In that lemonade stand budget, I tried to call the Chicago Tribune. When I picked up the phone, they said “Yes, ma’am.” And I was devastated. And that’s what you get for being eight or nine when you call them. And it was tens of thousands of dollars just for a day. And I knew that wasn’t going to going to work out well. So I did what any entrepreneur does, I start my own business that does a newspaper. And I tell you that that whole story to say really, it was that newspaper that got me started in the entrepreneurial journey because it some real businesses, not passersby that I tried to sucker into buying lemonade.
I actually saw that I had a little bit of a design ability. I’m not that great of a designer, but enough at the time to be able to really start doing design for businesses. So I started a marketing firm. By the time I was 14, we had 200 clients in 25 countries and 13 people working with me. So that was really where I got my start. From there, I did several other software startups and medical device startups and just had a great journey, learning many things along the way. But getting my start all I really, I did truly start with a lemonade stand.
Robert Leonard 2:58
You’ve certainly come a long way from a lemonade stand. What have been some of the biggest challenges that you faced during the beginning stages of founding a startup?
Ryan Vet 3:06
A lot of people see that startups are this glamorous, exciting… You see the Silicon Valley stories that are awesome. And you think, that can be me? And yes, absolutely, it can be you. But they only show you the good things. And we live in the Instagram day and age where you don’t post what went wrong on your trip. And so I think, just the bumps along the way, and especially younger, even before I was in college trying to do some of these things. Or when I was in college with my first, what I would call Big Boy startup, which was a software startup.
People don’t take you seriously always when you’re younger. And so really, being able to prove, but also do it humbly that you knew what you were doing. And you could take care of their marketing or you could take care of their branding, or whatever the need was. So those are some of the challenges at the beginning. And then every day, you’re faced with the decision: are you going to push on and keep going? Or are you going to throw in the towel? And I think that’s why a lot of founders ultimately give up.
Robert Leonard 3:59
Yeah, they don’t show all the nitty-gritty. Everything looks like an overnight success, right?
Ryan Vet 4:04
Robert Leonard 4:05
So in your current startup, Boon, you’ve been able to run a successful capital-raising campaign in an area that is relatively new in comparison to other funding avenues that are available. Can you talk to us about your experience using equity crowdfunding to help get Boon off the ground?
Ryan Vet 4:22
Absolutely. So having been in a number of startups, and having worked with venture capital on angels and things over time, I brought this idea of equity crowdfunding to them. And so, I really started talking to them. Now, this is really like an initial private offering of your stock that you can give and sell just like it was on the publicly traded market, except it’s private. And thanks to the JOBS Act in 2016, it actually made it legal for just about anyone to be able to invest. Whereas before, you had to be an accredited investor, which was $250,000 in annual income for the last several years or a million dollars net worth, excluding your primary residence.
So you look at America, you know, there’s a very small subset of people who have that ability to invest in startups. So 2016 year rolls around, JOBS Act came, and then a lot of professional investors gave a lot of… there’s just a lot of stigma associated with equity crowdfunding. Is that the fallback plan? You went to all the angels and they said, “No.” Did the VCs reject you? And so I face that stigma a lot. But I went to some people that I knew in the industry, and that were investors, and I’m an investor myself, and I said, “Hey, I’m thinking about this. And here’s why.” So for Boon, our motto is practicing good. And the idea of giving everyone an equal opportunity. And we want to do that with equity crowdfunding.
So we partnered up with Wefunder. There’s about 44, that number is also changing daily. But there are about 44 platforms that are approved by the SEC to be able to offer these initial private rounds. And it’s just like investing, except you can invest as little as 100 bucks. And it really allows peers, it allows an industry to rally behind you, and invest in your platform before you go to traditional angel money or even institutional money later on down the road. So it’s been a unique journey. And I know we’re going to talk about it a little bit more throughout this conversation. But that’s really why I want to do it, I want to do something different. I raise money in many other ways. And I was like, this is the right startup to give it a shot.
Robert Leonard 6:22
How is it different from Kickstarter?
Ryan Vet 6:24
So Kickstarter, you’re giving away your money, if you put 100 bucks, you’re going to get a t-shirt out of it. And if you’re lucky, the restaurant that you put 100 bucks in might open, or that brewery might open, and you might be able to drink a pint of beer there someday. Basically, we could go on Kickstarter in the next two minutes and start a campaign and just raise money. And that money, you never see again. I think one of the best examples, and I don’t have the numbers in front of me.
