Howard Lubert | What Makes a Good Deal?

Area President of Keiretsu Forum MidAtlantic and SouthEast

What makes a "good deal" for an Angel Investor? 

In this episode of the Experienced Voices podcast, host Jeanne Gray sits down with Howard Lubert—Co-founder of Keiretsu Forum Mid-Atlantic & SouthEast and Fund Manager of Accelerator Venture Partners. 

With a career spanning over 10,000 pitch reviews across every business sector, Howard shares his "vantage point" on what it takes to get funded in today’s market.

As the leader of the fastest-growing regions within the world’s largest accredited investor network, Howard pulls back the curtain on the Keiretsu Forum application process, how to avoid funding dealbreakers, and the secret to determining a fair startup valuation.

Whether you are a first-time founder or a serial entrepreneur, this deep dive will help you understand the mindset of an angel group and how to build a win-win relationship with your investors.

Key Takeaways from This Episode:

• The specific criteria angel investors use to write a check.
• How to determine if your startup is "fundable."
• How to navigate the vetting and qualification process for entrepreneurs.
• Strategies for building long-term investor relationships that go beyond the pitch.

Transcript

Who is Howard Lubert?

Jeanne Gray 0:03

I'm Jeanne Gray, founder and publisher of American Entrepreneurship Today, a website that brings news and valuable information to entrepreneurs, innovators, and investors all across America. A podcast series, Experienced Voices, explores the journeys of very successful people in the entrepreneurial arena who are open to sharing the key elements that led to their great success. Today we have Howard Lubert, a seasoned investor with over three decades in the private equity space. For the last 11 years, he's been at the helm of Tier 2 Forum in Atlantic and Southeast, a community of accredited private equity angel investors, venture capitalists, and corporate institutional investors. In his career, Howard estimates that he has reviewed well over 10,000 company pitches, and he can quickly assess those that have potential and those that do not. Welcome, Howard, to Experienced Voices.

Howard Lubert 0:58

Thank you, Jeanne, for having me. Well, let me start by telling you that uh this past March I celebrated 36 years of involvement in the private equity space. It started when I was asked to look at a company for safeguard scientifics, a venture fund that's no longer out there, but back in the day, uh was notable in that it was the very first publicly traded VC fund on the planet. Um and I started Correptsu 11 years ago this past March as a result of bumping into some Correpsu forum members at a conference I was attending in San Diego. Um and in listening to them describe their process, I became instantly interested, having looked at angel groups in the Philadelphia area 12 years ago and 15 years ago, and not really finding anything that uh got me excited about doing angel investing. So I've been doing this a long, long time. Um and I credit uh the work that I did with Safeguard in the venture capital space uh very much for the result of having created what have turned out to be two very successful regions in the Karatsu Network.

Jeanne Gray 2:22

So if a if a deal is going through uh Keiretsu Forum, Mid-Atlantic or Southeast, what's your role specifically in your involvement? Are you involved in some of the discussions or you or do you have just simply oversight as as things uh progress?

Howard Lubert 2:40

Well, uh I have on my team a director of due diligence who is hands-on involved from start to finish with every due diligence process. Unlike most angel groups, if we invite a company into due diligence with us here in the mid-Atlantic or Southeast regions, it comes with the understanding that, like a VC fund, we are also going to negotiate the term sheet. And I negotiate every single term sheet for every single due diligence project that we do. So I'm very hands-on. And I'm I guess kind of pleased to say, from an egotistical kind of side, that in the 36 years of being involved in this, the term sheet that we use is something that's evolved over that time. And it's an extremely aggressive but fair term sheet, but but does something that I unfortunately entrepreneurs don't think about. And that is we've designed a term sheet that absolutely excites and attracts investors to write checks. And at the end of the day, no matter which term sheet you use, if it doesn't attract investors who write checks, there won't be a company. So I'm very hands-on and involved in every single deal we do from that negotiation of the term sheet.

Jeanne Gray 4:02

Can you can you share or refine what you said about why it attracts you know angels to write checks?

