S1:Ep77 Harvard Insights: The Future-Ready Investment Playbook for Startups & Investors in the AI Era

My amazing guest today is Jeffrey Fidelman from New York, United States. Jeffrey brings deep expertise in investment banking and startup growth, and we’re diving into a powerful topic: Harvard Insights on Successful Investment Banking for Startups in the Age of AI. Together, we’ll explore this future-ready playbook for impact and uncover what truly drives success in today’s AI-driven landscape.

Recently Jeffrey was elected to the Board of Directors of Harvard Alumni Entrepreneurs (HAE), a global community of alumni founders, investors, and executives.

Jeffrey is also a part of the Diamond Executive Group of the AI Game Changers Club - an elite tribe of visionary leaders redefining the rules and shaping the future of human–AI synergy.

Jeffrey is the Founder and Managing Partner of Fidelman & Company, a leading advisory firm launched in 2015 to address the critical fundraising and growth strategy needs of early- to mid-stage companies. 

Jeffrey’s career began in residential real estate, which led him to the Portfolio Manager role at Morgan Stanley, followed up by the role of Vice President at HSBC, driving revenue strategy across banking, lending, insurance, and retail for Manhattan. 

As a seasoned entrepreneur, investor, and advisor with deep expertise in finance and fundraising strategy, Jeffrey has built and supported ventures across multiple industries, globally. 

🔑 Key topics discussed:

✔ What Really Makes a Startup Fundable Beyond the Idea

✔ How AI is Transforming Fundraising and Investor Due Diligence

✔ The Top Investor Priorities Before Writing a Check

✔ The Biggest Fundraising Mistakes Founders Make (and How Investors Interpret Them)

✔ Protecting Founder Interests in Deal-Making

✔ What International Founders Must Know About US Investors

✔ Staying Agile in the Fast-Moving AI Era

✔ The Outdated Fundraising Beliefs Founders Must Unlearn

✔ The Most Powerful Fundraising Advice for Founders Today

🔗 Connect with Jeffrey on LinkedIn: https://www.linkedin.com/in/jeffreyfidelman/
🌏 https://fidelmanco.com/

Chapters

• 0:00 Welcome and Guest Introduction
• 3:01 Jeffrey's Entrepreneurial Journey
• 10:54 Building Fidelman & Company
• 19:05 What Makes Startups Fundable Today
• 24:28 AI's Impact on Fundraising Processes
• 30:49 Key Investor Priorities Beyond Revenue
• 34:04 Common Fundraising Mistakes to Avoid
• 39:28 Importance of Legal Documentation
• 43:07 International Fundraising in US Markets
• 45:33 Adapting to Rapid AI Changes
• 51:55 Realistic Fundraising Timeline Expectations
• 55:12 The Power of Consistency and Closing

Transcript

Speaker 1: 0:00

Hello and welcome to Digital Transformation and AI for Humans with your host, amy. In this podcast, we delve into how technology intersects with leadership, innovation and, most importantly, the human spirit. Each episode features visionary leaders who understand that at the heart of success is the human touch nurturing the winning mindset, fostering emotional intelligence and building resilient teams. My amazing guest today is Jeffrey Fidelman, from New York, united States. Jeffrey brings deep expertise in investment banking and startup growth, and we are diving into a powerful topic Harvard Insights on Successful Investment Banking for Start startups in the age of AI. Together, we will explore this playbook for impact and uncover what truly drives success in today's AI-driven landscape.

Speaker 1: 0:54

Jeffrey is the founder and managing partner of Fidelman Company, a leading advisory firm launched in 2015 to address the critical fundraising and growth strategy needs of early to mid-stage companies. His firm is supporting clients across capital races, business sales, acquisitions and strategic initiatives all over the world. Recently, jeffrey was elected to the board of directors of Harvard Alumni Entrepreneurs, hae, a global community of alumni founders, investors and executives With deep experience. As an interim CFO and COO, jeffrey has successfully guided dozens of companies through pivotal financial transactions, helping them unlock growth, secure capital and navigate complex market dynamics.

Speaker 1: 1:49

Jeffrey's career began in residential real estate, which led him to portfolio manager role at Morgan Stanley, followed up by the role of vice president at HSBC, driving revenue strategy across banking, lending, insurance and retail for Manhattan. As a seasoned entrepreneur, investor and advisor with deep expertise in finance and fundraising strategy, jeffrey has built and supported ventures across multiple industries globally, helping founders secure capital, scale operations and negate growth. I'm honored to have Jeffrey as a part of the executive group of the AI Game Changers Club, an elite tribe of visionary leaders redefining the rules and shaping the future of human-AI synergy. Welcome, jeffrey, I'm so happy to have you here in the studio today.

Speaker 2: 2:43

Thank you, ami. Likewise, I'm happy to be here.

Speaker 1: 2:46

Let's start the conversation and transform not just our technologies but our ways of thinking and leading. If you are interested in connecting or collaborating, you can find more information in the description. Don't forget to subscribe for more powerful episodes. And if you are a leader, business owner or investor ready to adapt, thrive and lead with clarity, purpose and wisdom in the era of AI, I would love to invite you to learn more about AI. Game Changers, a global elite club for visionary trailblazers and change makers shaping the future. You can apply at aiagamechangersclub. Jeffrey, I've been waiting for this conversation for quite a while and I'm so happy to get the chance to ask you about everything what really matters today and what is going to be increasingly important in the coming years. But to start with, could you please share with us a few words about yourself, about your journey, about your passions?