But Oculus Rift was a Kickstarter. And I think they sold for like almost a 1000-x two years later, for what people invested. So if you put 100 bucks into Oculus Rift, when they were on Kickstarter, you would have got $100,000 two years later, on real numbers. However, they were on Kickstarter. So guess who got that money? The founders, it was 100% owned by the founders. You weren’t buying stock. You weren’t buying securities. So with equity, crowdfunding, you’re buying stock, just like you would in a publicly traded company. The difference is, it’s still a startup. So it’s going to be much riskier, the stock isn’t quite as fluid. So you can’t buy and sell as you want. But you’re actually investing. So when you put $100 in or $500, or $10,000, whatever number you want into something that’s on equity crowdfunding, it’s still an asset. It doesn’t become a liability or a sunk cost. You actually get equity in that startup. And if that startup does well, you’re going to make a lot of money.
Robert Leonard 7:40
So why would somebody, as the founder, want to go an equity crowdfunding route rather than Kickstarter? I mean, I get it from an investor’s perspective. You definitely want to own a part of the company, you don’t want to give your money away for free. But as the founder, why would you choose to give away part of the company, when you could just go to Kickstarter and retain the whole company?
Ryan Vet 8:00
I’m saying, “Hey, I’m not just doing a shot in the dark, kind of a flash in the pan startup or product.” Because on Kickstarter, you see a lot of products and restaurants and movies. It’s sort of, I mean, those aren’t the only categories. But you do see those more on something like Wefunder, StartEngine, or SeedInvest. You’re actually seeing people say, “Hey, I’m going to write that big check. And it’s a new deal flow.” So if you are an investor, deal flow is sometimes hard and sometimes geographically limited by the angel network you’re in and things like that. And so, more and more professional investors are actually looking to some of these equity crowdfunding platforms for some of their big deals.
Robert Leonard 8:35
Now, can you get the same virality aspect of equity crowdfunding? I know, like Kickstarter, you don’t get equity. But a lot of times, the founders can go that route, because yeah, maybe they’re only getting 1500 dollars from a person at a time. But there’s so much virality behind that, that their products go just absolutely go viral, and they raise two-x of what they were looking for. So can you get that same aspect in an equity crowdfunding?
Ryan Vet 8:59
You absolutely can. And there are many campaigns that have done that. And you do see a lot of success in the beverage industry right now, particularly on equity crowdfunding. So I would definitely say, going with Boon, which is a software, I would say, almost borderline enterprise software company and going the equity crowdfunding route, it was a bit more challenging than I would have hoped. However, for those more consumer products, equity crowdfunding, you’re going to get that same virality that you’re going to get with Kickstarter, but you also get people who are invested in your company. And you never know if that person is also going to have deeper pockets that when you go to raise your series A or whatever your next round looks like, they might come in, or the connections that they bring, whereas someone who invests in Kickstarter is really just looking for that one and done t-shirt, free bottle of beer or whatever it might be.
Robert Leonard 9:45
You just never know who that investor is, you don’t know who’s in their network, they could bring a lot of money to the table, without you knowing it. Now, for those who are really familiar with Shark Tank, does it kind of allow people to become a shark, if you will?
Ryan Vet 10:01
Oh, absolutely. I mean, you don’t get to have someone walk in front of you. And you know, you don’t get to be Mr. Wonderful and say something insulting about, like, you’re dead to me. But I would say there are also some Shark Tank companies that I’ve invested in, both before they were on Shark Tank and after they’re on Shark Tank over the last several years via equity crowdfunding. As an angel investor, you get the dozen deals a month that are in your general area. Or maybe if you’re lucky, someone will travel. But that’s the extent of the deals you see. And usually, a given region is confined to a type of industry to some extent and so, you see a lot of the similar deal. With equity crowdfunding, you get to see the whole nation, all sorts of different deals, and it’s just absolutely spectacular.
Robert Leonard 10:43
So if someone listening to the show right now wants to try raising money for their own startup using equity crowdfunding, what is the best piece of advice you can give them to help their campaign be successful? On the other side of that, what is the biggest thing that you would caution them on?
