1 00:00:04,400 --> 00:00:12,360 Speaker 1: Welcome to Tech Stuff, a production from iHeartRadio. Hey there, 2 00:00:12,360 --> 00:00:15,920 Speaker 1: and welcome to tech Stuff. I'm your host, Jonathan Strickland. 3 00:00:16,040 --> 00:00:19,239 Speaker 1: I'm an executive producer with iHeartRadio. And how the tech 4 00:00:19,400 --> 00:00:22,520 Speaker 1: are yet? You know, there's been an awful lot of 5 00:00:22,560 --> 00:00:26,560 Speaker 1: talk about tech and money recently, whether we're talking about 6 00:00:26,600 --> 00:00:32,880 Speaker 1: cryptocurrencies or the collapse of Silicon Valley Bank a SVB. 7 00:00:33,560 --> 00:00:36,320 Speaker 1: Plus there's been talk about how the startup trend is 8 00:00:36,400 --> 00:00:38,680 Speaker 1: kind of in a bit of a slowdown right now 9 00:00:38,800 --> 00:00:43,279 Speaker 1: due to investors being a bit more cautious in order 10 00:00:43,320 --> 00:00:46,160 Speaker 1: to protect their money in a time of economic uncertainty. Plus, 11 00:00:46,200 --> 00:00:50,280 Speaker 1: you've got high interest rates on loans, which contribute to 12 00:00:50,720 --> 00:00:57,400 Speaker 1: a desire to wait for things to improve before investment 13 00:00:57,440 --> 00:01:00,720 Speaker 1: money starts flowing like wine once again. So I thought 14 00:01:00,720 --> 00:01:04,360 Speaker 1: I would actually do a Tech Stuff Tidbits episode about 15 00:01:04,360 --> 00:01:08,440 Speaker 1: the different types of funding in startups in general. But 16 00:01:09,040 --> 00:01:13,360 Speaker 1: we are of course interested in tech startups because honestly, 17 00:01:13,440 --> 00:01:16,920 Speaker 1: I find the stuff confusing at times, like how does 18 00:01:18,400 --> 00:01:22,720 Speaker 1: an idea for a business end up getting the support 19 00:01:22,720 --> 00:01:26,560 Speaker 1: it needs to actually become a thing? And I figure 20 00:01:26,600 --> 00:01:29,160 Speaker 1: we can take this episode by talking about the various 21 00:01:29,200 --> 00:01:33,720 Speaker 1: stages of funding that a startup will typically seek and 22 00:01:33,760 --> 00:01:37,440 Speaker 1: what each of these stages means. So let's say you've 23 00:01:37,440 --> 00:01:42,440 Speaker 1: got an idea for a new tech business. Maybe you 24 00:01:42,560 --> 00:01:45,720 Speaker 1: plan to make an app that detects which spots in 25 00:01:45,800 --> 00:01:48,680 Speaker 1: town are just on the verge of becoming trendy, so 26 00:01:48,760 --> 00:01:51,600 Speaker 1: that your users can jump in and be super cool 27 00:01:52,000 --> 00:01:56,360 Speaker 1: by going all Instagram on these spots before they blow 28 00:01:56,480 --> 00:01:59,280 Speaker 1: up as trendy spots. So you could be a tastemaker. 29 00:02:00,000 --> 00:02:02,240 Speaker 1: You know, you're really stylish, You're ahead of the curve, 30 00:02:02,480 --> 00:02:05,559 Speaker 1: and it's all because you have the spidy Sense app 31 00:02:05,640 --> 00:02:09,799 Speaker 1: that tells you win some place or object or thing 32 00:02:10,639 --> 00:02:13,639 Speaker 1: or fashion or whatever is about to really take off. 33 00:02:14,000 --> 00:02:17,600 Speaker 1: It's an idea, so dumb it can't fail anyway. You 34 00:02:17,720 --> 00:02:21,079 Speaker 1: got this idea, But how do you actually turn this 35 00:02:21,200 --> 00:02:26,200 Speaker 1: idea into a business. Well, you're gonna need some starting capital. 36 00:02:26,680 --> 00:02:30,560 Speaker 1: Maybe you are limiting costs by doing the classic Silicon 37 00:02:30,680 --> 00:02:35,240 Speaker 1: Valley story of launching out of a garage. Your initial 38 00:02:35,280 --> 00:02:38,679 Speaker 1: offering might be built on top of your own computers. Well, 39 00:02:38,840 --> 00:02:41,160 Speaker 1: that's not going to work for very long, because assuming 40 00:02:41,680 --> 00:02:44,640 Speaker 1: your idea actually does catch on, you're gonna need way 41 00:02:44,639 --> 00:02:48,520 Speaker 1: more computer power and storage in order to scale your business. So, 42 00:02:49,080 --> 00:02:53,959 Speaker 1: assuming you're not independently wealthy and willing to pour your 43 00:02:54,000 --> 00:02:58,440 Speaker 1: own money into this venture, what do you do? Well, 44 00:02:58,440 --> 00:03:03,600 Speaker 1: one thing you could do is apply at an incubator. So, 45 00:03:03,680 --> 00:03:08,120 Speaker 1: an incubator is an organization designed to provide resources to 46 00:03:08,320 --> 00:03:12,839 Speaker 1: fledgling startup businesses. There are different types of incubators out there. 47 00:03:12,960 --> 00:03:19,079 Speaker 1: Some require a little more established business than others. Some incubators, 48 00:03:19,120 --> 00:03:21,639 Speaker 1: if you come in with a great pitch, will bring 49 00:03:21,680 --> 00:03:24,160 Speaker 1: you in even if all you have is an idea. 50 00:03:24,480 --> 00:03:28,240 Speaker 1: Not many, but some will. And so you come in 51 00:03:28,320 --> 00:03:30,360 Speaker 1: with this idea and you pitch it to the incubator, 52 00:03:30,400 --> 00:03:33,160 Speaker 1: you go through the application process and they say, excellent, 53 00:03:33,680 --> 00:03:37,320 Speaker 1: you can be one of the businesses that we incubate. 54 00:03:38,120 --> 00:03:41,520 Speaker 1: So assuming that you do that, then you can get 55 00:03:41,560 --> 00:03:45,320 Speaker 1: access to resources that can include stuff from office space 56 00:03:45,680 --> 00:03:51,160 Speaker 1: to mentorship and classes, to networking as a building, connections 57 00:03:51,160 --> 00:03:55,080 Speaker 1: with potential partners and investors and team members, that kind 58 00:03:55,080 --> 00:03:59,880 Speaker 1: of networking. Usually the incubator takes some equity in your 59 00:04:00,080 --> 00:04:03,520 Speaker 1: business as a result, so they have some ownership of 60 00:04:03,560 --> 00:04:08,400 Speaker 1: your business, and the incubator often has input to some degree, 61 00:04:08,680 --> 00:04:11,480 Speaker 1: sometimes a lot of input on the evolution of your 62 00:04:11,480 --> 00:04:15,920 Speaker 1: business because the incubator is giving you access to these 63 00:04:15,960 --> 00:04:20,599 Speaker 1: resources and in return, you are expected to make something 64 00:04:20,680 --> 00:04:22,560 Speaker 1: out of your idea. But the only way you can 65 00:04:22,600 --> 00:04:25,120 Speaker 1: do that is if you put the work in. So 66 00:04:25,400 --> 00:04:29,320 Speaker 1: incubators are great resources for some types