When you’re creating something from scratch, as is the case when you’re founding a company, you always have to have your sights set on the degree of growth you want to see. Business growth is something that you should always have your eye on because at the end of the day, a business only grows as much as you see it growing. Manuel Gonzalez is the Founder and Managing Partner of Global RIFF. Elliot Begoun talks to Manuel about the foundations you have to build to encourage sustainable business growth. Remember, no matter how good your idea is, it won’t flourish if you pay no mind to the impact that it can have on your industry and the world.

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Listen to the podcast here

Planting The Seeds To Grow Your Business With Manuel Gonzalez

We’ll cover a lot of topics and I’ll let Manuel Gonzalez introduce himself but first, a few little housekeeping notes. We want your questions so ask away but please do so in the Q&A. That will allow us to gather those, put them in order, fire away, and put Manuel on the hot seat. I’m going to let Manuel introduce himself. I affectionately call him the Hispanic George Clooney. I’ve known Manuel for a long time. He’s one of the great innovators in this space. He’s a brilliant mind and I get to claim him as a good dear friend, so that’s awesome. Thanks for doing this with me. Introduce yourself and give everyone a sense of your background.

Thank you for your kind words. This is probably the best compliment anybody has ever given me. Not even at home do they call me that. I’ve been in the food industry for many years. My first attempt at it was a yogurt company that I started with my sister and then we sold it in the Mexican crisis of ‘95. I’ve gone through many crises and we can maybe talk about some war stories behind that. In ‘95, we sold that company in the midst of that crisis. At that time, I was in business school in the east, in Washington, and Rabobank was opening the Mexico City office. A friend of mine from school had been hired by Rabobank and he said, “Why don’t you apply to this bank? They do full finance and you know that.” They hired me for 22 years in the bank in the Mexico City office. I came to San Francisco in 2012.

One of the things that were quite a shock here, like taking a dive into cold water, was to see innovation. I live in the Silicon Valley area. You read about it and people tell you about it but when you’re here, you realize there’s a lot more than you thought. In what we see nowadays, entrepreneurship in food and the changes in food were not as evident and widespread but I felt that it was something important to do for us at the bank, so that led me to work on the creation of FoodBytes!. Later on, I left the bank to build a venture capital firm, which is what I’ve been doing, and that’s RIFF Ventures.

There’s a lot of that that I want to come back to. I want to talk to you a bit about the purpose and why you felt there was a need for something like FoodBytes! and TERRA. The other that we’ll talk about first is that you also have a more global perspective. Your wife is from Switzerland. You’ve spent quite a bit of time in Europe and looking at innovation in Europe and other parts of the world. What do you see here that’s different, both in the ecosystem and in brands? What could we be learning from some of the other countries that are driving innovation?

When you look at different countries and you look at people, talent is everywhere. You have great ideas, amazing teams, and highly educated people are all around the globe. There is a difference however when you see that in the Bay Area. The thing about food is that when you think about building a business in food, you do not necessarily need to think globally. You do not necessarily need to think super big because you can have a great local regional business that gives you a great lifestyle. However, when you think about tech, you’re going to feel the best apples in the neighborhood that doesn’t exist. You can have the best coffee shop in the neighborhood or the best ice cream from your city, but that’s not how that works. 

What I saw here that sometimes I don’t see in other places is the global and big ambition that has been trickling down from tech entrepreneurs into food entrepreneurs. What I saw here was that impulse to have a global impact on whatever you do. You find that more and more in other places, but here, it’s prevalent and it’s not surprising many times that when you see big valuations and outcomes, you start seeing them first around this area than in other places. It’s nothing to do with time, the quality of an idea, or with the possible impact that something could have. It’s how big you think.

I know the thing that is prevalent here is that idea, and this is important, that failure is defined as not doing. When you act, you do it, and you try, that’s already something that is highly appreciated. In other places in the world, failure is stigma so you’re afraid. When you have a conversation with people, here, they never say, “You failed at doing something.” In other places, they do say that. There are certain elements of how things are done here that promote the idea of having big impacts and big ambitions, and it matters.