Ryan Vet 10:59
I would say, first of all, whenever you go to fundraise, people are going to do due diligence on you. They’re going to look at your company, make sure your numbers are what they say they are, your technology does what it says it does, etc. Equity crowdfunding is still trying to find itself. It’s still trying to figure out how to best make certain things work and how their technology works, and all of that. So interview the company, and figure out what platform out of the 44ish platforms that there are right now. Figure out which one works best for you, because some focus on robotics, whereas others focus more on the beverage industry. While others focus on software and some n consumer products. So figure out which one has the audience that matches your company, and do that well. So I would say that first of all.
The next thing I would say is you still have to raise money. And I think a lot of people forget that. They just think, “Okay, if I put this campaign on. It’s automatically going to go gangbusters because there’s 150,000 people that have invested in a startup on this platform over the past three or four years.” That’s not true at all. You still have to do fundraising, you still do pitches, you still do all of this. And I would say, with the fundraise, I am right in the middle. And this has actually been the most difficult fundraise I’ve ever done for the lowest return.
There are two reasons. One, I did fall into the trap that “Oh, people are going to be so excited. The audience I’m pitching 500 bucks means nothing to them…” which those are both true. But I undervalued two valuable things. One, people who are unfamiliar with investing, I thought it would be an easy jump. It’s not, they’re not familiar with investing. So just like if you were to go to knock on, you know, your wealthy neighbors’ door, and they’ve never written a check to a startup, today’s not the day that they’re going to start most likely. You really got to work on that. So that was the first mistake I made.
The second opportunity in the area where it just shocked me is I have a fairly decent network of angel investors who have supported other things I’ve done in the past. And I have been able to call on them before and they will write a check. So I’ve gone to the same people. And because I chose to go equity crowdfunding, they devalued what I was doing. So that was a really hard learning lesson. Some of the people that I had valued me and said, “Whatever your next venture is, here’s what I’m going to give” were the very people that said, “Oh, let’s just wait till the series A. I don’t know about this equity crowdfunding. I don’t want to sign up for an account. I don’t want to do it that way. Send me an old-fashioned contract.” And so that’s been really, really surprising and challenging.
And so the good news is you can raise a simultaneous series D, which is more of a traditional raise in conjunction with a reg CF or a crowdfunding round. The problem is it doesn’t show up. So I could have raised $10 million on the back-end on a reg D with the people that I’ve worked with in the past, and you only see the hundred thousand dollars that I’ve raised via the platform. So there’s just a lot of things, especially if you’ve done fundraising before, you’ll be surprised at how challenging it is to overcome the stigma of that.
Robert Leonard 13:57
You said you wanted to be different. But given that stigma, why would you go that route?
Ryan Vet 14:01
I wanted to try it. And I don’t think there’s been a lot of people that have come out and talked about their successes and failures on equity crowdfunding. I know I shared some things that might not be the most positive. But on the flip side, I’ve met some of the most interesting people that I would have never, ever, ever crossed paths with, that have invested into Boon. And so I’ve got to meet those people. And we got picked to be the first startup score reg CF from FastCTO, which is a huge honor. Things like that, that would have never ever happened without it.
So there’s a lot of non-monetary value I have received out of equity crowdfunding, plus the learning and being able to educate others now as they go look and pursue startups. If you’ve got a product that people are going to love, absolutely go reg CF. It makes sense. People are going to put their money behind it, they’re going to get equity in your company. And they’re also going to get the first version of your product. If you got an enterprise platform that’s a little bit more complicated to explain, go the traditional route. And so it just really depends what kind of company you’ve got going on.
Robert Leonard 15:01
So all of that being said, would you do it again?
Ryan Vet 15:04
I would under different circumstances.
Robert Leonard 15:07
And by that, do you mean a different product?
Ryan Vet 15:11
I do mean a different product. I don’t think I would do it again for this type of product that’s in a niche market that has a finite number of people that are interested in the product, and would-be users of the product. So I definitely, definitely would do it again. I mean, I own a couple coffee shops and wine bars with a business partner. And if we ever wanted to scale that real big, and bring it to a city near you, I think equity crowdfunding would be the exact right route to go, because people are going to get behind it. They’ll be able to come into the physical space and say, “Hey, I’m a part-owner of this coffee shop.” That is an example of one that I would definitely do that way. Again, it just depends. I would do it again. I would be much more careful in making sure the platform that I chose is aligned with the type of investors I need. All these platforms are so good, and they have so many loyal investors. You just have to figure out which most aligns with what you’re trying to achieve.