Speaker 2: 3:49

Sure, well, again, thank you for having me. I'm equally as excited to be here and share with you my thoughts, my story, my answer to some of the questions that you have. My background, or really my interest, has always been in entrepreneurship, or really my interest has always been in entrepreneurship, and I think back to when I was a kid, coming into the city with my parents only on Black Friday, just as a kind of a family trip, and looking up at the large buildings, thinking to myself there's someone in each of those windows and probably depth of 10 or 20 offices or apartments or what have you, and everyone's doing something. Everyone is contributing in some sort of way, whether it's meaningful or less meaningful, to some sort of business, right? Someone makes the windows, the steel, the plastic, the rubber. Someone makes the engines, the cars, the pens, the plastics, the chairs. There is someone somewhere that is both manufacturing, ideating and creating, shipping, buying, selling all of these different things around me. And that's really what sparked kind of my thirst for information and also my love for entrepreneurship that there really is something for everyone that could be good at doing and be able to execute on Fast forward. I worked my rear end off so I could get accepted into Harvard and graduate from there, and shortly thereafter I went into what a lot of people did with first real estate and then banking.

Speaker 2: 5:16

On the real estate side, I kind of fell into that in 2008 and 2009 because, as some or many will know that there was a recession that hit New York, new York and really the rest of the country and what ended up happening was that there was an influx of international buyers coming into the city to purchase real estate, both residential as well as commercial and the majority of those buyers were either Russian speaking or Chinese speaking. My family are immigrants. I'm first generation, but I speak fluent Russian, so I was able to build a business, not because of my wealth of knowledge in the space, but more because I had the language and I can communicate fluently in Russian to the buyers that were coming in, and also, as you hear now, I speak English quite well to help them navigate the real estate in the city. And we started building a business around that, first representing them on residential purchases and then, slowly, as those portfolios started to increase and build up, they wanted us myself and my partners to manage that real estate for them and then got into commercial real estate. During the time I was commuting back and forth, coming to the city on a train on Thursdays, leaving from the city back on a train on Thursdays, leaving from the city back on a train on Sundays to take my classes finish school Meanwhile kind of running a business semi-full-time I won't call it part-time, but semi-full-time remotely from Boston, coming into the city doing open houses and meeting with clients over the weekends.

Speaker 2: 6:42

Shortly thereafter, right around 2010, I ended up selling my stake of the business to my partners and going into finance. Everyone around me was going into finance. I had a thirst to understand the financial markets and I'll never forget going into Morgan Stanley. It was like going into a new country. I mean, people are speaking English, but they may as well have been speaking Chinese, because I understood absolutely nothing of what they were talking about Credit swaps and yield curves and all of these different kind of sophisticated financial terms that they were using. I needed to learn really, really quickly what everything meant, so that I didn't both stick out as like a sore thumb and for sure had imposter syndrome of why me of all people, why am I here and how did I get here?

Speaker 2: 7:29

I learned the language pretty quickly and I think I was relatively successful at Morgan Stanley and surely thereafter I ended up taking a different position with Asia's BC as kind of VP, as you mentioned, really to help them figure out revenue growth across Manhattan. And really what I did in that role was try to understand number one, the bank's different types of products, and this was going from institutional banking to more retail banking. So the products there were very different than what we had at Morgan Stanley. Morgan Stanley was a lot more financial products trading, whether it was mutual funds or whether it was stocks or bonds or fixed income rather, or equities and going over to HSBC it was a lot more categorical types of products and what I mean by that is there was wealth management, there was kind of retail banking, checking and savings accounts, there was insurance and there was lending and that was kind of the four food groups, so to speak, of retail banking, and there still probably is.

Speaker 2: 8:32

So I worked there for quite some time and figured out a way to really work with people from a corporate perspective. That was my first real exposure to corporate, whether it's banking or just corporate work in general, and Morgan Stanley it was a lot more myself and my partner to client facing and there was very little interaction with corporate in between, not for any other reason than there just didn't need to be, whereas going to HSBC it was a lot more corporate. Yes, I still had some interface with investors, with direct clients, focused on how to manage the different financial advisors, bankers and different people who had exposure to those clients directly. I had a great time. I love the people I worked with. It was really encouraging and, as I mentioned, it was again kind of taking myself out of a very comfortable situation with Morgan Stanley and putting myself despite them both being banking roles, totally different day-to-day work and again I felt like a fish out of water.

Speaker 2: 9:30

And while there, I had this interest both in venture capital as well as consulting and I was not proactively looking for any roles. But I was approached by two different firms at the same time. One was PwC, who ended up giving me an offer Pricewaterhouse to be a consultant there, and the other came from a venture capital firm, really a family office, that also wanted to kind of bring me in as a more senior role and into a partnership and help them develop a fund. And you know, I can't say hindsight 2020, I have any regrets. The main reason why I ended up going into venture versus going into consulting was because and you know I can't say hindsight 2020, I have any regrets the main reason why I ended up going into venture versus going into consulting was because of the pay.

Speaker 2: 10:10

Going into consulting I looked at that as kind of a big step back. I think I just proposed to my now wife at the time and in my mind I'm thinking to myself I need to take the next step up and make more money, frankly, rather than take a lateral step or even a step back to go into consulting and then ultimately could have, I'm sure, risen through the ranks and approached it from that nature. So I ended up choosing going into venture. I was a partner at a venture fund and our focus was around early stage tech and tech-enabled investments, and that's really where I recognized a significant gap in I'll call it in venture in general, or maybe around fundraising for early stage companies or even emerging managers so fund managers that were just starting out on raising a fund or second fund or even third and the gap that I recognized was well. And the gap that I recognized was well, fundraising kind of 101 and 201, there's nothing really necessarily proprietary about it. There's nothing50 or $300 million a year.

Speaker 2: 11:30

So the idea around fundraising, yes, there's still a structure and consistency, but it's almost like, well, this company is definitely getting funded, let's just figure out who's going to fund it. And when you go into earlier stage, the dynamics change a lot. They're pre-revenue, they're just making revenue, they're just post-revenue, they're not making a lot of money. Maybe they're losing profit. They're not profitable necessarily. So it's a lot less about yes, this company is definitely getting funded, who is it going to be? But more so, let's go out and build relationships with investors so that the founder or the manager can build that relationship and ultimately raise capital, build trust and raise capital from that investor.

