it back on top of a laptop I love that phil that's but definitely the exercise also I mean, like, what a bitter reminder I mean, this spare can be like really could be any entrepreneur there's no entrepreneur that doesn't have that feeling you're right that's a really, really himself and this is maybe getting to, like, esoteric I know we have to move on, but so buddhism, right? And we're not going to get into okay, so let's talk about religion? No, we're not gonna do that uh, but life is suffering right? Sounds very depressing what's like this that sucks. Why would I want to have that is my ideology, but you it's very important whether you're planning a life style and you're or planning business planning a family to not look at let's say retirement as this solution to all your problems the deferred life plan and then when I get to retirement I will solve all these things and everything will be great not true ask anyone who's tried to retire or who has retired it's not true similarly, like I will build this business I will have money and then I will solve all my problems no you won't you trade up you just get a different set of problems and if you expect that and view those challenges opportunities that have been placed before you to grow I know it sounds everything motivational speaker but you will ultimately be more effective at reaching your goals so like that practical pessimism of being prepared for those worst case scenarios is really important thing we have I think we're going to take one final okay and that's gonna be from anjali all right hey guys uh so I think tim's still a lot of my questions on guys guys touched on this and I don't know maybe you actually answered it but do you find that when companies take bc money they become less resort's resourceful just like going back to you know, steve lincoln lean started method and all that I mean there I think there's a movie in two thousand one it was like the start of a movie and oh yeah the dot com bubble and he's like two douchebags just going around that valley like we got more money and they would move into like some fancy new york office but I just don't know I guess yeah, absolutely and this has been like such saying market over the last year were literally you were like I got an idea to have some money and like somebody is like most likely like yeah here take two million dollars but I think that that's the virtue of like bootstrapping early on right because to me it's like unless you've actually like done that unless you actually know what a dollar's worth unless you know how to negotiate something get something from free from someone right because you have passion because you've built something great like if you if you don't have that as sort of like your backbone I think it's very easy to raise you know, millions of dollars on dh just really don't have a sense for like what that means right for what that means on a daily basis for how you spend it and I think that is the stoy to me the most important so it's like there's it's not bootstrapping versus vc money at some point you're raising a big money and big business you need cash there's no that's strange you know but you really need to know what it's what it's what's necessary to make money right? What it's like tio to not have any money right like all those things are incredibly important so that balance to me it's just critical any entrepreneur needs to know that yeah zo just teo also dress that a few things so jack ma alibaba group huge, huge, a late later investor. But prior to the ahu stuff with with ali baba and jack, ma said, we had a few advantages when we started. We had no money, no experience and no plan, and so it forced us to make our decisions very, very carefully. Uh, three other thing I would say is that the characteristics that make a world class, venture backed entrepreneur of the same characteristics that make a world class bootstrap entrepreneur, uh, they're the same principles, same principles apply theory of the us, such a guru in terms of also just one book that really helped me in the early stages, uh, losing losing my virginity by richard branson. Like what, like most inspiring entrepreneur, just in terms of, like scrapping really hard, just hustling so hard like they almost went out of business so many times, the stories were great. The stories were really, really inspiring. So I read that over and over and over again.