Robert Leonard 16:02
So there are two things I want to talk about there. The first thing is the alignment. Now, I understand why you would need an investor base that matches the business that you’re looking to start. But then again, do you run the risk of potentially being just a number and you know, in a pool of so many startups, whereas if you maybe go on a platform that your product isn’t the same as everything else, could you stand out more and maybe raise more money?
Ryan Vet 16:27
If they’re only investing in robotics. There’s one platform that pretty much like does robotics and biotech only. IF you try to come in with a snuggy on that platform, it’s not going to work. So you do stuff to know the investor base to some extent. And the other thing is, there’s just not a lot of research on equity crowdfunding. It’s been around for three years. It’s a very, very new thing. Not a lot of startups have done it. And so breaking through the noise with a startup isn’t that hard. There’s only, you know, a company or two coming on a week in equity crowdfunding. So it’s not like you’ve got thousands and thousands of startups. And now that number is increasing rapidly. And now you’ve got kind of a secondary market with companies like Kingscrowd, who are doing essentially Wall Street Journal or Morningstar valuations on equity crowdfunding startup, which is awesome.
Robert Leonard 17:13
Yeah, that makes sense. You definitely can’t pick a platform that is exclusive for one type of product or service. But I think the other really interesting thing for equity crowdfunding is this idea of owning part of the business that you’re investing in. I think new investors and specifically millennials really love that idea of actually being an owner of that business. So by really making it known that investors are actually an owner in that business, when they invest their equity crowdfunding, unlike through Kickstarter, I think that can be huge for equity crowdfunding.
Ryan Vet 17:44
Absolutely. I mean, you get a stock certificate from some of these companies. It’s real stock. And I think people don’t understand that. They hear about stock and so many startups these days are like, “Hey, come get stock options when you come to our company,” which is great. If you have the opportunity and the company’s good, take it every time. Take it. But a lot of people don’t get exactly what you’re saying, you are buying a piece of the company. This is not going into the trash, you can put this on your balance sheet. Now it is going to wait for five to seven years, startups take a little bit of time to materialize. And I think that’s the other thing that scares some people. So like, I can’t part with my $10,000 for seven to ten years. It’s like, well, you know, maybe you can’t and I think that’s one of the big disadvantages of equity crowdfunding is anybody can invest, and there are limits on how much they can invest. But if anyone can invest, and they invest too much, they can get in a predicament, and they’ll be coming knocking on your door to get that money back. And there is a window in which they can get that back, which makes it difficult for the raise. But after that, that money is locked up till there’s some sort of a liquidity event.
Robert Leonard 18:49
What does that period look like where they can get their money back?
Ryan Vet 18:52
So that’s probably the biggest shocker I have in this equity crowdfunding thing. It blew my mind. So I’ve been told, and research showed the average across all platforms, about 5%, or maybe 10%, churn on investors. I was always under the understanding that you had 48 hours to withdraw your money. The reality is until the first round closes. So if your event, if your raise started in June, which mine did, and if that happens, up until my campaign does its first close, you can pull out your money. The first person in put in $16,000, the very first investment we got on Wefunder. If they wanted to, they could take out that $16,000 that’s been sitting there, that has been part of our total. But they could take that up out until the last moment. And so that’s a huge issue. And I would say from experience, we probably hit closer to 20% to 30% sure-in. So, we’ve lost a substantial amount of money in this sort of bail-out type environment. So it’s part of the thing that the government has put in place so that someone who realizes they invested too much, or new information comes in, there’s still a little bit of leeway. But it’s a pretty difficult thing. So I would say, keep your campaign as short as you can. Really focus on hitting hard as quick as possible. Close your first tranche as quickly as possible. There are minimums, so you have to hit that minimum. But as soon as that’s closed, close it. Bring in the money.
Robert Leonard 20:19
Yeah, that’s really interesting. I didn’t know that. But I kind of liked that idea, honestly, for investors, just because I think about the people that might be investing in that. And for me, 5, 7 or 10 years is my average holding period, that’s when I go into positions, assuming. But for other people who don’t think that way, I think for new people, I think it’s interesting that they have that in place to kind of save them a little bit from themselves if they don’t know necessarily what they’re getting into. But from the entrepreneur or founder perspective, it’s interesting, because that entails an interesting dynamic, that you definitely have to make sure you play your cards right. And you just have to make sure I guess, put as much information out there as you can. So people are aware of everything that they’re getting into.
