Ryan Miller
My name is Ryan Miller and for the past 15 years have helped hundreds of people to raise millions of dollars for their funds, and for their startups. If you're serious about raising money, launching your business or taking your life to the next level, in the show will give you the answers so that you too can enjoy your pursuit of making billions. Let's get into it.
Building a great company and product doesn't have to be hard. My next guest has built multiple startups and has delivered billions of dollars in value to all of his investors. He's going to walk you through the startup fundamentals on building a company and raising capital. So the question is, When are you going to start building your company, so you too can enjoy your pursuit of making billions? Here we go.
Tim Hwang
Yeah, thanks for having me. All right. Big fan, big fan of the show. And obviously, a lot of great lessons were learned along the way. So look forward to conversation.
Ryan Miller
Awesome. Thank you. You're You're very kind. And we've done very well all because of great guests like you. So it's truly an honor to have you here. Really quick. Let's address the beginners. Let's hit him right between the eyes. For people starting out in your industry? What have you found, if you had to coach yourself in the early days, when you were starting out again? What advice would you give to the younger Tim version of you on how to win in the early days and how not to blow it up and ruin it? So what advice could you give to people starting out?
Tim Hwang
Yeah, you know, well, I think that a lot of people think that founders are these like risk taking kind of cowboys that go out there and quit their jobs and pioneer industries and things like that, which, you know, all those things are definitely true. But I think that a lot of what a lot of people get wrong is that founders fundamentally are constantly reducing risk. And so you think about sort of like what it takes to get from an idea to a successful business to successful exit, instead of always thinking about how to reduce the biggest risk at that certain stage, when you're really in the early stages, you know, you're thinking about do people actually want my product or service and you spend a lot of time thinking about cultivating the optimal offer, you're working on working on the product, working on the service in light, and really making sure that that resonates in the market. And then let's say you have a great product, and you sort of move on to the next stage, which is, you know, you have a great product customers are resonating with it, but you need to actually start building a company, we can't just be you know, slinging some stuff in the back of your car. So now you need to actually put together a team and think about, you know, like, is there a way for me to scale out kind of product development, distribution, whatever the case is, you start building out a co founding team, and it's somewhat of a team, and so on and so forth. Let's say you have a great products first couple of really numbers in the light, then you say, Okay, well, how do I really scale this up, and you think about capital, right? So you think about sort of how do I reduce my risk by partnering with the right people creating a financing strategy to kind of start scaling business, whatever the case is, and then from there on, let's see, have a great product, have a great team, you've got some great capital, and then now you've got to scale up this business. And so you spent a lot of time recruiting, and building up your company structure, your organization, your culture, and like, all those things are incredibly important at the end of the day, because what you're trying to do is reduce the biggest risk that's in front of you at any given time. And so I guess the biggest thing that I would say is, you know, it's really just putting some level of focus and attention on the things that matter. And you know, I'm sure we'll get to this in a little bit. But oftentimes, when you start a company, you're kind of running around doing a bunch of stuff, and your calendar is filled with stuff. And, you know, it seems really busy, it's very easy to get to feel like you're extremely busy, but actually have accomplished nothing for the day for the week. And so really focusing in on those risk areas, and then kind of laser focus your time and resource attention on those things, I think is really the most important thing overall.
Ryan Miller
Brilliant! And, you know, building a product that nobody wants is one of the biggest risks of all, that's for sure. So yeah, that product market fit is brilliantly said, and for the beginners, what are some ways to not lose? How do you how do you avoid getting wiped out in the early days? What have you found to be some helpful advice for beginners in that area?
