Adam Wells: Here today, really excited to pick up a little bit where we left off on the, what we are calling a rants series with AVL and your particular expertise and the B2B SaaS world and GST, I think we both have unique points of view that that approach some of the topics that were going to cover today from different angles, but all under the goal of helping our customers, and our clients, and people in our network scale and the best way possible.
Roman Villard: Yes, there is a lot of questions out there, a lot of things that we have come across a, you know, it is fun to highlight have a conversation about, so excited jump into it.
Adam: Awesome. Awesome. Well, again, we have got Roman Villard from AVL Growth Partners. I am Adam Wells with GST and let us dive right in. So, one of the first things that we have pulled the various constituents in each of our companies is decisions to seek and then what does it look like. What are some best practices in terms of actually accepting venture funding when you are an early stage company? What are some parameters that you have seen through the companies that are walking through your doors?
Roman: Yes. It is interesting particularly in the environment that we are in now with this political and economic uncertainty, capital is tight on the investor front. When you are seeking investment is a little bit more challenging to get investment, so I think there is been a tendency to say, “Okay, somebody offered me a term sheet. I am going to run with the exits of first or maybe only offer that I have gotten.” Where I see a little bit of pause on my end is how is that capital of line with your growth goals with your management team and what you really want to get out of an investor? I think it is imperative to understand how the investor is going to work with you, how you are ultimately your growth goals in the scalability of that capital aligns with the investor. So it is just tactically is asking questions of the investor of, how do you work with your measurements? What your portfolio companies doing? How do you work best with us? Where do you focus your time and energy as an investor invested interest in our company? It is so easy to say, “Okay, I have got money now or I have got an offer, let us run with it.” It is a very tempting thing but being patient, wise with that investment process is super important.
Adam: Yes, definitely, especially when a term sheet comes with a board seat. That that is, you almost have to take a look at them, would you say in equal parts? What is the contribution? What is the person sitting on that board? What direction are they going to advocate for the company? What strings essentially are coming with the funding?
Roman: Yes, certainly and some investors are going to be, want to be very active in their portfolio companies and be much more of a managerial partner. Others would be more passive and say, “Hey, we really want you to run with this.” As a founder, you need to really decide what path you want to go down. Most founders I have talked to, want to retain that level of control to dictate where their company goes.
Adam: Definitely. Definitely. Well, jumping off from there. How have you seen founders communicate with their customers, with their investors as we just mentioned as well as other people in their network might be mentors, advisors, some people that are not necessarily direct investors in the company. I think we have all often seen that there is a lot of emphasis placed on customer feedback, as you scale up a solution, as you are growing your business. Do you think that there is a slot that should be allocated either concurrently or before or after for network feedback in addition to customer feedback?
Roman: Yes, it is a great question, and I think, there is a lot of attention that needs to be turned to customer feedback. That is critical for you developing your product or your service, but congruently, being active and seeking a network that is going to help further your cost, further your business, your mission is hyper important to growth. Not only just from a personal learning perspective, but those advisers and those people who have been there before or who have innate familiarity with what you are doing. Just sitting and listening and having a conversation can really help you align your business for long term growth. A lot of times there is the matter of getting out there and going to talk to people, understanding who in this market can really help me get to that next level.
Adam: Yes, definitely. I would say that there are compounding effects to each of those activities, some for better and something possibly for worse. If you are only getting feedback from people who like you blindly and what you are doing, then the compounding effect might be, you are getting a confirmation bias to go in the wrong direction. Whereas if you really spread a little bit wider to find particular parties that are aligned with your vision, you can have tremendous compounding effects to grow the company.
Roman: Yes. It is interesting too because I, we talked about how there are mentors, advisors, service providers out there that will attempt to align themselves with organizations via equity. Lots of circumstances that is really good and you want to do that. You want to incent people to have that best interest, but I would take a look at that through the lens of what value is being provided, how are they helping me iterate on my product, on my service, and how are they helping me grow the organization beyond the services they are providing. It is kind of suffering those two in looking at them independently is super important. Like, this team, this individual going to help further my company and will that best interest really align both of us moving forward.