of startups because 67 00:04:30,000 --> 00:04:32,600 Speaker 1: you can easily have a situation where you have folks 68 00:04:32,600 --> 00:04:35,479 Speaker 1: who are really good at coming up with ideas right, 69 00:04:36,000 --> 00:04:39,479 Speaker 1: or maybe they're really good at coding, like they're good 70 00:04:39,480 --> 00:04:42,760 Speaker 1: at the building part, but maybe they have little to 71 00:04:42,839 --> 00:04:46,560 Speaker 1: know business experience or expertise. They don't know how to 72 00:04:46,560 --> 00:04:48,279 Speaker 1: start a business. They don't know how to run a 73 00:04:48,320 --> 00:04:50,560 Speaker 1: business and keep it successful. They don't know what it 74 00:04:50,600 --> 00:04:54,560 Speaker 1: takes in order to keep the lights on well. At 75 00:04:54,600 --> 00:04:57,680 Speaker 1: an incubator, startups can learn the ins and outs of 76 00:04:57,760 --> 00:05:03,120 Speaker 1: business itself. They can the foundation for what will be 77 00:05:03,240 --> 00:05:07,240 Speaker 1: a company further down the line, So startups can start 78 00:05:07,279 --> 00:05:10,080 Speaker 1: to learn how to do things like draft business plans 79 00:05:10,240 --> 00:05:14,119 Speaker 1: and to form a team, both a team of people 80 00:05:14,120 --> 00:05:17,200 Speaker 1: who are making the thing that you're offering and the 81 00:05:17,240 --> 00:05:21,200 Speaker 1: team that oversees that. They can start to make out 82 00:05:21,360 --> 00:05:24,480 Speaker 1: a hierarchy plan for their organization. All this kind of 83 00:05:24,520 --> 00:05:29,080 Speaker 1: stuff that is required for a business to have the 84 00:05:29,080 --> 00:05:32,160 Speaker 1: best chance to succeed. Now, it's not that every startup 85 00:05:32,200 --> 00:05:35,280 Speaker 1: has gone through this. There are some that have gone 86 00:05:35,279 --> 00:05:40,239 Speaker 1: through a very haphazard approach and through all logic should 87 00:05:40,279 --> 00:05:44,880 Speaker 1: have failed, but somehow didn't. But generally speaking, these are 88 00:05:44,880 --> 00:05:46,359 Speaker 1: the sort of things you need to do if you 89 00:05:46,480 --> 00:05:50,200 Speaker 1: want to have a good chance of being around for 90 00:05:50,320 --> 00:05:53,440 Speaker 1: more than a couple of years. There are a few 91 00:05:53,480 --> 00:05:56,080 Speaker 1: different kinds of incubators. As I mentioned, a lot of 92 00:05:56,120 --> 00:06:00,880 Speaker 1: colleges have incubator organizations, so you might have student and 93 00:06:01,080 --> 00:06:03,599 Speaker 1: or faculty taking on a really big part of running 94 00:06:03,600 --> 00:06:08,280 Speaker 1: those operations. There are also corporate incubators. Google had one 95 00:06:08,320 --> 00:06:12,120 Speaker 1: called Area one twenty, so once upon a time you 96 00:06:12,240 --> 00:06:15,440 Speaker 1: probably have heard this. At some point, Google had this 97 00:06:15,600 --> 00:06:19,280 Speaker 1: policy in place where employees were allowed to dedicate up 98 00:06:19,320 --> 00:06:23,279 Speaker 1: to twenty percent of their work week to their own projects, 99 00:06:23,279 --> 00:06:27,240 Speaker 1: with the one qualifier being that the projects should ideally 100 00:06:27,279 --> 00:06:31,720 Speaker 1: be something that could potentially benefit Google if it pans 101 00:06:31,760 --> 00:06:35,839 Speaker 1: out well. Area one twenty served as an incubator for 102 00:06:36,000 --> 00:06:39,760 Speaker 1: projects that had a lot of promise and gave employees 103 00:06:39,760 --> 00:06:42,560 Speaker 1: the resources they would need to further develop their ideas 104 00:06:42,560 --> 00:06:45,760 Speaker 1: and potentially see the mature into a business of their own, 105 00:06:46,120 --> 00:06:48,960 Speaker 1: so it wouldn't just become a Google product, it could 106 00:06:49,000 --> 00:06:53,520 Speaker 1: potentially become a Google spinoff. Google, by the way, abandon 107 00:06:53,600 --> 00:06:57,560 Speaker 1: the twenty percent time project back in twenty thirteen, so 108 00:06:57,880 --> 00:07:01,680 Speaker 1: that is not a standing at Google anymore. They still 109 00:07:01,720 --> 00:07:08,080 Speaker 1: do incubate businesses, but it's a slightly different approach now. 110 00:07:08,520 --> 00:07:13,640 Speaker 1: Now similar to an incubator is an accelerator. So incubators 111 00:07:13,680 --> 00:07:18,200 Speaker 1: help startups at the earliest stages of development, perhaps before 112 00:07:18,240 --> 00:07:23,720 Speaker 1: there's even a business idea that has formed around a 113 00:07:23,760 --> 00:07:27,640 Speaker 1: product or service idea, right, so it may be at 114 00:07:27,640 --> 00:07:31,400 Speaker 1: the earliest stages of germination for a business, whereas an 115 00:07:31,400 --> 00:07:34,960 Speaker 1: accelerator typically is for a startup that already has established 116 00:07:35,680 --> 00:07:39,600 Speaker 1: the business part, at least the rudimentary elements of a 117 00:07:39,640 --> 00:07:44,720 Speaker 1: business part. And so an accelerator takes a startup business and, 118 00:07:44,920 --> 00:07:48,840 Speaker 1: as the name suggests, accelerates it on its way to 119 00:07:49,080 --> 00:07:53,800 Speaker 1: scale up to becoming a larger business that it will 120 00:07:53,800 --> 00:07:56,320 Speaker 1: need to be in order to be a success. Incubator, 121 00:07:56,520 --> 00:07:59,440 Speaker 1: on the flip side, is a place to help develop 122 00:07:59,520 --> 00:08:04,520 Speaker 1: and earth of business, but both incubators and accelerators helped 123 00:08:04,520 --> 00:08:08,440 Speaker 1: startup companies find funding, and this kind of brings us 124 00:08:08,440 --> 00:08:11,480 Speaker 1: to the first real round of getting capital for your business, 125 00:08:11,480 --> 00:08:16,280 Speaker 1: which is called seed capital or seed funding. And this 126 00:08:16,320 --> 00:08:20,559 Speaker 1: could happen before you get into an incubator, probably before 127 00:08:20,560 --> 00:08:23,320 Speaker 1: you get into an accelerator, or it could be part 128 00:08:23,720 --> 00:08:26,560 Speaker 1: of that process. Part of what the incubator is trying 129 00:08:26,600 --> 00:08:30,880 Speaker 1: to help you do is to secure seed funding. This 130 00:08:31,000 --> 00:08:34,240 Speaker 1: is the initial round of funding the startup needs in 131 00:08:34,360 --> 00:08:37,800 Speaker 1: order to become a thing. It's what pays the bills 132 00:08:38,160 --> 00:08:41,640 Speaker 1: and helps the startup establish the basics and start to 133 00:08:41,640 --> 00:08:49,439 Speaker 1: do things like registered trademarks, you know, have an office space, 134 00:08:50,040 --> 00:08:54,199 Speaker 1: make payroll for the initial group of employees while they 135 00:08:54,240 --> 00:08:57,839 Speaker 1: further develop their idea. But it's the earliest, earliest stages. 