Ryan Vet 20:59
Absolutely. That’s been interesting. I am glad that people who aren’t accredited investors, who might not have accumulated wealth, do have the ability to pull that out. And again, pay their rent or whatever that might be. But it’s very surprising. It is definitely surprising. And that’s a risk that you run. So plan to raise probably 20% of more than you thought you’d have to to be able to hit 100% if that makes sense.
Robert Leonard 21:23
Yeah, absolutely. That’s really interesting. So we talked a lot about equity crowdfunding, let’s shift gears a little bit and talk about some of the other fundraising tactics that you’ve used for previous startups. Can you explain some of the other fundraising strategies that you’ve used, that you were successful with, and how someone listening to the show might be able to replicate those for their own business?
Ryan Vet 21:43
Absolutely, depending on what you’re doing, you really have to figure out kind of what your trajectory is, if you’re doing a business. Let’s say you’re opening another coffee shop and wine bar like mine. Venture money is probably not what you’re going to want to do. There’s going to be a cap to some extent on what you’re going to earn on that business. And maybe alone, or the SBA, or friends and family that are going to do some sort of personal loan deal with you or invest with you is the right option. Because you’re not going to get a 10-x multiple on venture capital. It is going to take way too much. And honestly, they probably wouldn’t invest in it. So you know, if you’re doing something more like that, that’s a great business, you can make a lot of money. That’s one option.
And then I would say where I enjoy playing the most, and where I have put my money… I’m part of a venture fund, and part of angel networks, I have raised money from angel networks, I have raised money from VCs. I think that is probably for any business that I would say a scalable, so any software platform, any product that you can put a little bit of money behind and rapidly expand it and have good margins, that’s when you really want to go to venture capital or angels. You’re going to start with angels, usually, unless you just have a homerun idea or know people, I’m usually going to start with the angels’ route. Get a concept together, maybe generate a little bit of revenue. And then you’ll be able to invite some of the venture capital players into that.
Robert Leonard 22:59
For people listening to this who don’t know what is a seed B or a seed C round.
Ryan Vet 23:04
Basically, and this is not how every raise goes, but usually, it starts with either friends and family round or bootstrap round. That means you go out and you get maybe $50,000 or a hundred thousand dollars, and you’re building your prototype, and you’re saying, “Hey, I have an idea. I think there’s product-market fit, let’s build this together.” And so that’s really the friends and family round, bootstrap part, when you’re either putting the money in yourself or you’re asking your parents or aunts and uncles or, you know, your rich second cousin on your mom’s side, whatever it is. You’re getting a little bit of money.
If you start to prove that out, usually you go into a seed round. The seed rounds are usually a little bit bigger. You’re talking maybe 100 to a couple hundred thousand dollars. This is where you’re showing that your product really does work more than your neighbor is using your lawn mowing business, you’ve got a couple people, whatever it is, and you’re starting to grow. Then once you’ve shown that, hey, you can actually… your product works, people like it, and you can scale it, meaning you can, without a lot of money, be able to replicate what you’ve done. So the more people you have, your cost structure isn’t going to change that much, meaning you’re more profitable. That’s when you go to the venture capital world. And that’s when you get a series A.
So a series A is just for a round of money that you get, usually after the seed and friends and family round. And then that go series A, B, C, D, so on and so forth, until I guess they run out of letters. I’m not really sure what happens once you get past that. But usually around a Series B or C is where most people start to turn cash flow positive, meaning they’re starting to actually make money. And you have a couple other options whether you get acquired or whether you IPO or whether you get private equity investment. Every company is so different. So that’s just a big generalization of generally the flow of how it works. But there’s obviously exceptions and different paths you can take along the way.
Robert Leonard 24:56
You mentioned there the different types of investments that fit different types of companies. But what we haven’t talked about is whether a startup should raise capital at all, you know, up until this point, we’ve made the assumption that every startup needs to raise capital. But what about the ones that don’t? I had a very successful entrepreneur, Nathan Laka on the show. And he talked about not raising capital, he actually recommended against it. What do you think about startups needing to raise capital? Do you think every startup should? Do you think a certain type of entrepreneur should? Different types of businesses should? When should they pursue outside capital?