Adam: Definitely. Yes, that is huge. Definitely. As we are talking about network evaluating, investor alignment, tell me a little bit about what you are saying to founders coming through your doors, seeking the services of AVL Growth Partners in terms of, are they wanting to lean into the strengths that they bring to the business that they are started and that they are growing, or are they wanting to somehow delegate some of the things that maybe become most easily to them because they are on this track of, I just want to learn and get my hands dirty. What is your recommendation in either of those cases?
Roman: Yes. We have conversation of the founders all the time and they are often to two very different approaches. Often times, these founders come from technical backgrounds and they say, “Hey, I do not know what I do not know as it relates to finance, R&D, to law, fill in the blank.” Particularly as it relates to finances, “Okay. Well, maybe I took an MBA course on how to build a financial model.” I really need some sophisticated support in my industry to help build that because I do not know what I do not know. That is where we really find a great relationship with folks that are able to own what they do really well and able to pass off what they could really use support with.
Now, the flip side to that is folks that say, “Well, I know this really well and I have the ability to do it but I just do not own the time the capacity.” There is always a bit of a red flag to me when I hear that messaging because it tells me that it is going to be very challenging to relinquish control of part of the business. What we try to do is say, “Hey, you come from this technical background, you focus really well in the on the dev side, or on the sales side, or fill in the blank.” What we try to do is just allow the founder this acting to focus on those areas that they do really, really well and then supplement them with professionalism and sophistication on the finance side of things for what you all does.
Adam: Yes. It is really wanting to identify for the founder. What is the highest and best use of their time? Then also to what degree will they be micromanaging something that they are going to delegate. That often is a key factor as okay, whatever you are wanting to offload or do you feel like you are going to need to micromanage them because you do know it so well, or are you going to trust, you are going to bring on a trusted partner that you have the full confidence that they can execute what you are not as good at.
Roman: Yes, and it is hard. It is really hard. As a founder, you want to have control and ownership over what direction your business is going and making sure that things are moving in the right direction. Just having the awareness of relinquishing the power in those areas that you do not feel as confident in, you could really help propel the growth and the scalability of the organization by working with folks like GST, working with folks like AVL, and there are many other groups out there that could really supplement the management team and a lot of really cool ways.
Adam: Yes, for sure. One of the things that we see and that we try to emphatically lean into is, there are a few different founder personas that want to do everything themselves. Due to some degree understand what the highest and best use of their time is, but like you said, they want to have control and so they keep their core strengths internal and they keep some of their weaknesses internal. Because we are doing so much, they do not have the time or that kind of mind space to get better at their weaknesses. We have seen that to some extent that can really slow down the growth oriented, sentiment B2B SaaS and what these founders really want at the end of the day.
Roman: Yes, certainly. At the venture stage, it is about velocity. It is about growth because now you have outside parties that you are reporting to and they are vested in your growth. If you do not grow, there will be repercussions. That is just the challenge of understanding where your strengths are, but also acquiring that patient wise capital.
Adam: Definitely. Yes, for sure. We have touched a little bit on what could slow growth, it seems to be there is a fine line. You do not want to grow too slowly, keeping everything internal. You do not want to go too fast and be too eager to take on money not knowing what the kind of atmosphere is around the money, what the overall alignment at contribution of the investors would be. You want a patient investor to some degree, but you want ones that will augment your strengths. Let us hit on the, you know, is there such thing as growing too fast. Is there such thing, you know, in what ways, is it bad to either grow too fast or to how could a founder get over their skis, so to speak in terms of where they envision themselves a year, two years, five years down the road?