136 00:08:57,880 --> 00:09:00,480 Speaker 1: You're not necessarily doing business yet. You may not even 137 00:09:00,559 --> 00:09:04,280 Speaker 1: be a publicly known entity yet. You might still be 138 00:09:04,360 --> 00:09:07,640 Speaker 1: kind of a developing, in secret kind of company. Often 139 00:09:07,679 --> 00:09:10,040 Speaker 1: seed funding comes from people who are close to the 140 00:09:10,040 --> 00:09:12,559 Speaker 1: folks who are behind the startup, So this could include 141 00:09:12,559 --> 00:09:17,080 Speaker 1: friends and family, former or current employers, that kind of thing. 142 00:09:17,480 --> 00:09:20,319 Speaker 1: And in return for providing some of the seed capital 143 00:09:20,360 --> 00:09:23,800 Speaker 1: for the business, the investor receives some equity or percentage 144 00:09:23,800 --> 00:09:27,600 Speaker 1: of ownership of that business. So if the business succeeds, 145 00:09:27,840 --> 00:09:31,800 Speaker 1: there will be an eventual payout, But it's entirely possible 146 00:09:32,360 --> 00:09:35,480 Speaker 1: that seed capital investors are supporting a startup not because 147 00:09:35,520 --> 00:09:37,720 Speaker 1: they're hoping to get a big payoff down the line, 148 00:09:38,240 --> 00:09:41,000 Speaker 1: but rather they believe in the people behind the project 149 00:09:41,520 --> 00:09:45,600 Speaker 1: and they want to support them. So it's important because 150 00:09:45,640 --> 00:09:48,720 Speaker 1: a lot of these startups they fail. More than half 151 00:09:48,840 --> 00:09:53,840 Speaker 1: the vast majority of startups do not succeed. So often 152 00:09:53,880 --> 00:09:56,360 Speaker 1: we're talking about people who are taking on a financial 153 00:09:56,440 --> 00:09:59,440 Speaker 1: risk because they believe in the people behind it or 154 00:09:59,440 --> 00:10:02,720 Speaker 1: they want to s support them. Also, we're typically talking 155 00:10:02,880 --> 00:10:07,920 Speaker 1: about pretty modest amounts of money in the long term, 156 00:10:08,000 --> 00:10:11,600 Speaker 1: Like later on, when we're talking about Series ABC funding, 157 00:10:11,760 --> 00:10:14,600 Speaker 1: you're talking about the tens of millions of dollars or more. 158 00:10:15,400 --> 00:10:18,400 Speaker 1: Now we're talking about, you know, maybe hundreds of thousands 159 00:10:18,400 --> 00:10:20,200 Speaker 1: of dollars, which is still a lot of money, but 160 00:10:20,280 --> 00:10:23,720 Speaker 1: in the grand scheme of things, is much much smaller. Now. 161 00:10:24,360 --> 00:10:27,360 Speaker 1: Seat capital provides funding that otherwise would be off limits 162 00:10:27,360 --> 00:10:30,160 Speaker 1: to a startup. I've talked about in episodes that I 163 00:10:30,240 --> 00:10:33,440 Speaker 1: mentioned with Silicon Valley Bank that it's really hard for 164 00:10:33,440 --> 00:10:37,040 Speaker 1: startup businesses to secure like a business loan because they 165 00:10:37,120 --> 00:10:39,319 Speaker 1: might not have anything they can put up as collateral. 166 00:10:39,720 --> 00:10:42,160 Speaker 1: They might not have any track record they can point 167 00:10:42,240 --> 00:10:46,800 Speaker 1: to as showing their ability to make a successful business. 168 00:10:47,720 --> 00:10:50,719 Speaker 1: The business itself might not really exist yet. There might 169 00:10:50,760 --> 00:10:53,760 Speaker 1: not be an easy way to explain where revenue is 170 00:10:53,760 --> 00:10:55,840 Speaker 1: going to come from. They may not be able to 171 00:10:55,840 --> 00:10:59,120 Speaker 1: generate any revenue for a while, So the loan can 172 00:10:59,160 --> 00:11:01,840 Speaker 1: be seen as being too risky, and seed capital can 173 00:11:01,960 --> 00:11:05,000 Speaker 1: end up taking over that spot, because I mean, where 174 00:11:05,000 --> 00:11:07,320 Speaker 1: else are you going to get the money to get started? 175 00:11:08,480 --> 00:11:13,080 Speaker 1: And really it's usually just enough to establish the earliest 176 00:11:13,120 --> 00:11:15,400 Speaker 1: days of the business so that the founders can actually 177 00:11:15,480 --> 00:11:18,200 Speaker 1: seek additional investment. So you can almost think of it 178 00:11:18,200 --> 00:11:20,520 Speaker 1: as the money that a business needs in order to 179 00:11:20,600 --> 00:11:23,760 Speaker 1: get seen by the next level of investors. And we'll 180 00:11:23,760 --> 00:11:27,200 Speaker 1: talk about them after we come back from this quick break, 181 00:11:36,080 --> 00:11:39,880 Speaker 1: all right, Before I move on to venture capital funds, 182 00:11:39,920 --> 00:11:42,760 Speaker 1: because that's ultimately where we're headed for this next bit 183 00:11:42,760 --> 00:11:46,320 Speaker 1: of the discussion. There is one kind of special early 184 00:11:46,400 --> 00:11:50,320 Speaker 1: investor that I could mention at this stage. Investors who 185 00:11:50,400 --> 00:11:54,080 Speaker 1: typically can step in at the seed funding phase or 186 00:11:54,120 --> 00:11:58,199 Speaker 1: perhaps the next one, and that is the angel investor. 187 00:11:58,559 --> 00:12:01,760 Speaker 1: So an angel investor is usually a high net worth 188 00:12:01,960 --> 00:12:06,640 Speaker 1: individual h and WI. It's someone who has a lot 189 00:12:06,679 --> 00:12:10,559 Speaker 1: of liquid assets at their disposal. That's a way of saying, 190 00:12:11,080 --> 00:12:13,040 Speaker 1: if someone's got a whole lot of cash they can 191 00:12:13,080 --> 00:12:15,800 Speaker 1: throw around, or at least it's someone who could very 192 00:12:15,880 --> 00:12:18,120 Speaker 1: quickly get hold of a mountain of cash that they 193 00:12:18,120 --> 00:12:22,760 Speaker 1: could throw around. Angel investors sometimes provide seed money to startups. 