Speaker 2: 12:11

And the gap that we recognized was that no one really wanted to, let alone had built a process that reflected institutional investment banking and then applied it to early stage companies or emerging managers. And you have this whole world of advisors that continues to exist today, where it's one, it's up to five people that are working trying to figure out how to successfully raise capital for early stage companies. And what ends up happening, or what we ended up recognizing, was that there is a kind of this misalignment of interests between the advisors that are helping early stage founders raise capital and those early stage founders in their companies, and the misalignment of interests I'm not going to go into a huge monologue about this is really based around well, early stage company A comes to me and I'll go to John Smith, the investor. Company B, john Smith, the investor. Company C, company D, e, f, g I always go to John Smith, the investor, because that is who I have a relationship with. But the issue there is that, despite the company paying me, the economics, my relationship and who I really care about is the investor, because I know that no matter which company I end up working with, I'm always going to go back to the same set of investors. And that immediately creates this misalignment of interest where the advisor is more focused on the relationship with the investor than the relationship with literally the client who's paying you, the company, and there's kind of reverberating effects around that in terms of how advisors will think and act and speak and even in the negotiation process. So we wanted to take all of that and kind of flip it on its head, and it took some time to figure out exactly how to do it. So day one in 2015,.

Speaker 2: 13:56

When I started this firm, it was more about consulting, more about let's help our clients prepare for the fundraise. But let's help our clients prepare for the fundraise, so we'll put together a deck, a model, a valuation, a capital structure. We'll help with design. We'll bring resources in in-house to do all those things instead of farming it out and having a disparate team. So we built that over the course of two, three, maybe even four years and, as a last deliverable, we would kind of give all of our clients essentially a book like this to say well, here are all of your fundraising documents. Here is the copy that you should be sending to investors. Here's what you should be speaking to investors about, the agenda for investor calls. Here's an initial lead list for you to start going out to those investors, initial lead list for you to start going out to those investors and effectively. Here is your customized fundraising strategy that if you follow and put consistency behind it, you will raise capital.

Speaker 2: 14:52

And what ended up happening over the course of 12 or 16 weeks. Shortly after, we would end the engagement with the client and give them that book. 90, 95, 99% of our clients would come back to us and say, jeff, this is great, can you do it for us? And that's really where Fundraise as a Service was born, which is the other kind of part of our business, where not only do we help clients with fundraising preparation but we also help them with fundraising execution. So fundraising execution again, the way that we apply it is not necessarily building a Rolodex and selling our clients 10, 20, 30 relationships we have with investors but rather taking best practices.

Speaker 2: 15:35

And what I was saying earlier, nothing we do is proprietary. If you Google, if you chat, gpt, what are the best practices around raising capital? That is effectively what we have been able to productize and now offer to our clients. So what we do today, aside from the prep work, is offer this fundraiser as a service, which is us having gone out subscribing to all the different investor databases, like PitchBook, prequin, dakota, fintrix there's probably a few that are missing there Aggregating the data a single place and then layering an analyst on top of that who does all the research, who does all the qualification, who does all the personalization, and then picks up the phone and calls the investor on behalf of ABC company or emails the investor from alexatabccom, so that from the investor's perspective, it's the company reaching out to them directly, and the analysts are not meant to pitch the business, but rather just gain interest and requalify who they're reaching out to and then put them on the phone with the founder or the manager.

Speaker 2: 16:35

Because fundamentally, at the end of the day, what is incredibly important at an early stage of raising capital whether it's for a fund or for a company is that that founder, that manager, needs to build a relationship with the investors directly. But that's really what is incredibly important about raising capital. Yes, there's structure, yes, there's consistency. We've built that and effectively rent that out to our clients on a month-to-month basis. But really, it anyway will always fall on the founder or on the manager to put effort in to actually raise that capital. So that's a little bit about me. That's a little bit about how all of this had started in the market trying to create something to fill the gap around preparation and then being proactively asked for us to help set up a structure, a consistent structure or productized structure that we could then offer to our clients to help them raise capital.

Speaker 1: 17:34

An incredible life story. Thank you so much for sharing it with us. I absolutely love the way you're working and your approach, how you transformed the way both investors and fundraisers companies who need money. They are navigating that stage because it is truly interesting how you can help them in a completely different way. In a completely different way, and so many brilliant ideas get a chance to be landed in reality instead of just disappear somewhere between the lines. So I absolutely love it. Thank you so much, jeffrey. You've worked with hundreds of founders and investors. In simple terms, what really makes a startup fundable today, beyond just having a great idea, and what are the signals that make investors take the startup seriously?

Speaker 2: 18:34

I think that the fundamental attribute that investors look for in when they make a decision of whether or not to fund a company is forward progress.

Speaker 2: 18:44

And I would say that forward progress, as with many things that are that are time-based, is not a measure at a single point, but rather a measure over multiple points. And that's all to say that. You meet an investor today. They want to see forward progress. They want to see where you're going to be in three months, in six months. They want to see how quickly you can achieve certain milestones, and different investors will have different milestones that they're looking for, whether it's based on their investment thesis, whether it's based on personal interests, whether it's based on whatever it's based on on personal interests, whether it's based on whatever it's based on. Consistently speaking, that forward progress has been what our clients have been asked for from investors in order for those investors to make kind of a go-no-go decision. So what is forward progress and how do you kind of effectively communicate that to investors? Number one it's never too early to start raising capital, and that's not to say that you have just an idea on a napkin. You pick up the phone and you start calling investors asking them for money. I think that's one point that, especially as of recently with AI, with vibe coding platforms, is no longer acceptable for the most part to have an idea on a napkin and call investors to raise $150,000, $250,000 to build an MVP. Now that doesn't really apply to, let's call it biotech If you're developing pharmaceuticals or drugs. It doesn't necessarily apply to deep tech If you're developing some sort of quantum computing or space engine thruster. But by and large, if you're developing some sort of widget or services company or software company, you can most likely get some sort of MVP built for a few hundred, maybe a few thousand dollars and a few hundred or maybe a few thousand hours of your own time. So I think you know from a starting point it's important to start building prior to even going out to look for investors. I think, along the same lines, when you do decide to raise capital as I mentioned before, it's never too early to start it's important to have some sort of we'll call it marketing or socialization period before the fundraise, and the structure and the consistency look exactly the same.