Why Angel Investors Choose to Write Checks

Howard Lubert 4:12

Sure. So as you can imagine, there are literally tens of thousands of companies looking to angel investors every year for funding. The competition is incredible. There is, however, uh a differentiation between Karepsu and many of the other angel groups that are out there, and that is that we are not doing raw startup investments. We're coming in later when the company's a little bit more mature. And as a result, perhaps the competition is even more exceptional at our level because there are very few venture capital funds that are investing in early stage deals like we are. And in fact, Randy Williams, the founder of Careptsu, would tell you that he positioned Careptsu as the stopgap to fill in that space when the early stage venture capitalists moved upstream. So the when you assume that there are a hundred deals available to every angel investor to write a check in, there there need to be strong differentiators. Number one, there needs to be a strong due diligence report that helps vet the deal and help the investor understand what it is he or she's investing in. But then on top of that, by having a very strong investor-friendly term sheet that, shall we say, offers a better return on investment than the other 99 deals? That's kind of the icing on the cake to us that helped motivate our members and other investors to write checks in the deals that we bet.

Jeanne Gray 5:59

So, how how do you move the entrepreneur forward through what you're saying is terms that are investor, very investor-friendly, but they're thinking they can go to a different angel group or maybe not, in which they accept this little bit more favorable approach to the investor through your term sheet. You know, you know, so because they're learning, they're they're doing this sometimes for the very first time. How do you kind of nurture them through?

Howard Lubert 6:30

Yeah, well, we start at the very at the very beginning with the entrepreneur to suggest a number of things. Number one, and most important, we sit across the table, not as adversaries or competitors, but as partners who are about to get married and be together for a long period of time. And it needs to be a win-win, positive relationship, or it won't work. So, with that positioning, we then go into the psychology of why this particular term sheet has been so successful for so long, and why, while on the surface, it may look like the company is giving up more than they might have to if they went to if they went another route with another angel group with a different uh investment document. At the end of the day, the success factor of our term sheet in our due diligence um speaks for itself. In fact, it's interesting that I can tell entrepreneurs that if you're able to get through due diligence with us and negotiate this term sheet, we have been successful in funding 99% of every company that has come to us and used this term sheet. We've only had one company in our 11-year history not get funded going through our due diligence and using this term sheet.

Jeanne Gray 7:59

That's pretty impressive. So if an entrepreneur is listening to this podcast, what do you define as early stage?

How Angel Groups Support Entrepreneurs

Howard Lubert 8:09

We're the guys that typically want to make the first quote unquote formal round investment, typically series A, and then follow on with series B, C, D, and so on, depending on the space the company's in. So we're we're the guys that typically come in after the self-funding, the friends, family, and fools round, and perhaps even an earlier stage angel round, like a seed round. We're the first, quote unquote, typically formal round. So we're the guys you come to for that series A. Uh, our sweet spot, we tell people that we will invest between $500,000 and $3 million in that first round. The reality is we've never done a round list of a million dollars. And I just closed the documentation for a series B that we're going to lead starting this month for $20 million.

Is Your Startup Fundable? Key Criteria

Jeanne Gray 9:07

So, in a specific company or entrepreneur who's looking for funding for his company, um, is it revenue producing or you know, the whole aspect of proof of concept moving into revenue producing repeat customer? How would you have them self-assess that they're eligible to approach you?

Howard Lubert 9:28

From a positioning standpoint, it's very silo specific. So if it's a life sciences pharma company, they're not going to be anywhere near revenue, they're not going to be anywhere near FDA approval. And our decision to invest and work with them is obviously going to be based on a very deep due diligence into the quote-unquote secret sauce or IP that they're working on, whatever that's based in. If they're a medical device company, that's a much shorter tail. Um, but again, it will they'll likely still also not be revenue generating. Uh if you get out of life sciences and look at the other silos that we're very active in technology, consumer products, clean green energy, et cetera, um, it's very helpful if the company's already generating some revenue. But I tell the entrepreneurs in those spaces the perfect inflection point to come to Kiretu Forum is the company that is ready to transition from RD into sales and market.