194 00:12:23,080 --> 00:12:26,560 Speaker 1: If the amount is less than a million dollars, then 195 00:12:26,600 --> 00:12:29,560 Speaker 1: they may just loan the money to the startup and 196 00:12:29,600 --> 00:12:32,880 Speaker 1: the startup will pay back the angel investor with interest 197 00:12:32,960 --> 00:12:36,400 Speaker 1: on top of the loan at some later date, assuming 198 00:12:36,400 --> 00:12:38,439 Speaker 1: that you know they have the money to do that. 199 00:12:39,280 --> 00:12:42,160 Speaker 1: But if it's more than a million dollars, angel investors 200 00:12:42,280 --> 00:12:45,520 Speaker 1: typically will take a stake in the company. They will 201 00:12:45,559 --> 00:12:50,640 Speaker 1: take part ownership of that company, and then they know 202 00:12:51,679 --> 00:12:54,040 Speaker 1: they typically have a lot more say in how things 203 00:12:54,120 --> 00:12:57,840 Speaker 1: develop from there. So as a founder, you have to 204 00:12:57,840 --> 00:13:00,840 Speaker 1: start making these decisions of how much control do I 205 00:13:00,880 --> 00:13:04,719 Speaker 1: want to seed to the people who will give me 206 00:13:04,760 --> 00:13:07,800 Speaker 1: the money that lets me pursue my dream. And it's 207 00:13:07,840 --> 00:13:11,359 Speaker 1: a difficult question to answer. It's really up to the individual. 208 00:13:12,240 --> 00:13:15,320 Speaker 1: Angel investors take on a huge amount of risk. Like 209 00:13:15,360 --> 00:13:19,080 Speaker 1: I said, the majority of startups will fail within five years. 210 00:13:19,920 --> 00:13:25,520 Speaker 1: Only a few ever developed beyond being a small business 211 00:13:25,559 --> 00:13:27,320 Speaker 1: and reach a point where they can hold their own 212 00:13:27,360 --> 00:13:31,520 Speaker 1: initial public offering or IPO, or they get snapped up 213 00:13:31,520 --> 00:13:35,360 Speaker 1: by some bigger companies. So angel investors and other seed 214 00:13:35,360 --> 00:13:40,120 Speaker 1: capital investors are pouring money into something that statistically is 215 00:13:40,320 --> 00:13:43,680 Speaker 1: kind of a long shot. Some angel investors actually band 216 00:13:43,760 --> 00:13:48,080 Speaker 1: together to create angel networks. This spreads the risk out 217 00:13:48,200 --> 00:13:50,240 Speaker 1: across a group of people. It also allows them to 218 00:13:50,280 --> 00:13:53,120 Speaker 1: pool resources, so you're not pouring as much of your 219 00:13:53,120 --> 00:13:57,120 Speaker 1: money into individual investments. You know, it's part of a 220 00:13:57,160 --> 00:14:00,400 Speaker 1: pool of money that other people are contributing toward. It 221 00:14:00,440 --> 00:14:03,280 Speaker 1: also means that you're dividing up the equity you have 222 00:14:03,360 --> 00:14:07,600 Speaker 1: in that business. But you know, the lower risk means that, yeah, 223 00:14:07,600 --> 00:14:10,760 Speaker 1: maybe you are investing money into stuff you believe in, 224 00:14:11,160 --> 00:14:12,760 Speaker 1: but you're not going to see that money come back, 225 00:14:13,040 --> 00:14:15,000 Speaker 1: but maybe it'll be slightly less than if you were 226 00:14:15,040 --> 00:14:19,400 Speaker 1: just going in by yourself. All right, So the startup 227 00:14:19,400 --> 00:14:24,000 Speaker 1: receives the seed funding, maybe it's an incubator with the 228 00:14:24,000 --> 00:14:26,480 Speaker 1: founders learning how to structure and run a business. On 229 00:14:26,520 --> 00:14:29,960 Speaker 1: top of receiving the resources they need to develop their idea. Further, 230 00:14:30,840 --> 00:14:33,160 Speaker 1: whatever the case, they are now ready to attempt to 231 00:14:33,160 --> 00:14:38,000 Speaker 1: secure a loan, which they might also do later in 232 00:14:38,040 --> 00:14:41,640 Speaker 1: the structure. So like loans typically don't really become a 233 00:14:41,720 --> 00:14:44,440 Speaker 1: thing until you're past the seed funding stage at least, 234 00:14:44,480 --> 00:14:47,440 Speaker 1: and usually it's after you've done Series A or maybe 235 00:14:47,480 --> 00:14:52,920 Speaker 1: even Series B funding, or you instead of looking for 236 00:14:52,960 --> 00:14:56,640 Speaker 1: a loan, you face venture capital investors, or maybe you 237 00:14:56,640 --> 00:15:01,000 Speaker 1: do both. So Silicon Valley Bank would be an example 238 00:15:01,040 --> 00:15:04,000 Speaker 1: of a financial institution that used to take a chance 239 00:15:04,040 --> 00:15:07,800 Speaker 1: on tech startups before the bank collapsed, so they were 240 00:15:08,040 --> 00:15:11,320 Speaker 1: known to offer loans to businesses when other more established 241 00:15:11,360 --> 00:15:15,920 Speaker 1: banks wouldn't. And you know, tech investors would also turn 242 00:15:16,000 --> 00:15:18,800 Speaker 1: to SVB to take out loans in order to invest 243 00:15:18,840 --> 00:15:22,000 Speaker 1: money into startups. So SBB played a very important part 244 00:15:22,760 --> 00:15:26,440 Speaker 1: in the early stages of funding for tech startup companies. 245 00:15:26,720 --> 00:15:29,400 Speaker 1: Sometimes it would be actually after Series A, so we'll 246 00:15:29,440 --> 00:15:31,760 Speaker 1: get to that in a second. Let's talk about venture 247 00:15:31,800 --> 00:15:38,160 Speaker 1: capital investors. These are groups of private investors who you know, 248 00:15:38,480 --> 00:15:41,600 Speaker 1: it could be a single person, but it's usually a 249 00:15:41,600 --> 00:15:46,360 Speaker 1: company that has a bunch of people as their clients 250 00:15:46,440 --> 00:15:50,400 Speaker 1: who contribute money to the venture capital firm that then 251 00:15:50,560 --> 00:15:54,560 Speaker 1: uses that money to invest in various startups and jump 252 00:15:54,600 --> 00:15:58,400 Speaker 1: in after seed funding. The venture capital investors out there, 253 00:15:58,400 --> 00:16:04,000 Speaker 1: many of whom our long time players in the financial world, 254 00:16:04,400 --> 00:16:08,200 Speaker 1: are the ones who pour significant money into a startup. 255 00:16:08,200 --> 00:16:11,120 Speaker 1: We're talking about the tens of millions in some cases, 256 00:16:11,240 --> 00:16:14,440 Speaker 1: or you know, obviously you have things like unicorns where 257 00:16:15,240 --> 00:16:18,680 Speaker 1: you're talking about crazy amounts of money being poured into 258 00:16:19,080 --> 00:16:24,520 Speaker 1: a startup. The funding is intended to really accomplish two goals. 