Speaker 2: 20:58

You want to start reaching out to investors, but instead of reaching out to investor day one and asking them for capital, it's more important to reach out to them and start building a relationship. Hi, mr and Mrs Investor, this is what I'm building. I'd love to grab you for 20, 30 minutes, explain to you our thoughts, our progress and what we're working on, because we will eventually be looking to raise capital, or we will be looking to raise capital next quarter, and this allows you to have a less impeding conversation with the investor so that they understand you will eventually be raising capital. They're looking to learn more about you. They're looking to learn more about the business that you're building, the technology, the service, the widget, whatever it is, and they know that they'll ask you for forward progress. You're anticipating that by not asking them for capital on the very first call that you're having Now.

Speaker 2: 21:45

I think anyone listening should take that with a grain of salt. That's all the way. All the way for the earliest stage of company that you have, or if you're raising a fund, kind of the same circumstances apply as you start, kind of getting later in the progress of your company, in the stage of your company, in the stage of your company pre-revenue to revenue, pre-seed to seed, whatever the case may be. You can be a little bit more aggressive in terms of the outreach and right away asking for capital and having kind of an open fundraise. But the idea here is that the fundamental difference and we'll take media stories aside of OpenAI raising 3030 or $300 billion or all these different kind of people who are spinning out of larger organizations being able to raise capital very quickly, by and large, for the average company that is raising capital, most investors will say you know, we'll meet you, we'll maybe hopefully like the idea that you're presenting to them if you've done the qualification and personalization the right way.

Speaker 2: 22:43

And more often than not they will ask for forward progress.

Speaker 2: 22:46

Call me back once you've hit a million ARR, call me back once you've hit 10,000 members or users or active users or monthly active users or whatever the metric that they'll give you.

Speaker 2: 22:58

So on one hand, going into a fundraise, it's important for founders and managers to understand that most investors most often will ask for forward progress, which means that whenever you are calling them initially, it's going to take three to six months to continue giving them those updates of forward progress and then raising capital from them. So hopefully that provides some sort of context for going out and really what's important to investors it's not so much of any one specific go get a million in ARR and then go raise. But it's more about starting the raise, understanding what the investor's criteria are and then peppering them over the course of maybe once a month newsletter, maybe it's once a month call, if they're open to it, but giving them additional information so that when you are ready to raise or when you do need to raise it's not the first time they're meeting you they have information or they have enough information about who you are, what you've done and what you've been working on for them to more easily make a decision.

Speaker 1: 23:56

Brilliant. Now you mentioned AI as well, and of course, ai is changing the ways we are navigating this space one way or another. So how is AI changing the way money is raised from finding investors to doing the background checks and deciding how much a company is worth and how much to invest and how are investors themselves starting to use AI to guide their decisions?

Speaker 2: 24:25

I think it's a double-edged sword. I'm seeing too many people rely on AI a bit too much in both decision-making, modeling, valuations and everything else, and I think that needs to be measured by some sort of manual human interaction. Who has knowledge based around whatever it is that you're doing so. For example, one of our clients had reached out to an investor. They have a DocSend link with their deck attached to it and the investor's response was that they're building an LLM to review company submissions and create investment memos and they're unsure of whether or not they can access that platform. And the moment I saw that email, I haven't responded to a client. But the moment I saw that email is the moment I saw that, whoever the head investor is and I won't name any names they have a broken system and a broken process. I mean there's no way that you can comfortably rely on AI today to do all of your diligence and underwriting and investment memos and, essentially, investment decision making. I mean, perhaps that's their thesis and that's what they're betting on, but I wholeheartedly disagree with that approach, especially when you have a platform like DocSend or Google Drive or Adobe Share or Canva or any one of these other platforms that majority of founders will be using and then your investment LLM whatever you're building doesn't have access to it. I mean, that's a little bit of a ridiculous comment in my mind of how these venture firms are kind of building their funnels.

Speaker 2: 25:49

So I would say that AI is super helpful on both sides. Number one to get investor feedback, like as a founder, for example, or as a manager. You can run your decks through AI. You can run multiple decks through AI just to get a sense of standard or best practices, to start tweaking your presentation and funding information based on that.

Speaker 2: 26:21

Very helpful as a supplement to your process, not as a replacement to your process, especially today when, by and large, there's so much hallucination in AI where it may generate false information and you're none the wiser because you've just entirely off-put your diligence and origination process into AI. That said, I think it can help with valuations and underwriting when you quintuple check the sources that it's using and the links actually pitch deck that they can to be applicable for everyone. So I think AI can be helpful. I think it should be used to supplement existing workflows, but I think the ones the companies or the founders or anyone who is just looking at AI as a 100% replacement to an otherwise human-led process. I believe that they're going to get burned, and probably very quickly.

Speaker 1: 27:39

I truly like and appreciate your balanced-wise approach, because there is still two ways of using AI, even three potentially, because the third one is exactly in the middle. But there are those who are running all in into using AI and delegating the critical processes where they shouldn't be delegated to the AI, and that's the danger of it, and I'm grateful that you highlighted that, risa.