How Keiretsu Forum Chapters Operate Globally

Jeanne Gray 10:37

Okay. So let's let's uh take a step back. So you handle two regions of Kirtsu Forum, Mid-Atlantic and Southeast. Can you explain a little bit about how those two regions are set up? Um where they're located. Um are they chapters within the regions, just so that we understand uh where your footprint is?

Howard Lubert 11:00

Sure. So we have five chapters in the Mid-Atlantic region. Uh we started in Philadelphia and then ironically expanded by invitation into DC, followed by Pittsburgh. Uh, we then acquired the rights to the New York chapter. And just before the pandemic started, or actually, as the pandemic was finishing its first year, uh, we quote unquote opened a chapter in what we refer to as North Jersey, but it's actually headquartered in Princeton. In the Southeast region, we have chapters in southern Florida located in West Paul Beach and Atlanta, with plans once we get back to live meetings, to expand into the Raleigh Drone Research Triangle Park area and possibly Storlet. So within Correct and Forum in North America, there are seven regions that make up 33 chapters. Uh, and we have the East Coast with one exceptional outlier, and there is a single chapter in Boston.

Jeanne Gray 12:07

And within the chapters or the or the each of the forums, um a significant portion of the members are accredited investors, true.

Howard Lubert 12:18

With the exception of our due diligence fellows, 100% of our members must be accredited investors by SEC definition, or they can't join CorrectSoup. The interesting thing is that we also have a very active sponsor base. So we have law firms and accounting firms and PR firms, for example, that pay us for the privilege to become sponsors so that they can market and network not just to the entrepreneurs who are coming through, but also to our members. Uh, and they are also accredited investors as well.

Jeanne Gray 12:56

So when an entrepreneur approaches uh the forum and they're they're pitching, uh is there a sweet spot? Uh you mentioned life sciences, or are you you have a broad range of uh industries represented in who you've who are funded?

Howard Lubert 13:14

Yeah, correct is a little, well, not a little. Correct is very unusual compared to the typical angel group. First of all, of the over 350 angel groups in the United States, over 80% of them are doing seed and startup deal stuff, unlike Korepsu. And of the other 20% that are doing later stage deals, the interesting thing is that the vast majority of angel groups invest in one or two silos. Correptsu is the exception. Again, because of our size and our breadth, we've invested in 14 different silos. But that said, there are five key investment areas that for the past 10 years that we've been involved in order of interest have been life sciences, then technology, then consumer products on the West Coast real estate, here clean green energy, and so on and so forth.

Jeanne Gray 14:16

So I know you run meetings with your or for your member investors. So where is the pathway in for the entrepreneur? Is it uh being referred by someone, or are they just simply contacting you directly and pitching to you that they would like to have access to your group? And and when, quote unquote, if you give an entrepreneur access to your group, what does that mean?

Howard Lubert 14:43

The process is is very definitive and pretty straightforward. It starts with us receiving an application from the entrepreneur or their company that they're interested in talking to us about funding. And those applications can come to us a couple of different ways. Number one, you can Google excuse me, you can go to our website and click on the entrepreneur tab and read through the materials that will lead you to a button that will take you to our online application forum where you can complete the application. If you have previously completed an application with another angel group, there's a strong likelihood that it's on the same platform as us, and you can ask that group to syndicate that application to us. And then, third and final, obviously, with a network of 33 chapters, we get a lot of deals where entrepreneurs have applied first to another region of Koretsu, and now they're actively funding and they want to syndicate to us to give our members an opportunity to see the deal, in which case they typically come to us already with a Koretsu due diligence report and a term sheet. And we're happy to see if we can't help fund those.

Jeanne Gray 15:59

So if I'm walking through the door and I'm an entrepreneur, somehow someone referred me to you. Um what is my first touch? Am I invited in to give a deck presentation or are you opening it up for one of your expos? So what's my first real experience directly into the group?