259 00:16:25,040 --> 00:16:29,600 Speaker 1: One for the investors. Ideally it will represent a return 260 00:16:29,680 --> 00:16:32,000 Speaker 1: on investment at some point where you will make more 261 00:16:32,040 --> 00:16:36,000 Speaker 1: money than what you put in at some point further 262 00:16:36,080 --> 00:16:39,440 Speaker 1: down the line, assuming that things go well. But the 263 00:16:39,520 --> 00:16:43,000 Speaker 1: other thing it's meant to do is to provide the 264 00:16:43,120 --> 00:16:47,600 Speaker 1: startup the support it needs to get on a path 265 00:16:48,440 --> 00:16:53,520 Speaker 1: toward that success, to further establish the business, to allow 266 00:16:53,560 --> 00:16:56,120 Speaker 1: it to grow and to scale so that it can 267 00:16:56,160 --> 00:17:00,480 Speaker 1: start to really become a success, to attract the talent 268 00:17:00,840 --> 00:17:05,560 Speaker 1: it needs, to produce whatever the product or services at 269 00:17:05,560 --> 00:17:12,600 Speaker 1: a level that is sustainable and profitable, and hopefully reach 270 00:17:12,640 --> 00:17:15,560 Speaker 1: a point where the company can have a big payout 271 00:17:15,560 --> 00:17:18,439 Speaker 1: to its investors, which could come in the form of 272 00:17:19,280 --> 00:17:22,679 Speaker 1: an initial public offering that is the company goes from 273 00:17:22,760 --> 00:17:27,160 Speaker 1: privately held to a publicly traded company, or it gets 274 00:17:27,200 --> 00:17:31,320 Speaker 1: acquired or merged with another company, and in that process 275 00:17:31,920 --> 00:17:34,439 Speaker 1: there's a transfer of money that ends up being a 276 00:17:34,440 --> 00:17:37,560 Speaker 1: big payout to the early investors. In either case, the 277 00:17:37,600 --> 00:17:40,280 Speaker 1: investors end up getting back their investment plus a healthy 278 00:17:40,320 --> 00:17:41,840 Speaker 1: return on top of it. It may not be in 279 00:17:41,840 --> 00:17:45,080 Speaker 1: the form of cash with initial public offerings, it might 280 00:17:45,119 --> 00:17:48,200 Speaker 1: be in the form of additional shares of the company. 281 00:17:48,880 --> 00:17:52,679 Speaker 1: Venture capital companies are also betting on long shots, but 282 00:17:52,720 --> 00:17:56,480 Speaker 1: the general ideas that while most startups do ultimately fail, 283 00:17:56,840 --> 00:18:01,160 Speaker 1: some will succeed, and if you're really wise with your 284 00:18:01,200 --> 00:18:04,920 Speaker 1: investments and you have a wide enough spread of those investments, 285 00:18:05,359 --> 00:18:09,320 Speaker 1: then hopefully the successes will more than make up for 286 00:18:09,520 --> 00:18:12,879 Speaker 1: the failures. If you lose a million dollars on startups 287 00:18:12,920 --> 00:18:15,880 Speaker 1: that ultimately fizzle out, but you make ten million dollars 288 00:18:15,880 --> 00:18:18,840 Speaker 1: on the one that went to the moon, well you 289 00:18:18,880 --> 00:18:22,160 Speaker 1: could say that it all paid for itself at the end, right, 290 00:18:22,160 --> 00:18:24,600 Speaker 1: like you made a huge profit. That's not how it 291 00:18:24,640 --> 00:18:28,480 Speaker 1: always works out, but that's how the game is played now. 292 00:18:28,520 --> 00:18:32,359 Speaker 1: Startups might seek multiple rounds of venture capital funding. They 293 00:18:32,400 --> 00:18:36,720 Speaker 1: typically do. It is typically required before a business can 294 00:18:36,800 --> 00:18:41,320 Speaker 1: really establish itself to a point where it can really 295 00:18:41,359 --> 00:18:45,160 Speaker 1: become a success. So the first round, usually called Series 296 00:18:45,240 --> 00:18:48,120 Speaker 1: A funding might happen when the startup is still kind 297 00:18:48,119 --> 00:18:50,600 Speaker 1: of figuring out its place in the world. Part of 298 00:18:50,800 --> 00:18:54,520 Speaker 1: what determines the funding rounds is that venture capitalists try 299 00:18:54,600 --> 00:18:59,040 Speaker 1: to figure out a valuation for the company. Valuation essentially 300 00:18:59,040 --> 00:19:03,960 Speaker 1: means how much is that company really worth? And worth 301 00:19:04,080 --> 00:19:07,480 Speaker 1: is It's a subjective thing. There are actually different ways 302 00:19:07,520 --> 00:19:10,000 Speaker 1: that you can come at a valuation for a company, 303 00:19:10,320 --> 00:19:14,399 Speaker 1: and it's not necessarily that one way is better or 304 00:19:14,440 --> 00:19:17,800 Speaker 1: more legitimate than another. It all depends upon your perspective 305 00:19:17,840 --> 00:19:21,240 Speaker 1: and the point that you take, the approach you take, 306 00:19:22,200 --> 00:19:25,600 Speaker 1: But it typically involves things like figuring out like how 307 00:19:25,960 --> 00:19:28,840 Speaker 1: experienced is the team in charge. If it's a team 308 00:19:28,840 --> 00:19:33,080 Speaker 1: that has a series of wins in its past, that's 309 00:19:33,119 --> 00:19:35,959 Speaker 1: going to add to the value the perceived value at 310 00:19:36,000 --> 00:19:39,639 Speaker 1: least of the company. How good is its business plan? 311 00:19:40,080 --> 00:19:44,920 Speaker 1: What assets does the company have at its disposal? These 312 00:19:44,920 --> 00:19:47,320 Speaker 1: are all different questions that kind of contribute to it, 313 00:19:47,359 --> 00:19:52,200 Speaker 1: and then ultimately the investment community figures out, well, we 314 00:19:53,320 --> 00:19:56,159 Speaker 1: estimate that the value of this company is x amount 315 00:19:56,240 --> 00:20:01,399 Speaker 1: so that's what the investments kind of reflect. The investments 316 00:20:01,400 --> 00:20:05,159 Speaker 1: reflect the perceived value, like what is the future of 317 00:20:05,160 --> 00:20:08,720 Speaker 1: this company, what could it be worth five years down 318 00:20:08,760 --> 00:20:14,199 Speaker 1: the road, And that ends up informing investors. It's not 319 00:20:14,240 --> 00:20:16,840 Speaker 1: always right. There are a lot of companies that end up, 320 00:20:17,000 --> 00:20:23,000 Speaker 1: in hindsight, having been highly overvalued and investors board way 321 00:20:23,080 --> 00:20:27,640 Speaker 1: too much money in that. Again, with hindsight, you could say, man, 322 00:20:27,720 --> 00:20:30,840 Speaker 1: there was just never any chance that that business was 323 00:20:30,880 --> 00:20:35,399 Speaker 1: going to realize the value that was poured into it. 324 00:20:36,400 --> 00:20:39,760 Speaker 1: Like if someone's poured a billion dollars into a company 325 00:20:40,119 --> 00:20:42,080 Speaker 1: and there's just no way that that company is ever 326 00:20:42,160 --> 00:20:45,240 Speaker 1: going to be a true billion dollar company in the 327 00:20:45,240 --> 00:20:48,200 Speaker 1: sense of it