Speaker 2: 28:11

And look, I'll share another kind of anecdote I recently read I don't know what the article was called, but it was an article about how Steve Jobs would hire people and he called it a beer test or people called it a beer test where he would essentially, on his first several hires, he would go for a walk with someone and have a conversation and then go and sit and have a beer with them, and there's just no way, at least today, that AI could do something like that, and I think it's incredibly important for the culture of a business, for the underlining investments that a venture fund is making.

Speaker 2: 28:44

There's a cultural aspect to that as well, because I want to make sure that there is multiplicative effect of my portfolio companies as an investor.

Speaker 2: 28:53

So if I'm investing in 10 companies, there's a way for those 10 companies to work together in some way, shape or form, share ideas, interact with one another, and the only way to do that successfully is making sure that there's no multiple effect. There's no way that you can make two plus two equal five. Then it's just two plus two is four, maybe if you keep them in silos in that way, where you read this about Ford, you read this about Jobs. You read this about Musk. I mean, elon Musk apparently was interviewing every single one of the first employees for, whether it was Tesla or SpaceX or one of those companies probably all of them because he wanted to know who is going to be working for his business and how they're going to be interacting with everybody else. And there's no difference there or when you're looking at investing in a company or hiring or doing anything within looking at investing in a company or hiring or doing any within a business or within a fund.

Speaker 1: 30:04

Synergy is really crucial if you are truly talking about business, you want to grow, and it's really important that you highlight that two plus two is four is not enough If you want to grow as a business. I totally agree, and there are so many episodes in my podcast around the importance of culture, the importance of communication, connection, all those softer skills which are actually oftentimes left outside of the equation but which are defining how much will those two plus two give in the long term? Exactly, jeffrey, many founders think investors just want to see big growth numbers. What are the two, three things investors actually look at first before writing a check? And why are those often more important than just revenue, if they are?

Speaker 2: 31:04

I think revenue is still an important factor in what we hear from many investors ask for and look for. So I don't want to discount revenue from the conversation and whether or not I personally agree with the approach. Even seed stage investors are looking for significant revenues and growing revenues. I think that, to loop back to what I was saying earlier, I think culture, fit and synergy amongst portfolio companies is incredibly important for investors to make sure that they can have a multiplicative effect on all the investments that they're making. I think that, going back to what I said earlier, as well as forward progress, so does this founder have the ability to think about growth, whatever it is digital marketing, affiliate marketing, influencer marketing, on-campus reps, guerrilla marketing, word of mouth, referral types of based businesses but I want to make sure that well, I say I. I think investors want to make sure that there's a solid fundamental idea behind what the company is doing.

Speaker 2: 32:06

Product market fit has been an incredibly important metric that investors are looking at and the uptake and distribution of your product or of your service.

Speaker 2: 32:14

So does the founder, or does the team, or does the company as it stands today, have a solid plan for how it's going to grow?

Speaker 2: 32:22

And that all falls in line into well, what are you going to use my money for?

Speaker 2: 32:26

And I want to make sure that, number one, our clients are not raising too much money to not be able to actually deploy that capital efficiently, but also they're able to stand in front of investor and say, for every dollar you give me, I'm going to generate $1.50 in revenue, $5 in revenue, $10 in revenue, whatever that metric is, and they are acutely aware of how to increase that metric over time.

Speaker 2: 32:52

So it's not just about here's how I'm going to use your money, here's how I'm going to grow the business, but how am I going to get more efficient and more effective at growing the business with this capital? So two or three, I guess, two things that are incredibly important that investors look for in addition to revenue and revenue growth is going to be deployment of capital and how are you actually going to grow the business from a distribution perspective, and that doesn't necessarily have to be tied to revenue. It's more tied to users and active users and growth. And number two is going to be the synergistic qualities of a specific investment as it compares to the overall portfolio companies that I currently have invested in.

Speaker 1: 33:35

Brilliant. I'm sure that it will be so helpful for our listeners and viewers, because this is really something what they can focus on in order to prioritize what really matters for their growth and success. What are the biggest mistakes you see founders make when they go out to raise money, and how do investors usually interpret those mistakes on their side of the table?

Speaker 2: 34:04

Well I can talk about. The most common mistakes I see is just around the consistency and the structure of the capital raise. I think all too often companies think that they can buy a list of a thousand people, do a mail merge or something similar and hit send and just hit a thousand people in one shot and then they wonder why they have such a low open or low reply rate or not a good connectivity rate. I think it's incredibly important when most people don't do is really twofold. Number one is personalization. So if I'm reaching out to an investor for my company, you need to make sure that it's personalized. It's not just hi, you're an early stage investor, I'm an early stage company, let's connect. But rather there needs to be some sort of conviction and tie into the investment philosophy or the investment thesis of the investor and why I would be a good fit for their overall portfolio or why I would be a good fit for their overall portfolio or why I would be a good fit for their thesis or for their investment philosophy that they've spoken about before. So I think that's number one and that's kind of on the initial approach to investors that you need to make sure it's qualified and it's a good fit. Before you even reach out to that investor. Don't send a thousand emails at once. Limit yourself at 50 or 100 on a weekly basis so that you can start putting emails out. Or you can start putting calls and emails out and then start learning from the process itself. Fundraising is no different than when you're building a business or you're testing a new feature or you're doing anything else. If you're doing it the right way, it's a process, there is data that comes off of it. It's important to collect that data and then make decisions based on the data that you're collecting. So that's number one in terms of the outreach On.

Speaker 2: 35:48

The second point is follow-ups and consistent communication. So oftentimes we'll have our clients I mean, we're the ones that set them up with the investors so they're not really doing the outreach we are. Have a call with the investor and then it's just silence, it's crickets. And I think that's such a fundamental mistake because there's been so much time and effort and energy invested in getting kind of going from zero to finding the investor on one of the databases that we have access to, qualifying that investor, personalizing the outreach, doing the outreach, getting you on the phone with the investor has already taken up a significant amount of time.