The Keiretsu Forum Application Process Explained

Howard Lubert 16:21

So again, like everything else in CorrectSoom, the process is very rigid. So the first thing that has to happen is we have to get an application. And we get applications in every week. Every single one of those applications are typically reviewed the following Monday morning by my director, or I'm sorry, my vice president of Entrepreneur Services and myself. And from that, our goal is to identify the top 10 or so of those applications and invite those companies to come present to us at a screening meeting, which we typically hold on the first Wednesday of every month. The goal of that screening meeting is to pick the best of those companies that presented. And the entrepreneur comes away typically with one of three uh alternatives. Number one, we loved what you did, we're going to invite you to present to our members. Number two, we don't like what you did. We're sorry, we're not going to be a good fit for you. Good luck with your company someplace else. Or number three, we like what we are doing and we think there's really something there, but unfortunately, you did not resonate well in our screening meeting. We'd like to help you get that fixed and then come back to a second screening meeting with the hopes that that would then move you into forums in front of our members. So those companies that are successful in screening are then invited to forum meetings. We hold one every month, 11 months a year. And from those forum meetings, our members complete gold sheets, which indicate the level of interest in those deals. And from that, companies then get invited into due diligence and hopefully come out of that due diligence and get funded.

Jeanne Gray 18:08

Is there uh again looking at it from the point of view of first approach? Are are there elements of a of an early stage company in which uh it's a deal breaker at the very beginning, meaning I'm a founding entrepreneur, but I do not have my team in place, or I have not done this or done that. So is there just you know the the the the deal breaker at the very beginning? Someone's approached you, they look like they they uh fit, but they have not really expanded their model out sufficiently, and you guys see it right away. And you know, some of the ones you uh say you need to to go to go on to another funding source.

5 Major Funding Dealbreakers for Startups

Howard Lubert 18:53

Well, yeah, I think I think in in trying to help define quote unquote deal breaker. So the the process with us is a two-way street educational model from the very, very beginning when we first reach out and touch a company. So when the company sends in and delivers an application to us, if we're interested in that company and we want them to move forward, when we invite them into screening, it's with the understanding that they're going to get all kinds of feedback from us as part of that process. They will come out of our screening meeting a much smarter company. But that said, we have never invested in a company that had no team members at all other than the founder. Period, end of issue. We will likely not invest in a life sciences or a technology company that has been put together by faculty members from the university who are genius inventors but have absolutely no intention. Of giving up tenure and leaving the university to start a company. We will work with those people to help build a company and help build a team. And we will make those requirements of a successful due diligence process. We will even help recruit the people that they will need if they have no idea where to file them.

How Investors Qualify and Vet Entrepreneurs

Jeanne Gray 20:23

How about personality? I've heard that investors want someone who's coachable. So are your seasoned investors able to or are wary of certain entrepreneurs that come in with certain personality traits that you realize the venture's great, but it's just not going to go where it needs to go?

Howard Lubert 20:47

I think unfortunately it's safe to say that we are not able to always identify the deep-seated personality style of an entrepreneur from just a meeting in a screening meeting. But I can assure you of this if they get invited into due diligence, the most significant component of that due diligence is the HR section. And we use professional PhD coaches and mentors to execute that HR section of our due diligence report. And those folks will come away and tell us whether or not this individual or this team of individuals is likely to be successful in getting this company over the goal line to get us a return.

Jeanne Gray 21:37

So are you coming across entrepreneurs who have only one particular mindset, which is how do I give the least amount away of my company for the most amount of money? Is it is that an approach or an attitude that is now less less occurring because people are more educated about the investing process, or you're still seeing individuals come in and basically have a rigid, someone's planted some type of rigid thought about the valuation and what they need to have?