it's really worth a billion dollars, Well, 328 00:20:48,200 --> 00:20:51,240 Speaker 1: that's a big loss. It also means that you're inflating 329 00:20:51,280 --> 00:20:55,880 Speaker 1: a economic bubble, and if that bubble ever deflates or pops, 330 00:20:56,440 --> 00:20:59,520 Speaker 1: then you're going to see a huge collapse. We saw 331 00:20:59,520 --> 00:21:02,320 Speaker 1: this with the dot com bubble, and you know, you 332 00:21:02,359 --> 00:21:05,960 Speaker 1: could argue that we've saw it or we're seeing it now, 333 00:21:06,320 --> 00:21:10,600 Speaker 1: like we're seeing the deflating part now, But that's more 334 00:21:10,640 --> 00:21:13,720 Speaker 1: complicated because it involves other economic issues as well. Anyway, 335 00:21:16,240 --> 00:21:18,800 Speaker 1: when you're going through Series A funding. As a business, 336 00:21:19,000 --> 00:21:22,800 Speaker 1: you might actually still be trying to figure out things 337 00:21:22,840 --> 00:21:25,520 Speaker 1: like basic stuff like, Yeah, I've come up with a 338 00:21:25,560 --> 00:21:29,800 Speaker 1: product or service, but is there a market for that? Right? 339 00:21:29,920 --> 00:21:33,399 Speaker 1: What is the market for this thing I'm creating? Is? 340 00:21:33,560 --> 00:21:37,680 Speaker 1: Does one exist? If not, can I create that market? 341 00:21:38,359 --> 00:21:41,800 Speaker 1: You know, if you have something that addresses a challenge 342 00:21:41,880 --> 00:21:45,600 Speaker 1: or a problem, then that's one thing. Right. You could say, Hey, 343 00:21:45,640 --> 00:21:49,720 Speaker 1: this thing I've created, it solves this problem you have, 344 00:21:50,160 --> 00:21:52,760 Speaker 1: and it does it better than anything else out there. Well, 345 00:21:52,800 --> 00:21:54,480 Speaker 1: then you say, okay, there is a market for this. 346 00:21:54,640 --> 00:21:56,919 Speaker 1: The question then is how big is that market? But 347 00:21:57,000 --> 00:21:59,560 Speaker 1: it might be a case where you say, the thing 348 00:21:59,600 --> 00:22:03,400 Speaker 1: I have of solves a problem you didn't know you had, 349 00:22:04,160 --> 00:22:07,080 Speaker 1: and maybe it really is a problem. Maybe it's just 350 00:22:07,160 --> 00:22:10,840 Speaker 1: that you're doing something differently than you had before. Maybe 351 00:22:11,320 --> 00:22:15,000 Speaker 1: the way you're doing it differently is better, or maybe 352 00:22:15,080 --> 00:22:18,439 Speaker 1: it's not. Here's the crazy thing. The success for the 353 00:22:18,480 --> 00:22:23,480 Speaker 1: business doesn't necessarily matter on whether or not the projects 354 00:22:23,560 --> 00:22:28,120 Speaker 1: or service really is better than existing stuff. A company 355 00:22:28,200 --> 00:22:32,600 Speaker 1: might succeed or fail completely independently of that. Because life 356 00:22:32,720 --> 00:22:35,720 Speaker 1: is not fair. Okay, we're going to take another quick 357 00:22:35,720 --> 00:22:38,240 Speaker 1: break when we come back, I'm going to wrap this 358 00:22:38,359 --> 00:22:41,679 Speaker 1: up and talk a little bit more about the process 359 00:22:41,800 --> 00:22:54,640 Speaker 1: of funding. Okay, So we were still talking about series 360 00:22:54,720 --> 00:22:58,160 Speaker 1: A funding, where venture capital companies come in. So typically 361 00:22:58,600 --> 00:23:02,240 Speaker 1: you might have a single venture capital company acting as 362 00:23:02,280 --> 00:23:05,600 Speaker 1: an anchor here, and maybe a few other venture capitalists 363 00:23:05,920 --> 00:23:10,000 Speaker 1: come in and also invest in a Series A round. 364 00:23:10,359 --> 00:23:16,560 Speaker 1: Series A rounds typically are not ginormous. They can be 365 00:23:17,400 --> 00:23:19,919 Speaker 1: in rare occasions. For a while it seemed like that 366 00:23:20,000 --> 00:23:21,879 Speaker 1: was just going to be the trend, but that was 367 00:23:21,960 --> 00:23:24,800 Speaker 1: when people were getting real loosey goosey with their money. 368 00:23:26,280 --> 00:23:31,160 Speaker 1: But often there it's not small because we're still talking 369 00:23:31,200 --> 00:23:33,640 Speaker 1: in the tens of millions of dollars, but small lur 370 00:23:34,119 --> 00:23:39,240 Speaker 1: Then subsequent rounds of funding would be so you hold 371 00:23:39,240 --> 00:23:42,840 Speaker 1: your Series A funding and you typically have maybe one 372 00:23:42,920 --> 00:23:45,920 Speaker 1: or two anchors that hold that down. And this is 373 00:23:46,600 --> 00:23:48,639 Speaker 1: you usually don't see a lot of other like larger 374 00:23:48,840 --> 00:23:52,320 Speaker 1: financial institutions jumping in at this stage. It typically is 375 00:23:52,359 --> 00:23:54,879 Speaker 1: still venture capitalists because we're still talking about a pretty 376 00:23:54,960 --> 00:23:58,919 Speaker 1: risky kind of investment. Some of those investments will have 377 00:23:58,960 --> 00:24:01,120 Speaker 1: like a set amount of time on them when they're 378 00:24:01,160 --> 00:24:06,760 Speaker 1: supposed to be paid off, and the startup will have 379 00:24:06,880 --> 00:24:10,960 Speaker 1: to pay back that investment with whatever return on top 380 00:24:11,000 --> 00:24:15,320 Speaker 1: of it was promised. But then there's usually more than 381 00:24:15,359 --> 00:24:20,120 Speaker 1: one round of funding. Series A helps establish things, but 382 00:24:21,000 --> 00:24:24,640 Speaker 1: it's not unusual to see a Series B round of funding. 383 00:24:25,359 --> 00:24:27,280 Speaker 1: This is where you might see a couple more venture 384 00:24:27,520 --> 00:24:31,760 Speaker 1: capitalist companies get involved. You still may not see that 385 00:24:31,880 --> 00:24:36,800 Speaker 1: much from larger financial institutions at this stage, but it's 386 00:24:37,240 --> 00:24:40,159 Speaker 1: if a company seems to have promise that it's on 387 00:24:41,000 --> 00:24:44,080 Speaker 1: a forward momentum, then you might get a little bit 388 00:24:44,119 --> 00:24:47,359 Speaker 1: more in the investment community pouring money into Series B. 389 00:24:48,040 --> 00:24:51,120 Speaker 1: This typically is really focusing on scaling up a business 390 00:24:51,920 --> 00:24:55,640 Speaker 1: and making sure that it can meet a global demand. 391 00:24:56,359 --> 00:24:58,720 Speaker 1: Really important for tech companies, right, because a lot of 392 00:24:58,760 --> 00:25:04,400 Speaker 1: tech companies digital company needs. They're not limited by geography, right. 