Tim Hwang
You know, I would say that a lot of it comes down to sort of, you know, old fashion, talking to customers, you know, as crazy as it sounds, I think, you know, customers tend to actually have almost all of the answers, especially early days, you know, with my first company, I literally remember, you know, my co founders, and I made a Google spreadsheet, and we literally just copied and pasted prospects. And then we went over to 7 Eleven. And we bought those like, you know, prepaid burner phones and just sat down cold calling customers trying to get their feedback on whether they buy this product, and how much do we pay for it? And like we just did that, like literally hundreds, if not 1000s of times over and over and over and over and over again, just to get that customer feedback. And so I think that is sort of saying that I tell my product managers in any company I work with, which is that people try and make business really complicated. They put like a lot of really complicated terms with like, you know, the accounting and finance, corporate strategy and stuff. And I think business is really simple. Ultimately, I think it's basically a business exists to solve a problem for customers. And to do it over and over, you know, I don't care if you're selling electric vehicles or enterprise software, or your furniture or whatnot, ultimately, you build a great product, and you get it over the counter to customers, you do that over and over and over and over again. And that's a successful business really focusing on that value transfer between the customer and what you're offering. That's, that's really how you went at the end of day.
Ryan Miller
Brilliant. Awesome. Let's shift a little bit into a market. Right? So your market I'm curious of what are you seeing out there where it's at? And then maybe you can take us on a ride on where you see things going.
Tim Hwang
You know, one of the things I think a lot about is is the kind of future direction of enterprise software. And generally speaking, I would say there's a couple of things that have been happening Overall, I'd say two major trends in enterprise software over the last couple of years. So trend one is all the component parts around fintech. So you know, we call them the five major pillars of FinTech, so credit cards, loans, accounts, payments, and then it's a certain extent insurance and like slash investing, those sort of five pillars of investing have become atomized over the last few years, there's several dozen companies that essentially enable you to be able to very rapidly build a credit card or rapidly both accounts business or rapidly build a payments business or whatever the case may be, the cost of building a FinTech company has come down quite a bit. All you need to do so slink together, some API's, you know, wrap together an application, and that you're ready to go and have both credit card company, that sort of trend one. Now that's like a trend in of itself. But you know, I think for the purposes of our conversation, we can sort of talk about the bigger trend and trend two, which is around what I call the virtualization of software. Over the last couple 10 years or so, maybe 20 years, you've actually seen software winners shift from horizontal plays into verticalized plays. And so what that means is that, you know, maybe in the 90s, in the early 2000s, the biggest software companies that were growing the quickest, you know, were these like vertical or horizontal eyes, CRM companies, or marketing automation companies, or HR tech companies or accounting software companies. And then now, what we're seeing actually, is that the biggest software companies are the fast growing software companies are the ones that essentially are growing in a specific vertical, and then building as many services as they can, for a very targeted customer base. You look at companies like toast in the restaurant space, or service Titan, in the electrician, H Rackspace, or Viva in the pharmaceutical space, these companies essentially have this laser focus on a particular type of customer. And then they offer them things like a CRM dedicated for their particular industry, or a payments product that's fully integrated with certain marketplaces, where they offer their own marketplace with lending products that are tied specifically to credit underwriting in that particular sector. And so combine these two things. And what you've got essentially is this explosion of opportunity where you can pick an industry, agriculture, aerospace, healthcare, manufacturing, whatever the cases, and you can combine it essentially with some atomized FinTech products, and that you could go to market very quickly, you know, in that particular state. So imagine payments for farmers, or payroll processing for nurses, or CRMs, for food wholesalers, these are very specific products that you know, are targeting very specific customers. And you're essentially getting to a point where, yeah, there's a wide explosion of economic value happening simply through the combination of these two things.
Ryan Miller
Brilliant. As we round third base, this has been phenomenal, we're talking about the software industry and where things are going to the verticalization. Now, with all of your experience, and you've raised from some of the best people in the industry, what could be say, two or three things that you could leave behind to really just help round out in solidify a lot of that information. So people who are starting out in entrepreneurship, investing whatever it is, what would be some of the most critical advice that you can leave behind for our listeners around the world?