Speaker 2: 36:29

Follow up with the investor. Follow up consistently with the investor. You should be sending out a monthly newsletter to all of your prospective investors. Very simple. I usually say kind of three sections what I did last month, what I'm doing this month, what I'm doing next month, what I plan to do next month.

Speaker 2: 36:46

But having that ability to have a consistent communication with investors makes them remember that you exist, makes them see the forward progress of what I was talking about before and gives you the window three, four, five months down the road to call them proactively or email them proactively aside from this newsletter or anything else that you're doing and ask them for money and say, hey, we spoke five months ago. I've been sending you monthly updates. Are you available? We're just opening up our round and we want to close our round at that level, or are you interested in participating in our round at that level? So I think those two are kind of the most important mistakes that we try to correct and we try to get in front of On one side, even if founders or managers are not working with us.

Speaker 2: 37:30

Make sure that your outreach is personalized and it's one-to-one as opposed to one-to-many and then, once you actually have the conversation with the investor, recognize how much effort and time has been put into setting up that initial meeting, despite, again with us there's little work for the founders have done on that. But that's where the work kind of begins for the founder. Make sure you're consistently reaching out. There's some sort of form of communication going back and forth.

Speaker 1: 37:56

Brilliant recommendations and now we are getting into building up that playbook for real. But speaking about consistency, I think that that part is suffering more and more. The more we are using ai, the more overwhelmed the processes are creating in the decision makers, the more they are tending to fall into that pattern of missing something, of bypassing something, and I hear many leaders referring to this problem as something raising and growing with time, and I think actually we should make sure that it is getting eliminated from our processes, because this is crucial. If you already initiated the conversation, if you supported mutual interest, then it is also important to take the next step and be clear in your communication. It would save so much time and effort to everybody who is involved. Jeffrey, deal making can be confusing. When signing agreements, what should founders always try to protect and what are the areas where investors usually expect some flexibility?

Speaker 2: 39:21

I think well, okay, so two answers to the first one and then maybe more of a single answer on the second part. What is important is that any agreement is papered, documented and signed, and that any agreement that you actually put your name and or your signature on needs to be reviewed by an attorney, an attorney that knows what they're doing. So not a family attorney, not your real estate attorney, but an attorney who has dealt with these types of transactions before, and I can't say that I see this too, too often as a mistake, although we're not really involved in that process. But making sure that you have the right protections in place and there's a number of them, and it always depends on the devils in the details. It always depends on the terms agreed to and who the investor is and what they're looking for. But really making sure that there's no such thing as a handshake deal. Regardless of how much you trust this investor that you just met or you were roommates with him or her in college, or your second cousins twice removed, any deal with anyone when it comes to a business situation, must be papered, must be legally reviewed, must be signed. That way, there's no hard feelings down the road, all the expectations are set, they're papered, they're in black and white that you can refer to and they're kind of in concrete, so to speak. So I think that's incredibly important.

Speaker 2: 40:40

Having an attorney review it who has background in this is also important. I've seen several times that our founders will come to us and say, hey, we have this family friend who is an attorney, but they do real estate law or they do divorce law or they do probate law. They're going to review our contract and give us the OK, don't do that. Pay the extra dollars, but get an attorney who actually practices in the area of contract law, startup funding, maybe more specifically, because they will have the insight that the other attorneys won't have. And it's not that the other attorneys are not good I'm sure they're really really good at whatever they do but you go to an attorney who does startup law, who does contract law or startup or investment law, because they'll know what to advise you to look out for. So I think those are kind of the two really main important parts of when you get into an agreement what you should really look out for.

Speaker 1: 41:31

Hopefully. Potentially you just save somebody millions and so many nerve cells as well. So it is important to keep in mind that a gentleman's agreement is a good thing and we should still rely on it. But business is business and it is about signed agreements and proper documentation in place, for sure.

Speaker 2: 41:58

And what I'll tell you just anecdotally. We work with a lot of family offices who are spending up their own funds or own businesses or what have you. And a family office that I spoke with I don't want to say recently, many, many years ago, who's still a client of ours, friend of ours, a friend of the firm friend of mine personally at this point, he said something to me once that always stuck with me, which was he is not rich enough to be, and the idea behind it is that when you try to cheap out on certain things and cut corners, it will almost always be more expensive for you down the line.

Speaker 1: 42:36

Exactly, and I love that saying because that's what is really truly important to keep in mind, and I'm guided by exactly that definition myself quite often. More founders are now raising money internationally For those coming to New York or Silicon Valley. What do they need to know about? How US investors think, what they expect and how they judge opportunities?

Speaker 2: 43:08

So I would say about 20 plus or minus percent of our business is going to be international. Whether it's Europe, middle East, some in kind of Oceania, southeast Asia region, almost all of them are looking for capital in the US or US investors. So US investors that are looking at international opportunities are going to be first of all bound by whatever thesis that they have in their own funds. So maybe they can maybe they can't invest in international companies that are domiciled outside of the US and or have their main business operations outside of the US. So one of the expectations most many investors will have they're US-based is that you have a US-based entity for your business. That's not always super difficult and you can go around to different types of states and figure out where to register.

Speaker 2: 43:55

I know that where I'm right now in Connecticut, connecticut will have a ton of different programs non-dilutive funding, grant funding, forgivable types of debt for any companies that are coming into the state, whether it's from other states in the US or even internationally to coming into the state and opening up a business here, hiring here.