It’s an interesting perspective on failure and I agree. Failure here is almost a badge of honor. No one wants to fail, don’t get me wrong, but it’s not a stigma. It’s like, “That shouldn’t work. We’ll try something different.” It’s part of the learning process versus an endpoint. Let’s talk a little bit about FoodBytes! and then we’ll turn our attention more towards advice, thoughts, and ideas for founders. FoodBytes! always struck me as something strange for a bank to back and create. What vacuum or what space did you see in the market that made you or compelled you to develop FoodBytes!? What was the objective of doing that?

It was the result of asking a lot of questions. When I was telling you about coming here and seeing what was going on, going to a coffee shop or anything, and everybody was building something new, that’s something that you don’t see everywhere. There were many things that I was asking myself and it’s a long process. It took 1 to 1.5 years to find a model that I wanted to try. I went to Expo West in 2013, just when I came here and it was big. There were many people walking around the aisles and it was super confusing. It was hard to notice or to be noticed. That’s probably when the thought process started. It’s like, “How do you impact? How do you matter? How do you exercise leadership in a way?” If you’re a leading element of the food ecosystem, I was thinking, “If you’re leading, you should lead.”

If you go to a place and you’re not leading, that should be a problem. I started thinking, “We need to exercise some kind of leadership. We need to do something. In getting to know the clients over here in California and in the West, that was also hard because I came from sixteen years in the Mexico City office. I knew people and people knew me. I knew a lot about the market and the clients, and I could add a lot of value but then when I came here, everybody knew more than I knew. I felt I wasn’t bringing something new and interesting, something that would add value to what the CEO or a client already knew. I saw there was a blind spot in everybody’s view in the larger companies, which was the entrepreneur, innovator, people that were doing new things, and people who could disrupt.

I started thinking, “There are always people that I see as an expert because there’s a need from the client. How do I get to know them? How do I meet all these entrepreneurs? How do I do it in an efficient way? What am I going to do? Knock doors? Are we going to be sending bankers out to do that? That’s not their job to look at small companies. Can we create something that brings them to us? Can we add some value to them knowing that probably, at this moment, we don’t have the products and services?” That was the thought process. I’m always thinking, “Can we also create something that not only adds value to the startups but also to the larger companies? Can we create a space where we can bring them all together?”

At that time, one of the guys in the office told me, “There is this event and they’re going to be pitching. It’s stacked, but let’s see it.” We went to see it and it was organized by a group here in San Francisco and it was a cool pitch event. They had ten entrepreneurs and they had five minutes to pitch. There were 70 people there in the audience and there was beer and pizza. It was a lot of fun. It was a quick two hours that we were gone. That’s where I said, “Let’s do this for food. Why don’t we do that? Can we do this?” We approached those guys and said, “Would you do this for food?” They said, “Yeah, let’s try it.” “Also, we want to keep a certain budget, so we need to be super scrappy.” We tried it and it was like, “Let’s try a pitch competition. We can bring people here and invite them.” We sat around, “How will we call it?”

We went through that process. At first, it was interesting because this was the winter of 2014 or something like that. We were thinking about, “We’re going to promote the event and we’re going to do it in February.” I thought, “Nobody’s going to come to this thing. Nobody’s going to apply. Who would do that?” First, I saw 200 companies apply to pitch and I thought, “There’s a need here because why would people apply to something that doesn’t exist to pitch to an audience that doesn’t even know. They have never seen it. There’s a need to be in front of investors and companies,” and then it took off from there.

You’ve had them all over the world. Switching gears slightly, you’ve seen thousands of pitches and applications. For the founders, the people on this who are in the throes of fundraising. I want to get into a little bit more specifics around fundraising during COVID-19. In general, fundraising, what are the elements that you saw that were the wow factors or that time after time produced interest by the investors in the room from those presenting?