393 00:25:04,440 --> 00:25:08,320 Speaker 1: It's not like they're making a physical thing that they 394 00:25:08,320 --> 00:25:11,760 Speaker 1: can only ship to certain places. They're making a digital 395 00:25:11,760 --> 00:25:15,440 Speaker 1: product that at least in theory, could be accessed pretty 396 00:25:15,480 --> 00:25:18,480 Speaker 1: much anywhere where you have a connection. You want to 397 00:25:18,520 --> 00:25:20,640 Speaker 1: be able to scale your business so that you can 398 00:25:20,720 --> 00:25:23,639 Speaker 1: meet the global demand, which means you've got to have 399 00:25:23,720 --> 00:25:26,639 Speaker 1: access to all that compute power, storage power, all that 400 00:25:26,720 --> 00:25:29,639 Speaker 1: kind of stuff in order to do that not have 401 00:25:29,720 --> 00:25:33,400 Speaker 1: your service just crash whenever there's a spike in demand. 402 00:25:33,640 --> 00:25:36,800 Speaker 1: So Series B is really typically focused on scaling a 403 00:25:36,840 --> 00:25:39,600 Speaker 1: business up, but you can also have a third round, 404 00:25:39,600 --> 00:25:43,199 Speaker 1: a Series C round of funding. At this stage you 405 00:25:43,280 --> 00:25:47,479 Speaker 1: might start to see some larger financial institutions start to 406 00:25:47,520 --> 00:25:50,480 Speaker 1: come on board if again the company looks like it's 407 00:25:50,480 --> 00:25:53,720 Speaker 1: on the right track, that there is high hope that 408 00:25:53,800 --> 00:25:56,399 Speaker 1: this is a company that is going to firmly establish itself. 409 00:25:57,040 --> 00:25:59,280 Speaker 1: You can even have further rounds. You can have Series D, 410 00:25:59,480 --> 00:26:03,399 Speaker 1: series etc. There's no real limit to how many rounds 411 00:26:03,400 --> 00:26:08,000 Speaker 1: of funding a company could hold, except the limit being, 412 00:26:08,119 --> 00:26:10,840 Speaker 1: you know, whatever the investment community is willing to do. 413 00:26:11,320 --> 00:26:14,560 Speaker 1: If you're getting to a point where you're seeking, you know, 414 00:26:14,640 --> 00:26:18,320 Speaker 1: the tenth round of funding, you might have investors saying, 415 00:26:18,560 --> 00:26:20,639 Speaker 1: I don't think I'm ever going to get my money 416 00:26:20,680 --> 00:26:24,320 Speaker 1: back if I pour it into here, because if you've 417 00:26:24,359 --> 00:26:26,520 Speaker 1: taken this long to try and establish a business, it 418 00:26:26,560 --> 00:26:30,640 Speaker 1: may just be there's no business to establish. So this 419 00:26:30,720 --> 00:26:33,159 Speaker 1: is also a round Series B Series C where you 420 00:26:33,200 --> 00:26:39,680 Speaker 1: start to see banks take a slightly more acceptable risk 421 00:26:40,080 --> 00:26:44,040 Speaker 1: in loaning out money to these companies. So Silicon Valley 422 00:26:44,040 --> 00:26:46,960 Speaker 1: bank might be more involved in something that's going through 423 00:26:47,000 --> 00:26:51,359 Speaker 1: a Series B or Series C round. So then you 424 00:26:51,440 --> 00:26:56,320 Speaker 1: have to talk about what these investors actually own. They 425 00:26:56,400 --> 00:27:00,040 Speaker 1: might own debt, so in other words, they hold the 426 00:27:00,080 --> 00:27:03,600 Speaker 1: debt that the startup has, and the startup needs to 427 00:27:03,640 --> 00:27:07,400 Speaker 1: pay that debt back. So what you hold is an 428 00:27:07,400 --> 00:27:10,679 Speaker 1: IOU and eventually the company is going to pay that 429 00:27:10,800 --> 00:27:15,159 Speaker 1: IOU out to you, or you own equity in the 430 00:27:15,240 --> 00:27:18,240 Speaker 1: company you own, you have some sort of ownership of 431 00:27:18,280 --> 00:27:22,720 Speaker 1: the company itself. Now, with debt, you can actually buy 432 00:27:22,720 --> 00:27:25,159 Speaker 1: and sell debt, right, you can sell your debt off 433 00:27:25,200 --> 00:27:28,919 Speaker 1: to someone else. Maybe you sell it off at cost 434 00:27:29,080 --> 00:27:33,000 Speaker 1: or maybe at slightly above cost, and the person who's 435 00:27:33,040 --> 00:27:35,640 Speaker 1: buying it is hoping that the debt in fact does 436 00:27:35,720 --> 00:27:40,000 Speaker 1: get paid out ultimately with whatever return there might be. 437 00:27:40,760 --> 00:27:44,239 Speaker 1: And meanwhile you can walk away. You have sold off 438 00:27:44,280 --> 00:27:48,760 Speaker 1: your debt that you held for this startup, and you've 439 00:27:48,760 --> 00:27:51,000 Speaker 1: got your cash, and you can then invest it in 440 00:27:51,080 --> 00:27:53,560 Speaker 1: something else if you like. But this gets outside the 441 00:27:53,560 --> 00:27:56,120 Speaker 1: experience of the business itself, Like this sort of activity 442 00:27:56,160 --> 00:27:59,560 Speaker 1: can happen around the business and it doesn't necessarily directly 443 00:27:59,600 --> 00:28:04,439 Speaker 1: affect the business. So that's almost its own episode But 444 00:28:04,520 --> 00:28:07,880 Speaker 1: then you're talking about what is the end goal of 445 00:28:07,920 --> 00:28:11,119 Speaker 1: all of this, Well, I mean a couple. One is 446 00:28:11,160 --> 00:28:16,199 Speaker 1: that the business actually becomes a revenue generating entity. But 447 00:28:16,359 --> 00:28:18,920 Speaker 1: investors typically want to see one of two things happen. 448 00:28:19,000 --> 00:28:22,040 Speaker 1: They want to see a privately held company become a 449 00:28:22,040 --> 00:28:25,760 Speaker 1: publicly traded one through an IPO or initial public offering. 450 00:28:27,000 --> 00:28:32,359 Speaker 1: This is when you go through the extensive process of 451 00:28:32,960 --> 00:28:37,919 Speaker 1: having your company scrutinized to determine what the value is, 452 00:28:38,640 --> 00:28:43,080 Speaker 1: you set a price for the shares and the number 453 00:28:43,080 --> 00:28:45,240 Speaker 1: of shares that you're going to put out on the market, 454 00:28:45,640 --> 00:28:49,880 Speaker 1: and you start selling shares to the general public. Investors 455 00:28:49,960 --> 00:28:53,520 Speaker 1: at that point may get a big payout as a 456 00:28:53,520 --> 00:28:57,000 Speaker 1: company goes public, or they, like I said before, maybe 457 00:28:57,040 --> 00:29:02,320 Speaker 1: awarded with shares on top of whatever percentage they owned 458 00:29:02,320 --> 00:29:04,320 Speaker 1: in the company as part of the equity they held, 459 00:29:05,080 --> 00:29:09,160 Speaker 1: and that's like the big payout for investors, or one 460 00:29:09,200 --> 00:29:12,360 Speaker 1: of them. The other, of course being when a bigger 461 00:29:12,360 --> 00:29:15,959 Speaker 1: fish comes along and buys up a private company and 462 00:29:16,280 --> 00:29:19,000 Speaker 1: as part of the acquisition price, there's a payout to 463 00:29:19,040 --> 00:29:22,160 Speaker 1: all the investors, which again includes a return on top 464 00:29:22,320 --> 00:29:26,400 Speaker 1: of the investment. Those are the two goals for the investors. 