Speaker 2: 44:14

So I think that there are a lot of advantages of coming to the US and opening up an office and a presence here. There's a lot of support that's available from many different states in many different ways and forms that can help businesses open and operate here. So I think most US investors will be looking for something along those lines and going international. I think most international investors, by the same token, depending on what business that they're investing in, will more often than not look for that business to expand operations to the US or sales into the US, just based on number of people, disposable income, how people are spending their money. It's great if a business is operating well, profitable or just generating revenue internationally. But I think for almost every one of those businesses that we've spoken to, there's the expanding to the US in terms of sales is on almost every single one of their pipelines or timelines in terms of expansion, just because of the sheer availability of revenue that they can capture here if they position themselves well.

Speaker 1: 45:20

That's great to keep in mind and thank you so much for revealing those details. I'm thinking about artificial intelligence today. It is moving so fast that business plans can become outdated so quickly. How can founders show investors that they are using money wisely, while also proving they can adapt and stay ahead of this change and meet the shifts in the right way?

Speaker 2: 45:48

You know there's no easy way to answer this question and I've spoken about this. I've been involved in conversations around the same thing where you know you'll have Lovable come out. You know, one of the fastest, if not the fastest, growing revenue companies of all time Vibe coding platform raised a ton of money as well. The reality there is is that investors that kind of plowed money into lovable are now recognizing that there's four or five other platforms that are doing things either equally as good or even better than lovable. And, by the way, to your point, with AI, the best company doing whatever it's doing this week doesn't mean that they're the best company doing whatever they're doing next week. So the moat, the ability to kind of build the proprietary nature of like only we can do this or we are the best at doing this that starts to fall away Again when you're looking at the broad category of either vibe coding or a lot of these agentic platforms. What is the best today may not necessarily be the best tomorrow, and I think that's affecting a lot of investors where, even though they have this, oftentimes this grouper herd mentality of putting money into deals, it's incredibly hard and difficult, and more difficult with each day that passes, to invest in any one of these companies, because you almost know that I'm putting my weight behind company A or company B might actually be the better business next week, and then company C the week after and company D the week after that. So, just on an origination and diligence and underwriting perspective, it is increasingly more difficult for investors to be putting money behind those types of businesses. Now what does that mean for founders, or what does that mean for people who are trying to start a business and create it? There's two paths that you can take down, and I was recently at a dinner with Gary Vaynerchuk and he spoke about this and it really kind of opened my eyes to what a lot of startup founders had done over the past I don't know, decade, let's say.

Speaker 2: 47:45

And on one hand, there's the idea of financial arbitrage. It is not necessarily creating a business that wants to change the world, but it's creating a business growing at large enough to hope for some mega rounds, get a secondary off the table or just sell the business entirely within three to five years. There's nothing wrong with that, certainly not from an investor's perspective, because that's kind of how I'm making money on the steps of valuation. And then investor's perspective, because that's kind of how I'm making money on the steps of valuation and then secondaries and sale of the business. But that's one way to think about how to not be affected by knowing that you're building a business, that someone tomorrow will build a business that's better than yours. As long as you can capitalize on the fundraise, as long as you can capitalize on partnerships, all you really need to do is grow to a certain point, at which point you can take money off the table, and that's kind of the financial arbitrage opportunity, and I think it still exists today.

Speaker 2: 48:35

The other opportunity is I want to change the world and you know, it's one thing to say it, it's another thing to actually believe it and execute on that point. I'm building something that no one has and will fundamentally alter the way people do things. When you look at Uber, when you look at Facebook, when you look at Twitter, those individuals that built those businesses did change the world. They fundamentally altered the way that we do things online. There's still an abundance of opportunity now, especially with AI being able to help somebody do that, to create new categories of communication, of technology, of being able to fundamentally change how people interact with the internet or with AI, and I think that that's kind of the second opportunity that people need to be thinking about. And look, at the end of the day, one can turn into the other, the other can turn into one and vice versa.

Speaker 2: 49:30

But when people are thinking about, how am I going to start a business, what business am I starting?

Speaker 2: 49:36

I'm not saying that you necessarily have to figure that out day one, but even before I heard that kind of soundbite at this dinner, I've always asked kind of a similar question when engaging with a new client or a founder what are you building this for? Are you building this to be rich and famous? Do you want your company to be ubiquitous, known across the world? Do you want to build it into a lifestyle business? Do you want to build it just big enough where you don't care if anybody knows your name, as long as you can sell it and make money? And fundamentally, there's a slightly different approach based on the answer that you provide, on how you raise capital, how you build the business, how you think about hiring people and firing people and having operations and marketing the business. So, again, it's not necessarily something that has to be decided day one, but it is something that you should think about when you're starting a business and as you're growing a business, so that you can position yourself the right way to the right investors.

Speaker 1: 50:36

I absolutely love this approach and it's always good to know what is your why behind what you are doing. Then it makes things so much easier. And also, we are living in exciting times and everything is transforming and moving forward in such a fast and dynamic way that we absolutely need to adapt. But at the same time, we still have to keep what is really important in this game in front of our eyes as our North Star, because it is about the moving parts and those parts which are not changing so fast and so much, and it actually helps building long-term strategies based on those quite unmovable parts which are still like constant points, where you can still keep more balance.

Speaker 2: 51:39

Yep agreed.

Speaker 1: 51:41

Jeffrey, what is one outdated belief about fundraising that founders need to unlearn today, and how do most investors actually look at that same situation?

Speaker 2: 51:55

An outdated belief. I mean, that's an easy answer. When founders approach us and want to raise capital in 30 to 60 days, I have the best ideas and sliced bread I'm going to go out. And why wouldn't people invest in me right away? And this goes back to what I was saying earlier about forward progress.