A strong mission has always been the impact. First, you need a good storyteller to be in front of people. You need to know how to tell a story and how to present it. You need to have a strong mission and a strong why you want to do something, and that always made a difference. Presentation is something you work on. You can get a lot of help and they need to be short, all those things. The two things that were always super important were that whoever was in front of the audience was good at telling the story and that the mission had a strong impact because people would immediately get interested. “That’s why you’re doing this.” We saw things from the whole spectrum of food from ag, primary, all the way to the consumer. In every case, the companies that have a strong impact were the ones that people would be looking at.

You’ve left the bank and you’ve started a global venture capital fund, one that is looking for opportunities to invest in food, food tech, ag tech, and CPG globally. Why did you feel there was a need there? What are you looking for? Where’s the vacuum in that?

It’s hard, and a lot of people don’t believe in global. They think of a localized deal closed. In the end, great ideas come from different places. The thing about managing a fund or thinking about how that business works is that you need big outcomes. There are not many. There are only a few and you need them because, in the end, you need to return the fund. That’s why you need to be open to where great ideas come from and where you think a great team is. We were talking about big impacts, big outcomes, and global thinking. When you think that way and you look at any vertical in the food space, the competition is not going to be just a localized competition. Somebody is going to be a leader in that space and that somebody can come from different places.

When you look at an investment and you look at a company, you should think, “Is this the company that will lead in this vertical and will compete with advantage and with differentiation in this vertical?” In that sense, that idea can come from different places. Probably you’ve seen more of those here in the Bay. The companies that have been having big valuations and big impacts are usually around here. Not all of them, but most of them. That’s a global view. However, there are going to be more of those coming out of Asia, so you should be careful not to constrain yourself and make an investment in something that might not be competitive enough.

Let me switch gears to these uncertain times. Given nowadays world and what we’re seeing, how does this change the way brands and founders should be thinking about their future? What should they recognize as a truth or a fundamental in their business that maybe they weren’t thinking through prior to this?

Companies should be thinking about their independence like one channel. We’ve seen that it is difficult to determine, but we are where we are and we’re all sheltered at home, so delivery is important. Companies that have that kind of channel developed are winning but in the future, there will be another thing like this. Things like this are going to happen. The question is always going to be, do you have a business model that allows you to use different channels and different ways to reach the consumer? Companies that do not have a well-developed attention mechanism, attention market share, and marketing, they’re going to have a problem because it’s always going to be difficult to get attention, so independence. Now and the future companies should think about having not just one way, but different ways to reach the consumer. Maybe in the next pandemic or in the next situation like this, the one that wins is a different channel. You need to be able to weather the storm and come back on the other side.

I’ve talked a lot about the fact that being nimble, lean, and more capital-efficient is going to be important going forward. When there are these moments in time, you’re better prepared to withstand them than having something that’s saddled by inefficiency and a large SG&A burden on the business. I’m curious from your perspective as an investor if you feel like some of the gambling money is going to come off the table. We’ve all seen quite a bit of capital flow into businesses at the point in their lifecycle when they were still young and maybe their fundamentals weren’t quite there yet. Their unit economics weren’t quite there yet but there was a belief that the brand was capable of something great. I personally believe that brands are going to have to get further before they get that big level of funding. They’re going to have to prove greater traction and they’re going to have to make it a little bit further on their own. What’s your thought there? What’s changed in how you’re evaluating a business to invest in?

You asked the question, first is about capital efficiency and being nimble and lean. If you were not good at this, you’re going to have to get good at this, which is knowing your numbers well. You and I have seen many times how many people start a business without having a proper budget, knowing their numbers deeply, and understanding how cashflow works well. That’s essential and will continue to be essential because when you make a decision about capital deployment, you need to know how that’s going to affect your budget and cash, and what does that do short-term and long-term. It’s important. When you make a decision about retrenching, you can only do that rationally if you know your numbers well and how it changes your numbers would affect your cash. By the way, I’m not talking about revenues. Remember, accounts receivable will eat cash so you might be selling on credit and creating a cash problem. You need to know things like that.

Growth is the most voracious consumer of cash because you’ve got more of it tied up in inventory and more of it tied up in receivables. The faster you grow, the more cash you need.