Ryan Vet 25:34
Yeah, I would say, I’ll start with this, you are indebted to your investors. I mean, there is just something about this weightiness of taking other people’s money and having to be a steward of it. And spending that wisely. Now, some people have no regard for other people’s money and think it’s a free for all, but the majority, all of a sudden, feel this extreme pressure. So know that if you do take someone else’s money, that is a big burden, that is a big responsibility. You’re taking someone else’s hard-earned cash, with the thought that you’re actually going to multiply that money for them. So that’s the burden of it. But should all all startups raise money? Absolutely not. There are just some startups that shouldn’t raise money at all. Because it just doesn’t make sense for them, they’re not going to be in a point where they can scale or be profitable enough to make that money back. So again, I go back to the example of a coffee shop. You’re not going to want to raise necessarily money there, unless you’re going to open, you know, thousands of stores and pull a Starbucks. You’re never going to return that investor’s money and make it worth it, if you can bootstrap a company. So one of my first, it was actually my second startup that I did, I didn’t raise any money. I went in with a business partner, we self-funded it, and we started to grow it and we were able to flip it, without having to raise money. Now, could we have grown it bigger and maybe flipped it for more? Potentially, but we were really happy with kind of that trajectory.
And then you’ve got the startups that okay, these are going to be hundred million dollar startups or half a billion-dollar startups. Or maybe if you’re lucky, the next unicorn startup. If you’re doing one of those, I would definitely consider raising capital. I think one of the good questions to ask is, do I want 10% or let’s say 50% of a $10 million company? Or do I want 10% of a billion-dollar company? Well, you obviously want the latter. And so, just really understand what are you willing to give up. And I think some founders are really stingy and won’t give up any equity, and they end up shooting themselves in the foot. And then I think some founders might be too generous and be like, I don’t really care and give up too much. So you just really have to say, okay, this is where I’m going to be 5, 10, 15 years from now. This is how much I think the company’s going to be worth, the company is going to be worth this. I want to retain this much equity. And basically almost work backwards from where you think you’re going to be able to get the company to be.
Robert Leonard 27:47
What I really liked about what you said there was the talk about being indebted to the people that give you money, whether it be an angel, or VC, or whoever it is. I think that’s so important to remember, for anybody that’s listening to this, that might want to raise capital for their startup, because the second you take that money, you essentially have a new boss. And that’s something you need to keep in mind. Because when you become an entrepreneur, a lot of times you become an entrepreneur because you don’t want a boss. So just keep that in mind. It’s something that’s very interesting.
Now, you talk about if you’re going to scale and potentially become a unicorn that you might want to raise funding. How do you know, how does somebody know? I think somebody could have an idea that they think is amazing, where they bring it to other people. And you know, they might think otherwise. So how do you get a realistic expectation of what the future value of your business might be? And then, therefore, how to go about raising capital?
Ryan Vet 28:40
Find someone who will be honest with you and help you look at whether or not you can scale it. That’s a fairly black and white thing like, “Can this product be scaled? Can you get enough raw materials? Can you develop the software? Is the market a good fit?” Things like that. Someone that understands the market, because you’d be surprised how many ideas are already out there, and you just haven’t heard of it that is trying to do the same thing. So first of all, find someone that can be honest with you. And then from there, it’s really about your passion. If you’re passionate enough, your passion is going to fuel your drive to succeed. And I really firmly believe that if you say “Hey, you know, I can tell if this is scalable, the competitive landscape, and timing in the market is as good as it’s ever going to be. I’m going to just make this thing take off.” Basically, whatever you set your goal to, you can do it. Now that might mean if your ideas really are out there and out of left field, you’re going to have a lot of rejection. And you’re going to constantly get no. I mean, you can go to 999 angels or VCs, and they’ll say, “No, no, no.” You have to find the one that believes in you and can also partner with you. But if you’re not passionate about it, if your passion fizzles out, either get someone that can reinvigorate your passion or hang up the hat because you’re not going to hit your goal.
Robert Leonard 29:49
Now, we talked about scalability, what… and this is an idea that I think about a lot, and I’m curious to get your opinion here. When I think about it, people think that in order to have a successful startup, they need to have the next Uber or Facebook or Google, and they think they need to be multi-billion-dollar companies in order to be successful. But I don’t personally think that’s the case. I think you can have a 1, 5, 10 million dollar business, or even smaller, just a couple hundred thousand dollar business, where you’re making $5,000, $10,000, $15,000 or $20,000 a month in profit. And that’s life-changing. So talk to us about that idea, in terms of scalability and what size people need to get to to be successful. And just overall, that idea.