Howard Lubert 22:17

I would say that 10, 11 years ago, 40 to 50 percent of the entrepreneurs that applied to us had that mindset. And it was their goal, come hell or high water, to give away as little of the company as possible for the most money they could, and that's all they cared about. They didn't care whether the money was smart or dumb. All they wanted was give me the money and then get out of my way and let me do this. Um, we started requiring our term sheet as part of due diligence about five years ago, and we have noticed a significant change. I would say that probably less than 10% of the companies that come to us today still have that old attitude. And 90% are looking for much more than just money. They absolutely want smart money, they want hands-on investors that are going to help them succeed and grow the business. And we have we have actually had entrepreneurs say to us that the feedback that they've gotten from the gold sheets was as valuable as the money they were anticipating from funding. And I very seriously say in our meetings, they lied. That's not true. Nothing is ever more important than the money. But it's good to know that we're talking to people who recognize and appreciate the value of the rest of what comes with that money can mean to them.

Startup Valuation: How to Determine Your Worth

Jeanne Gray 23:50

So where is valuation in this in this process? Uh again, the entrepreneur is new to this uh area. They are they're they're going to others and listening to other people's opinion, but where does the determination of the valuation play in meeting a in getting a good deal in place?

Howard Lubert 24:13

Well, you can't negotiate a term sheet without having a mutually agreed-upon valuation. So it's right at the very beginning of the process. I I am on record as saying that in 36 years of being in private equity and negotiating deals, I can count on the fingers of one on one hand the times when I stopped and looked at the entrepreneur and said, you know, I think your pre-money valuation is too low. So the goal of the entrepreneur obviously is to get the highest possible pre-money valuation that makes sense. The goal, most people think the goal of the investor is to get it as low as possible. The truth is, there's a lot more to valuation than just reaching a win-win solution in the middle. If the company is coming to us telling us that this is the only venture round they're ever going to need to raise to be successful, then the pre-money valuation number is lots less critical than for those companies that are going to need to come back into a Series B or a Series C, et cetera. Why? Because if if the pre-money valuation is too high in the first round, it will create a real problem for the follow-on route. So again, as part of that educational portion of the process, entrepreneurs need to appreciate where that stands. I can share with you anecdotally and historically that in the 11 years of doing Korexu, if I had to pick a number, I would tell you that in the typical A and B rounds that we have led in the last 11 years, the cap table indicates that at the end of that successful raise, the investors typically own somewhere between 25 and 30 percent of the company. So the valuations can be incredibly different, incredibly difficult. In Savara Pharmaceuticals, a company we started investing in 10 years ago, which is now publicly traded, by the way, we invested in the first round at a 20 out of 17 million dollar pre-money. In the last round we invested in, we were investing in an 80 million pre-money valuation. We expect it to go up.

Jeanne Gray 26:43

So, Howard, after the entrepreneur has been funded, what should the entrepreneur anticipate in the relationship that it is starting with the angel group as they're beginning to access those funds that are so important to them?

How to Build Long-Term Investor Relationships

Howard Lubert 27:02

I think I think it's safe to say that 80% of the companies that we fund discover fairly quickly after we hand them the checks, and remember that they get a lot of checks because each of our members writes their own investment check. But after the funding is done, I think there's an epiphany on the entrepreneur side because from the beginning of the process, we've been telling them that we're going to be hands-on involved to help them succeed from the time we got the application until we get to the liquidity event. They probably hear that from everyone they pitch to. The reality is that most investment groups, and in the angel space specifically, most of the very early startup angel groups are making so many small investments that they really can't afford to stay on top of them. We're doing much bigger deals at a much later stage typically. And as a result, when we place board members, when we place advisors with the company, when they get phone calls unsolicited from a Koretsu member who says something like, I met a guy today who just sold a business in your space. I was telling him about you and he's interested. He may want to talk to you about how he may be able to help or anything that he can do. And by the way, it looks like he's going to join Karepsu. So the epiphany is that we really mean it when we say we're wound-to-toom investors and we stay engaged and involved. And I think it's a shock to the system for most of the management teams that we've worked with initially, and then slowly but surely they they tend to start to depend on us to bring that support and to help them succeed.

Jeanne Gray 29:05

With the funding or how the funding is set up, is it tied to, since you're doing specifically a series A, is it tied to a milestone that the angel group has in anticipation of that money going into the company?