Roman: Yes. It is a good question because if you are growing seemingly too fast, you have got a lot of really good problems you have to solve. We are really ramping your revenue and you are marching towards profitability, like, that is an exciting place to be and keep running. Where I see a lot of challenges those companies that envision that 200, 400 X year over year revenue and are projecting that on the current day business and it is good to plan for that. I think what, to have the awareness of where you are at today and what you need today to get to that point is super important. What we, how we characterize that is, are you putting an F250 engine in a Ford Focus. Do you need that firepower right now or can you wait? An example of that that I see recently is, okay, you are a million-dollar BW SaaS company and you got, let us call it oracle salesforce, these the ATP, these high-level programs that design for these Fortune 500 companies. Is your capital efficiency best used with those types of tools because there are so many great tools for early stage businesses to help them get there and the transition to those tools is not tremendously difficult, once you get to that point? Ensuring that you are aligning yourself with the best software, is the best providers, like during that scaling process is critical.
Adam: Definitely. Definitely agree. Some good advice that I received a couple of decades ago is, you can think of yourself in terms of maybe the systems that you are using, or some of your operational constraints as band, I am sorry, as a rubber band. You do not really want to go on, move on to a bigger rubber band until you are really stretching the one that you have already. What we have seen is, having a lens especially as you mentioned Salesforce and ADP and those sorts of much larger enterprise, software solutions have a lens of and everybody is expecting an optimistic and driving towards that this hyper growth. Have a lens towards how will the system be beneficial from a capital efficiency standpoint to my company, let us say over the next 18 months. Maybe your growth is going to weigh outpace your expectations and that is just a moment to be good enough for 9 months. Nonetheless, as you are evaluating these systems at the expense, what percentage of that system will you be able to utilize day one? Are you spending a hundred dollars but only getting twenty dollars of value out of the system for the foreseeable future? That may be a factor that that could help founders, evaluate which systems to deal with.
Roman: I will say it is tremendously difficult to do that analysis prior to purchasing a software because all of these large software have great sales teams and they are really good at giving you a solid pitch. Just understanding the landscape of those services that are out there to support the stage in which you are at and can scale you to a certain point is super important. I do not know. It is interesting to me when I see companies that are putting the cart before the buggy and they are jumping in on these existences. Anticipate needing that in two years. Again, it all comes back on the capital efficiency and if you can utilize that capital in other ways to help refine your product, refine your service, I think that would better position you to scale going forward.
Adam: Very good. Yes, I think, you know, it is-- do not-- nobody wants to be over processed. You know that words like bureaucracy and red tape come to mind. You do not want to be over systems because you are just pulling in and out of windows or your slave to the system that you are wanting to use to help maximize your own productivity. Obviously on the personnel side, you want to be staffed, again, capital efficiently to grow. Maybe back to the rubber band analogy, you do not need to hire a massive team when they are-- most of our marketing going to be sitting around, twiddling their thumbs, they should all be need based hires.
Roman: That is so right and we have conversations like that all the time where it is a conversation of, well, we are going to hire full-time or we are going to outsource this. Our conversation points are, thinking about that F250 engine in the Ford Focus, do you need to make that two hundred thousand, two hundred fifty plus equity CFO higher, when you have got all these other things that are happening organization that require different levels of work? Are there 40 hours to allocate to that person? I mean, it as a super expensive resource that could go across R&D, it could go across the attorney side of things, general counsel. Is that the right moves at this point in your organization or can you really effectively leverage an outside team or another group at a much more cost-efficient manner with just as high higher level of service to scale your company? We have those conversations all the time and frankly, it is fun for me to talk through how-- you know, particularly to us the CFO firm is becoming the de facto way to scale of finance organization because then we can effectively transition that work to somebody when the time is right.
Adam: Yes. That is awesome. Totally agree. Well, this has been fun, enjoy, putting our heads together, and sharing the experiences that we see our clients and our network come across. Let us do it again soon.
Roman: Yes, it sounds great.
Thanks for listening to our podcast! This week featured Adam Wells of GST and Roman Villard with AVL. If you would like to ask them specific questions about the podcast or their company feel free to send them an email.
Adam Wells- adam@gstdev.com
Roman Villard- rvillard@avlgrowth.com