Going back to the topic that we were talking about having different channels, there are channels that eat less cash than others. Maybe growth is different. They might respond in a different way to different situations. For you to know that well is important to make decisions, in particular, when you’re in a crisis. First thing, you need to know your numbers well. Do not say, “The finance function and the numbers function will come later.” It comes now. You need to know it well. That was the first question. What was the second one?

How are you looking at investments differently? What are you looking for now that maybe you weren’t looking as closely or considering prior?

The way you put it about gambling money. The thing that I’ve learned about people in finance is that they forget quickly. It happens in banks. People will come back and make crazy bets. Maybe initially, people are going to be cautious and then as returns become difficult, people again are going to play a bigger bet. What happens is you see valuations coming down so the possibility of return is different. When competition comes back, it is more difficult to get into deals and good valuations. People again will make big bets. I don’t think that’s going to change. In respect to the valuation of teams, in that sense, it hasn’t changed. Exceptional teams will succeed and that has always been the main focus for me.

I’m going to switch to a few questions from our audience. This one is aligned with what we were talking about. “A lot of venture capital that offered seed-stage funding has been shifting to larger checks and later stages as their funds mature,” which we all see. “It also seems like the same usual suspects are getting the investment. Do you see this changing pandemic-related or otherwise?” Do you see that the funds will continue to move up the market? Do you see funds being willing to get back down into funding earlier?

Yes and yes. Funds will always try to go upmarket because as you grow bigger and everybody wants to be bigger and wants to manage bigger funds, you need to put more money to work and you need to get into bigger deals. That’s the factor of growing. The question about seed is going to be how early do you need to get into a company to get into the deal or to lead the deal later? How early do you have to go in to get a good valuation and get some rights? That’s going to be a function of the market and it’s going to come back to that again. As more competition in the larger deals and the bigger deals comes in, you’re going to have to go in earlier to get into a company that you like. I don’t think that’s going to change. Both things will come back. I do not know when, but they will come back.

I’ve been calling it somewhat an uncertainty premium. That is one thing that’s going to stay. If you’re a founder who wants to attract savvier, sophisticated investors who tend to invest later, you’ll have to find creative ways to make that attractive to them. Also, make it as non-impactful from a dilution standpoint as possible. You’re going to have to think about the things in what you offer at an earlier stage that will say to an investor who invests at a later stage that it makes sense to come in. That means it could be follow-on rights. It could be things that give them an incentive for coming in early because they can double down on the bets that they like.

That’s going to change. It’s not going to be just the simple convertible note with the normal terms, 20% discount, reasonable valuation cap, and interest. There’s going to be a need for more creative funding mechanisms that entice an investor. This is a question more so, Manuel, as to whether you agree with this, to entice an investor to come in. If they come in early, they have rights at a later date that give them an opportunity to get to the front of the line on the next bigger round.

If you’re in an early company and usually your rounds are going to be with angels and legal, you’re competing with public markets. If you’re a wealthy individual that invests in companies, you’re looking at cheap valuations everywhere, not just the startup. If you have a cheap stock of a company you like that gives you liquidity in the public markets and you are waiting for that investment in a private company that doesn’t have liquidity and more uncertainty, you are probably going to choose the other one. In order to bring in an investor that has way more options from the point of view of possible big outcomes because valuations are cheap in public and private, then you have to make your offer more attractive. You’re going to have to give them more rights and more reasons why they should choose your stock over a public stock that is liquid. Because it’s cheap, it can give them a big outcome in their view. You have to be more creative with respect to the rights and the attractiveness of what you offer.

For this question, you have to channel your inner clairvoyant. As you do that, if the lottery numbers come to you, let us know there too. When do you think or when do you believe the fundraising market will normalize? Do you have any sense of how long it will take to return?

It’s hard to know. There was a survey that I saw of C-Suite executives in the Bay Area with respect to how long this was going to last and when are things going to come back. It will take 6 months to 1 year to come back to a more normal level, but it also will depend on how long this takes, which is why it’s important to have a strong view on restrictions and to get this under control. You should plan for 6 months to 1 year and think about keeping your company alive for a year with what you have. I know people have heard about ramen profitability, which is the level of profitability that pays for your expenses so you can survive through something. That’s how you should think about it. How can I put myself in the position to grow once this is over and weather the storm?