Howard Lubert 29:24

Well, there's two sides to that, Jeannie. On one side, when a company comes to us and says we need to raise $3 million, as part of that conversation and negotiation, I asked the company, tell me what the absolute minimum amount is that you need to raise. Let's just assume we do a $3 million raise and for some reason we only get to X. Tell me what X has to be to guarantee that the company will survive, recognizing that it may take much longer to get it over the goal line with limited funds, but so on and so forth. And from that conversation on the money inside, we negotiate the first close to protect the investors, but to also understand what that minimum amount is the company needs. And by the way, in many cases, they say we need the whole three million or we can't get there. The other side of that coin is that once we have successfully raised the money, the company has already told us as a result of the due diligence what they're using the money for and where they're going to go. And if it if it's one of the situations where they're going to be coming back for a series B, then we obviously monitor the milestones that they indicated in our due diligence to make sure that they're staying on track. And obviously, we have board members in place to help us stay current and knowledgeable what's going on. In the case of those companies that have told us, if you help us raise this $3 million, we'll never need any more, we're much more hands-on and helpful because we love to be in a situation where we're the last money in and we've negotiated a win-win term sheet, knowing that if the company can deliver what they've told us, again, based on the research and the financials and everything else, we can anticipate what the likely return on investment will be.

Jeanne Gray 31:36

So I've heard a an angel investor, couldn't have been a VC actually, who said that in the first year they often anticipate that the business plan that was presented to them has changed. Now, is that something that would be more associated with the seed stage? Or does that happen in Series A? That they've learned more about their market and now they've got to do something different.

When and How to Adapt Your Business Plan

Howard Lubert 32:05

Well, I think it's fair to say there's there's a very famous saying from a very famous boxer that said, No matter what your strategy is, that first shot up the side of your head changes everything. Um, but that said, I think it's fair to say that when the companies are coming to Carrezzo, and again, we have the advantage of getting them at what I would refer to as early stage, but certainly not startup. They've made the majority of their startup pivots, if you will, before we get them. And when we get them, that doesn't mean that there won't be an additional pivot, but it's never going to be, almost never, gonna be 180 degrees or 360 degrees. It may be 25 degrees. We had a company present to us today, for example, today was our foreign meeting day. So we had a company that presented to us today with a very unique medical device that's designed to be loaded with a medication, and their first target market is the opioid crisis. So they can load Narcan into a device that the patient then swallows, and this device lodges in their large intestine for three to five days and can automatically be triggered to release the Narcan on an emergency exit. In addition, they could load an opioid into that same device, have the patient swallow it after, let's say, some kind of major surgery, and then they the doctor can control the release of the opioid for pain management without any chance of the patient being able to overdose. Now, they tell us that their primary market is opioids first and then everything else. And a couple of our members who are life science experts pointed out to them that if with the pressure that's being brought on the medical industry to stop writing prescriptions for pain relievers, they think they think that the first market should be the pain resolution and so on and so forth, and then the opioid crisis. Secondly, and the company was receptive to hear that. Now, the next step for us is to see how well they were received by our members and see if the gold sheets indicate that we're going to take them into due diligence. And then, as part of that due diligence process, I can guarantee you that at least one of those two medical experts that were on the call today will be involved in that due diligence and they'll explore that. So that's what I would refer to as a small pivot as opposed to what happened much earlier than us.

Jeanne Gray 35:10

So we're getting close to wrapping up, and I wanted to uh backtrack on two very uh common questions that are posed to investors, but specific the fact that you know we've spoken about um you're focusing on series A and certain uh fundable funded amounts. Is there any value of an entrepreneur approaching Kiritsu who's not ready for you, but they want to bring themselves their attention to themselves as soon as possible?