465 00:29:26,400 --> 00:29:30,560 Speaker 1: And that's kind of why I get real cynical about 466 00:29:30,600 --> 00:29:35,440 Speaker 1: the startup and investment communities, because I've seen a lot 467 00:29:35,480 --> 00:29:38,840 Speaker 1: of startups that appear to exist only for the purpose 468 00:29:39,200 --> 00:29:44,440 Speaker 1: of getting snapped up by some other company, and that 469 00:29:45,320 --> 00:29:49,040 Speaker 1: strikes me as unsustainable in the long run, like it's 470 00:29:49,080 --> 00:29:53,720 Speaker 1: not providing actual benefit. It might provide employment to people, 471 00:29:53,760 --> 00:29:57,760 Speaker 1: which is good, right, but if no one ever figures 472 00:29:57,760 --> 00:30:01,360 Speaker 1: out how to take the central premise of this business 473 00:30:01,400 --> 00:30:06,880 Speaker 1: and make it into something meaningful beyond employing people, it 474 00:30:06,920 --> 00:30:10,240 Speaker 1: starts to look like it's just hollow. To me. There 475 00:30:10,280 --> 00:30:15,400 Speaker 1: are people who are really well known for being serial 476 00:30:15,560 --> 00:30:18,880 Speaker 1: entrepreneurs who will come up with a business idea. They'll 477 00:30:18,920 --> 00:30:21,880 Speaker 1: go through those early stages of getting seed funding and 478 00:30:22,800 --> 00:30:26,240 Speaker 1: venture capital funding, grow the business to a certain point. 479 00:30:26,720 --> 00:30:28,680 Speaker 1: Then they just want to bail and do it all 480 00:30:28,720 --> 00:30:33,000 Speaker 1: over again. And the cynical part of me thinks that 481 00:30:33,080 --> 00:30:36,200 Speaker 1: it might be because it's one thing to come up 482 00:30:36,200 --> 00:30:39,360 Speaker 1: with an interesting idea and to get people excited enough 483 00:30:39,600 --> 00:30:43,120 Speaker 1: in it to give you money, but it's another thing 484 00:30:43,120 --> 00:30:49,560 Speaker 1: to grow that into a stable business that can continue 485 00:30:49,600 --> 00:30:55,320 Speaker 1: to grow and to profit, and that the skill set 486 00:30:55,640 --> 00:30:58,440 Speaker 1: for the person who's great at creating that initial germ 487 00:30:58,440 --> 00:31:00,960 Speaker 1: of an idea and the person who's leading the big 488 00:31:01,000 --> 00:31:07,040 Speaker 1: company and providing that stability. Those are two different skill sets, 489 00:31:07,080 --> 00:31:10,640 Speaker 1: and not everyone has them, so I guess it's not 490 00:31:10,720 --> 00:31:14,120 Speaker 1: necessarily a bad thing to be a serial entrepreneur. I mean, 491 00:31:14,160 --> 00:31:16,800 Speaker 1: there can be some really great companies that grow out 492 00:31:16,840 --> 00:31:23,440 Speaker 1: of that. But I don't know. There's something about Henry 493 00:31:23,560 --> 00:31:27,920 Speaker 1: Higgins music man huckster stuff going on in that world. 494 00:31:28,000 --> 00:31:32,040 Speaker 1: Not everyone is a huckster, obviously, but it feels a 495 00:31:32,080 --> 00:31:36,000 Speaker 1: bit like the fast talking salesman who is setting up 496 00:31:36,040 --> 00:31:39,240 Speaker 1: a big sale and then bailing out of the town 497 00:31:40,080 --> 00:31:42,800 Speaker 1: before having to pay the piper. I'm using a lot 498 00:31:42,840 --> 00:31:46,840 Speaker 1: of different metaphors here and then doing it all over again. 499 00:31:48,120 --> 00:31:50,520 Speaker 1: I don't know. Maybe I'm just thinking like music man 500 00:31:50,520 --> 00:31:54,320 Speaker 1: slash Doc Terminus from the original Pete s Dragon or whatever. 501 00:31:55,280 --> 00:31:58,320 Speaker 1: In my head, that's what every single startup founder is like. 502 00:31:58,360 --> 00:32:02,400 Speaker 1: They're they're dressed in a equated outfits and doing fast 503 00:32:02,440 --> 00:32:06,520 Speaker 1: talking pattern songs. Probably not how it actually pans out, 504 00:32:06,560 --> 00:32:09,880 Speaker 1: but I'm okay living in that fantasy anyway. I thought 505 00:32:09,880 --> 00:32:13,280 Speaker 1: it would be interesting to talk about this because the 506 00:32:13,400 --> 00:32:16,920 Speaker 1: way that this world works is important. It has has 507 00:32:17,000 --> 00:32:22,560 Speaker 1: shaped the tech industry significantly since the nineteen eighties at least, 508 00:32:23,520 --> 00:32:27,520 Speaker 1: and I think it helps us understand where we are 509 00:32:27,680 --> 00:32:32,240 Speaker 1: now and how the products that come to us, how 510 00:32:32,280 --> 00:32:35,680 Speaker 1: those were able to exist, how they were able to 511 00:32:36,000 --> 00:32:38,719 Speaker 1: get to a point where we could actually see and 512 00:32:38,880 --> 00:32:42,560 Speaker 1: use them in the startup world obviously, I mean, it's 513 00:32:42,640 --> 00:32:46,760 Speaker 1: a totally different story for long established companies that are 514 00:32:47,200 --> 00:32:50,120 Speaker 1: you know, their own foundational pillars in the tech industry, 515 00:32:50,240 --> 00:32:53,480 Speaker 1: like your intels and your ibms and your you know, 516 00:32:53,600 --> 00:32:57,800 Speaker 1: AT and ts and whatnot. But yeah, I kind of 517 00:32:57,800 --> 00:33:00,560 Speaker 1: wanted to to look this over. I think it's an 518 00:33:00,560 --> 00:33:03,640 Speaker 1: interesting way to get some insight into this and understand 519 00:33:03,720 --> 00:33:07,520 Speaker 1: some of the issues going on within the tech sector. 520 00:33:08,400 --> 00:33:10,680 Speaker 1: All Right, that's it for this Tech Stuff Tidbits episode. 521 00:33:11,160 --> 00:33:13,320 Speaker 1: Hope you are all well, and I'll talk to you 522 00:33:13,360 --> 00:33:24,080 Speaker 1: again really soon. Tech Stuff is an iHeartRadio production. For 523 00:33:24,200 --> 00:33:29,040 Speaker 1: more podcasts from iHeartRadio, visit the iHeartRadio app, Apple Podcasts, 524 00:33:29,160 --> 00:33:31,160 Speaker 1: or wherever you listen to your favorite shows.