Ryan Vet 30:31
Yeah, I’ll start backwards with the idea of success. You ultimately define what success is, what does that mean for you? At what point? Do you have happiness? Or financial freedom? Or is your school debt paid off? Or can you invest in startups when you want to? Everyone’s view of success is different. And it changes. I mean, right now I’ve got a baby on the way. And my wife and I are expecting that changes a lot when you think of success. It’s like I don’t really care how much is in my bank account. It’s like, where’s my time? All of a sudden, the most valuable thing changes. So to answer your question from the back, first of all, understand what success is. If you want a cash flow business, that gives you flexibility, so you can do what you want, travel, be wherever you want, and you can make $10,000, $15,000 a month, $20,000 a month, whatever that is, depending on where you’re living, then that’s success. Maybe you just want a bunch of cash-flowing businesses.
I know a guy that all he does is have like 50 little cash flowing businesses, and he works for himself, doesn’t have investors. That’s great. Maybe what you want is you want to live that lifestyle that comes with a life-changing 100 million dollar check. And you can do that. But at the end of the day, what does 100 million dollars buy you that you don’t have today? Are you happy with where you are? Do you have the friendships and relationships that you have? Because if you go through a startup, chances are that something’s going to interrupt those friendships, those relationships. And so I would really challenge anyone that’s trying to figure out what they’re trying to do, who raise money, grow their company… Figure out what success looks like first for you. And then do that. And don’t forget, hear what other people say, because ultimately, happiness is far more valuable than anything you have in your bank account.
Robert Leonard 32:05
Yeah, that’s exactly one thing that I’ve found is that maybe having 100 million dollars is your goal. And if that’s the case, fine, then go for that. But I think that a lot of people, and I found this for myself included, you don’t need as much money, even to get the wildest things that you thought you did. You know, you actually run the numbers and you look at it, yes, you need a lot of money, and you need a lot more than average. But you don’t need a billion dollars to get that really fancy car or that house you want or whatever it may be or that watch… And the reason I bring this up is because I think you can approach business differently. I think you can be more patie. I think you can build your business with a much higher probability of success if you go that route, rather than just, you know, charging ahead as fast as you can, trying to raise all this money from VCs, angels, and trying to scale super fast. Whereas if you just take it a little slower, you have a much better chance at success.
Ryan Vet 32:58
That’s so true. And I think the thing we so easily forget, Robert, is that at the end of the day, people are what make businesses businesses. The people are the people that make the business, the people are the people that fund the business by buying or being customers. And at the end of the day, there’s still people at the end of it. And it doesn’t matter how much money you have. People aren’t going anywhere. Everything I’ve done is trying to inspire other sorts of positive change, because at the end of the day, it doesn’t matter how much money is in your bank account, if you have the friendships and the relationships because you’re not taking your money with you.
Robert Leonard 33:26
Now, Ryan, we’ve talked a lot about raising money from the perspective of the entrepreneur and from the startup perspective. But you’ve also been on the other side, you mentioned that a couple times. Let’s dive into that a little bit deeper. Talk to us about your experience from the perspective of an investor in startups.
Ryan Vet 33:44
Yeah, it’s a fun, fun ride. And it’s fun to come in at different stages of startups. I’ve come in early on. I’ve come in with ones that are generating some capital, one that are doing, you know, later series raise. And each one brings so many different benefits and excitement. I think for me, I really like coming in on the ground floor. And I love being able to mentor when I have a chance to hopefully share some advice and say, “Hey, there’s a huge pothole right there, you can’t see it. But trust me, I saw it, and I hit it and lost a tire and so don’t do it.” And so I love that. So I’ve invested through kind of a venture fund, an angel network, and then equity crowdfunding, actually. So those are kind of the three platforms through which I’ve invested or three outlets, and each one has its own benefits.
With a venture fund, you’re not picking the deals, you’re picking the fund. And so you have to trust the partners, you just have to agree with the philosophy of the fund. And then with equity crowdfunding, you’re 100% in control. And I think one of the biggest things that you need to come up with on your own is, what is your investment philosophy? At first, anything that was shiny, I invested, in which was just about everything. And it might be only a little bit here, they’re not massive checks. But the risk you run with that is, you can’t learn. I mean, if you have such a diverse portfolio, and you haven’t taken the time, and you’re just throwing a little bit of money everywhere, some might hit it, some might not. There’s a great book by Jason Calacanis, who’s a big angel investor, called “Angel.” And he talks about some great angel investment strategies. He’s talking about writing bigger checks. But even if you don’t have the means to invest $5,000 in 100 startups. Like he talks about, invest $500 in 10 startups and take that $5,000 and do that via Wefunder, SeedInvest or StartEngine, any of those. And start figuring out what your portfolio is. Do you invest in entertainment? Do you invest in hospitality? What’s your niche? And start investin. That’s the only way you’re going to learn. And guess what, you’re going to lose money. That’s part of it. But hopefully, you strategically lose money. And some of your investments also make all that loss back, and then some.