Networking Tips for Meeting Angel Investors

Howard Lubert 35:43

Yeah, well, again, there's there's multiple ways to look at that. The information that's available on our website, I think, clearly helps indicate to the entrepreneur at what level we're most likely to engage. That said, and I'll again I'll use an example actually from last month's uh forum meetings. We had a company out of Philadelphia that came to us um two plus years ago, and they presented, and it happens to be a company that's in the orthopedic surgery space. They've invented a piece of medical device that looks to be better than anything else that exists in that space today. But two years ago, when they came to us, we were very receptive to the idea. Again, our medical SMEs were all over this thing. They said this could be a game changer and so on and so forth. But we both very quickly recognized that the company was absolutely not ready for us. And we parted friends and moved on. And then last fall, one of our members who happens to be a medical device investor and owns a business that does nothing but that brought the company back to us. And we met with them in the fall. They came and presented, we did due diligence, and I'm pleased to tell you that this week we opened the due diligence funding portion of the process. So if an entrepreneur comes and it's too early, we certainly aren't going to put them in a place where they're gonna fail with our members. But if they come in there too early, we'll tell them they're too early. Come back when you can do this, this, this, and this. The truth is, if they're astute enough, they can get the answer right from our website when they understand that, as I as I think we mentioned in earlier part of our call, you know, the perfect inflection point for a company coming to Karezu, with the exception of Life Sciences, is one that is ready to transition or has just transitioned from RD to sales and marketing. And if they're a medical device, they're coming to us because they now need the money perhaps to execute a clinical trial to get FDA approval, but they already have the prototype, they already have some traction in the market. Meeting, they haven't sold any because it's not FDA approved, but they've gone out and done the customer discovery and subject matter experts have said, if you get this out, I'll buy it, I'll use it. So it's a different approach.

Jeanne Gray 38:20

One last question in that in that area. So a lot of emphasis is put on the pitch debt. So when they contact again for a presentation, where is the where does the pitch debt come in and timing of you and if and a follow-on presentation?

Pitch Deck Essentials: What Investors Want to See

Howard Lubert 38:39

Well, I would say that we're a little different than the typical angel investment group when it comes to the pitch deck. When a company applies to us, we haven't seen a pitch deck, we've only seen what they've put on the application. We may do some follow-up with them, but if we invite them into screening, we intentionally do absolutely no pre-vetting of their deck. They present the deck to us in what I would refer to as raw form at the screening meeting. And if they can get through the screening meeting with the deck as is, that's an enormous success because before they come back to the forum meeting, they must spend time with our professional coaching team. And our professional coaching team is going to fine-tune that deck and work with them to make that presentation perhaps two or three or ten times better, ten exaggeration, but two or three times more effective than it was when they pitched to us at the screening meeting. So it the pitch deck is critical for attracting and interesting our members to invite the company into due diligence, but it's not the end all be all of the of the process.

Jeanne Gray 39:58

So we approached uh our Conversation with what makes a good deal. And we've discussed it from the point of view of what the investors are looking for and how the entrepreneur needs to position themselves and be prepared for what the investors need. So sort of as we wrap up, are there two or three poor points sort of like as a checklist of what the two parties have achieved for having gone through the process?

Negotiating a Win-Win Deal for Founders and Investors

Howard Lubert 40:31

Sure. Well, first and foremost, the deal has to be win-win. It's not about begrudgingly giving a company and its management team as little money as possible for as much equity as we can get out of it. I would be remiss if I didn't point out that there are some people out there that do that. The reality is that the vast majority of us do not. And in the case of Kareptsu, we struggle to sometimes to get to a win-win with the understanding that if in any way the deal demotivates the management team to get the company over the goal line, then none of us will win. So we help, I think, we go out of our way to make sure that the entrepreneur understands that it needs to be win-win, that in some cases, especially if they're going to have a follow-on route, they're going to have to be more flexible with where they set pre-money valuation as part of the processes, and the other 20 pieces to that puzzle that have to come together that will guarantee interest and involvement from investors so that the company can raise the money they need to succeed. The follow-on support and board support and everything else that goes with that, you know, is part and parcel of the solution. So again, it's it's what the industry continues to call smart money. And I would like to think that the process at Parepsu is the ultimate on the angel side smart money investor solution.

Jeanne Gray 42:15

Well, Howard, uh, it was great chatting with you for our podcast. Um, I look forward to picking up other conversations with you in the future.