Speaker 2: 52:11

I'm often asked when speaking with partners and kind of affiliates of the firm what is our process of diligence? How do we select which clients we work with? And because we're a services-based business, for a very long time my answer was, quite frankly, as long as the check clears, we'll work with a business Again, barring a nefarious business or some character that we know we shouldn't be working with. But as time went on and as we kept getting asked the same question, what I recognized was well, who do we actually turn away proactively in terms of people that approach us? And if somebody that comes to us says great, we want to use your services, we'll sign up right away. Send us the contract, we're ready to go tomorrow. And oh, by the way, you know, our expectation is to raise money in two months.

Speaker 2: 52:55

Those are the clients, or the founders or the fund managers, that we will turn away immediately, because the idea of raising capital in such a short amount of time maybe maybe kind of existed in 2020, 21 into early 22. Maybe kind of existed in 2020, 21 into early 22. But that was probably a fluke or an outlier as opposed to the norm. The norm is investors need to see forward progress. Investors will likely take their time because they're not incentivized to deploy more capital faster. They're just incentivized to deploy that capital well over time. And when you look at some of the metrics around funds that have invested in 2020, 21, 19, their returns and their metrics do not look good at all, and that's probably part and parcel to having invested too quickly and having undergone diligence in expedient manner. So founders that kind of want or have the expectation of raising in a very, very short amount of time are not thinking about it the right way and going to probably approach the fundraise from a spray and pray perspective and reaching out to as many people as they can as quickly as they can, which is furthering kind of a lack of expectation or lack of understanding of the market.

Speaker 2: 54:10

So what ends up happening is that we have clients that have come to us, have that expectation, we turn them away and then two, three months later they come back to us and say, hey, we reached out to 10,000 people.

Speaker 2: 54:20

Nobody's invested in us yet and there's no personalization, there was no qualification. It was just a shock and approach to throw as much spaghetti at the wall to see what sticks and maybe, maybe on an incredibly high volume basis, there could be some activity. But if you want to raise capital, it's better to do it the right way. It will take, at least initially, what will seem like longer, but I say initially, what will seem like longer, because you will end up raising capital in six to nine months, versus the other side that had the two month expectation, throwing a bunch of stuff at the wall to see what sticks. 12 months later may or may not actually have raised that capital. So better to start slow, methodically, qualified, personalized. Do it the right way, although it might seem like it will take longer for you, but in reality it will be much faster than doing it the other way, where you just try to speed through the round and raise capital.

Speaker 1: 55:15

This is very helpful. And spray and pray yes, it may work sometimes, but overall it's not a sustainable approach and not a sustainable way of running business. So it's also one of those signs of how that company is tending to develop their strategies and approach this game overall, so it's also probably a good sign for the investors. I so much enjoy this conversation and I absolutely love your insights and everything you are sharing today. Jeffrey, if you could give the single most powerful piece of advice to someone with a new invention or brilliant idea who wants to raise money advice that reflects how investors really make decisions, what would it be?

Speaker 2: 56:12

Consistency is key and what will help you win, and I say that from a raising capital perspective. I say that from a business development perspective, both in terms of like going out to get clients, but also from developing your business and furthering it Over time. You might come out with the same idea as 100 people Three months later to what we're talking about now. Some people don't raise money. Some people had misaligned expectations. 20%, 30% of that will fall off. Now you're one of 70. Another six or nine months later now you're a year into it. It was too hard, people couldn't afford it. They spent money the wrong way, they weren't consistent. They're giving up. Now another 30, 40% fall off. You're one of 50. And you keep going along that path until you end up being one of 10, one of 20, one of five, one of one and you're the last man or woman standing. So it's something that I've always taken into heart. It's something where you know hindsight, being 20-20, maybe if I stayed in real estate, we would be having a very different conversation. I'd be at a very different point when I started this 10 years ago and almost every single day it's just about consistency putting yourself out there, making sure people know who you are, what you're doing, making sure people understand what your conviction is and how you're actually making some process better, and eventually you will be the last person standing that does what that person does, or even if it's not the last person standing, you'll be the oldest person standing, and I don't mean that from like a age of you perspective, but an age of whatever you're building perspective. Right Like now.

Speaker 2: 57:50

I can say we are a 10-year-old investment bank that focuses on startups and early stage companies and emerging managers. Yes, I'm sure there are other companies out there that are a year or three years old, that are doing the same thing. Maybe, maybe not in the same way as us, but there's no company out there that has been around for 10 years doing what we do there. Just there isn't, and I'm comfortable enough to say that only because we stuck it out and it's. It's not been easy. It's it's, you know, 10 year overnight success, as one of our other clients told us one time. But the sheer fact remains that in another 10 years, even if somebody starts today and another 10 years, if they say they've been around for 10 years, we'll be around for 20. And that carries a significant amount of weight with our clients, with the investors that we interact with, with all of the different stakeholders in our business that we engage with on a day-to-day basis. We have been doing this for longer than anybody else has.

Speaker 1: 58:48

Fantastic. It resonates so much with my credo and how I run my business, so it really touched my heart. But I see so much value in it, so this is super valuable. Our listeners and viewers were lucky today to get into this Harvard playbook with you and I'm so grateful to you for being here, sharing with us your wisdom, your experience and your vision. Thank you so much for this conversation, jeffrey.

Speaker 2: 59:24

Likewise, thank you so much for having me, emi.

Speaker 1: 59:28

Thank you for joining us on Digital Transformation and AI for Humans. I am Amy and it was enriching to share this time with you. Remember, the core of any transformation lies in our human nature how we think, feel and connect with others. It is about enhancing our emotional intelligence, embracing a winning mindset and leading with empathy and insight. Subscribe and stay tuned for more episodes where we uncover the latest trends in digital business and explore the human side of technology and leadership. If this conversation resonated with you and you are a visionary leader, business owner or investor ready to shape what's next, consider joining the AI Game Changers Club. You will find more information in the description. Until next time, keep nurturing your mind, fostering your connections and leading with heart.