Tim Hwang
Yeah, well, I think a couple things right. The first is around market selection and products, one of the things that I think a lot about is just how to take a very rigorous approach to selecting the right market, you can imagine for instance, like this gigantic like mental or you know, virtual spreadsheet, you can sort of create you know, on the x axis you have industries on the y axis, you have software categories, so, like CRM, hrs accounting, whatever marketing and then in the section you have like aerospace, health care, whatever. And so, you can actually look at each opportunity independently, you can say, you know, what is the market opportunity look like for, you know, HR and talent management for, you know, the seasonal agriculture space or something, or what is the accounting software market look like for manufacturers, and then you can sort of identify market growth rates, total addressable market, so all these things and sort of do the actual rigorous research and then actually ended up with a series of business ideas that you can sort of go out go after, so, if you ever really stuck on, you know, what, what to built. I think that really trying to have a very Data driven and rigorous approach, you know, to sort of methodologically methodically, essentially identify where those opportunities are is really important. I think that the second thing is just in terms of capital raising, I guess the number one question I get from people just, you know, like, whenever I talk to folks is just, you know, advice about fundraising. The one thing that I would say is that not all VCs are born the same. They think that ultimately, when you're doing a deal, you know, people aren't doing deals with other people. Like founders, VCs come in very different shapes and sizes. As an example, you've got like FinTech founders, you've got crypto founders, consumer founders, you've got enterprise software founders, you know, whatever the case is, in a very similar fashion, VCs sort of operate in a similar way. And you've got sort of, on one side, the bucket, kind of generalists. And then the other side, you've got FinTech VCs, and consumer VCs and marketplace VCs and beauty VCs. And whatever the case is, if you're pitching investors, you have to identify the exact type of investor you want to go after categorically by industry, and the categorically by size. So there's some investors that invest really early, some investors only do pre IPO. And so the way that you waste a ton of time, is if you just talk to everyone all the time, instead of being very targeted about people that are very interested in specializing your space. And then the last thing I would say is, and this is like more wishy washy, I would say, but it's really about building a culture and a team that really resonates with your values. It's not just like, you know, the things that you sort of draped on the walls that say, like teamwork and collaboration, excellence, but like really thinking about what is the type of business that you want to run, if you are an employee, right at this company, what are the values that you would want the management team to have in, in many cases, those things are very personal, you know, there might be things like having a sense of responsibility, you know, focusing on professional development, whatever the case is, and so it's, you've got to really think about that. And almost parallel to your business plan, you've really got to be very explicit about what your values are, and then be able to implement those in your hiring, recruiting your promotions, where the cases and that's you build a very strong culture for business for a decade plus in the future,
Ryan Miller
brilliant as we wrap things up, this has been good man, you this has been jam packed with value. I'm truly honored that you I know you're a busy guy, and you've taken a ton of time to spend with me, and we're gonna get you back on, they're raising hundreds of millions of dollars in just dominating the FinTech space. So really appreciate you coming on Tim and sharing that with our fans around the world. You know, just to summarize, folks, do your market research, make sure you understand what's going on in your market, making sure that you are building something that customers want. Second thing that Tim mentioned is hey, when you're raising capital, your hit rate is gonna go up when you actually approach VCs that are looking for stuff in your sector. Not all VCs, check it for me, folks, I get hit up all the time. Not all VCs just invest in startups. They invest in startups in particular sectors. So make sure that you understand the sector of the VC, just do a little bit homework. And you'll find out if you're a clean energy guy, don't start approaching a software VC, right. Like there's a big difference. And then finally, build a winning team. All starts with understanding your values. So don't rely too heavy on the resume. Yes, it matters. But it's not the one thing that rules at all. It's also values and their integrity, their attitude, or there's a lot of those soft skills that really go the distance you do these things, and YouTube will be well on your way in your pursuit of making billions.
Ryan Miller
Wow, what a show. I hope you enjoyed this episode as much as I did. Now, if you haven't done so already, be sure to leave a comment and review on new ideas and guests you want me to bring on for future episodes. Plus, why don't you head over to YouTube and see extra takes while you get to know our guests even better. And make sure to come back for our next episode where we dive even deeper into the people the process and the perspectives of both investors and founders. Until then, my friends stay hungry. Focus on your goals and keep grinding towards your dream of making billions