Robert Leonard 35:51
What does equity crowdfunding look like from the perspective of the investor? So I understand you’re getting a percentage of the company. But do you have any say in the company, do you get to involve yourself with the co-founders? Do you have meetings with them? What does that look like? What is your involvement?
Ryan Vet 36:07
Every company’s a little different and that’s actually…. So there’s no regulation on communication other than you have to put an announcement out at 50% of your As, a 100% of your As and yearly. That’s it, which you’re going to get that with just about any startup anyway. Every company has different involvement. And so it just depends on what you want, and what you want that involvement to be.
Robert Leonard 36:28
So it sounds like it’s really on a company-by-company basis. You mentioned that you’ve tried to help people avoid hitting the same potholes that you have. What are some of the biggest potholes that you’ve seen? What are some of the biggest mistakes you’ve seen startup founders make?
Ryan Vet 36:42
Most startup founders are very visionary. So if you look at their personality type, they see the moon and they say, “Oh, I could walk there.” Walter Isaacson calls it in Steve Jobs’ biography the reality distortion field. So there’s some part of that craziness that makes entrepreneurs successful. But at the same time, you have to have those weights at the bottom to keep you grounded, so you don’t float away. And so I think that’s one of the biggest things. You just don’t know what you don’t know. And having someone there that keep you grounded, but still let you float, is really, really important. So you don’t want someone that kind of poo poos all your ideas, but someone that keeps you grounded and lets you float. I think the other is part of it, and this is a really big risk, is if you’ve never had a million dollars in your bank account, which most people have not, and you get a million dollars of investment, startup founders say, “Oh, well, now I can add this benefit and get this person to raise and do that.” And they just spent a million dollars before they knew it. It’s really easy to do when you see that in your bank account, especially when you’re making money, and people are believing in you. And you get on this kind of emotional high. But it’s a huge, huge, huge risk. And so just very carefully plan out and stick to your budget, especially for the first six months when you get new investment.
Robert Leonard 37:53
If you were to boil everything you’ve learned from advising to investing in and starting your own startups, what is the number one piece of advice that you’d give to a millennial who’s listening to the show today that wants to launch their own startup?
Ryan Vet 38:07
People are first. Period. They are with you before you started, while you’re doing it, and after. And there’s a lot distractions, it’s really easy to get sidetracked by a huge check from a VC firm or potential acquisition, or a big deal that you just got or whatever it might be. And don’t ever forget, people are first and you’ve got to place your value on them, because they’re the ones who are going to be motivated to make your investment in them grow bigger. And they’re the same people who invested in you, so you don’t know who it is. So don’t do it under false pretenses just because you want somebody’s money, you don’t know who you’re talking to, you really don’t. And the reality is people are precious. And we should always put people above ourselves. Because when we do that, it also keeps you kind of in this healthy reality check of what you’re doing. So that would be the kind of the summation of everything we’ve talked about is put people first.
Robert Leonard 39:04
I’ve really enjoyed our conversation today, you’ve provided a lot of value for our listeners. Where can people learn more about you and all the things that you have going on?
Ryan Vet 39:12
Well, Robert, I appreciate the opportunity. It’s been fun and thanks for such thoughtful questions and people can reach out to me. I’m pretty much on any social media platform. My handle is @ryancvet, or go to ryanvet.com, and you can find out all about me. You can find out about Boon at doingboon.com. That’s doingboon.com. And you can learn more about Wefunder and StartEngine, and all the other crowdfunding platforms too just by googling equity crowdfunding and seeing what’s out there.
Robert Leonard 39:46
Awesome. Well, thank you, Ryan, very much. I’ll be sure to put links to all of Ryan’s content, his website, Boon, everything that Ryan’s a part of, in the show notes so you guys can check it out. Thanks again for your time, Ryan. All right, guys. That’s all I have for this week’s episode of Millennial Investing. I’ll see you again next week.
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