If you don’t have to raise now, you don’t, but a lot of people don’t have that luxury and are in need of raising. Raising what you need, staying as capital-efficient as you can, and doing those things is critical. A few more questions here from the group. This one’s cool. You can answer this one either directly from yourself or something that you’ve witnessed. This question comes in from Jared. “Can you share a specific example of when you invested in a company early? Why did you do it? What did they say? What did you see? What terms were attractive to you?” Whether that’s you personally. You’ve also witnessed a lot of deals consummated out of FoodBytes!, so whichever gives you the best way to articulate an answer would be great.

First of all, when we sat around the table, the team was outstanding. The smartest people in the room were them and every single important gap in a company or every single important element in that company that will make the company successful was filled by staff. Let’s say that you have a tech component and you have a buyer component. You have an amazing tech person, R&D, PhD person, and CEO. That was the first thing. The people there will say, “I want to work with this team.” That was number one.

Number two, they were in a vertical that has a lot of growth and is big. You find yourself in a situation where you see this big market is going to grow fast and if a team is going to succeed, it’s going to be this team. We have to get into this deal. That has always been the situation where you find yourself in a room with people that wow you and you say, “These are great.” Even if you think the idea is not there yet, you know it’s going to pivot and there are going to be prototypes and changes, you believe that in that market is into you.

It’s the team first and the confidence in the team and your confidence in the team. Let me switch gears to another question because we’ve got quite a few of them. This one is interesting. If you’re an early-stage brand that is doing the unheard-of thing and delivering a profit, how do you leverage this to position yourself for growth and to weather the storm? What would you do as a company? Do you double down and grow? Do you hold tight? If you want to add any more to that, feel free.

Something that we have seen in another crisis in 2008 and 2009, these are different crisis in different places, is that companies that were in a good position from a capital point of view and from a profitability point of view were able to take over the market share of those companies that deal and do it quickly. When you’re profitable and you’re generating cashflow, first, you need less outside capital to grow. That’s important. We were talking about dictating terms. When you need less money, you are able to have a better deal than others engaging with capital. More than anything, you can take over the white space that is being left out by the companies that cannot respond. You should grow. You should look at the spaces that are being left out and that you can access without having to deploy too much capital. That’s a little bit of the caveat here. You see companies retreating big and small. You see the white space moving to it.

I’ll add a couple of things. First of all, there’s a difference between profitability and cashflow-positive, being focused on cash first profitability. Second, I know that sounds somewhat strange but making sure you’re cashflow positive gives you a lot of choices. It gives you the choice of sheltering in place and weathering the storm or it gives you the choice of picking certain few strategic levers that you might want to pull and going after them. At this moment in time is probably going to be more attractive to investors. Like anybody, it’s a strange thing even in early-stage brands, we all have the sense as investors that there’s a risk. It’s risk capital. When additional uncertainty, the uncertainty that we’re uncertain of gets layered in, then we begin to be less risk-tolerant. When brands come forward that have good unit economics, a good pathway to profitability, that de-risks or reduces to some degree that uncertainty and puts you in a position that it may be a good time to raise because you can more effectively.

Another question that came in is, could you share some specific examples of rights, warrants, other things, other considerations that we should be offering on a convertible note? A couple of things I will say about that is, first of all, always make sure you’re talking to your attorney about this. One of the key mistakes made is that you do things to entice investors now that turn off future investors later, and you don’t ever want to do that. You don’t want to saddle your business with a later date of investment unattractiveness. Things that I see out there in the marketplace, some basics are increasing the discount rate, reducing the cap, and increasing the interest rate all of which, on a marginal cost basis, won’t cost you a ton of money. Your interest isn’t going to cost you much because that’s going to convert into equity over a 1 to 2-year period. If you lower the cap, then raising the discount becomes less significant because more than likely, the cap will come into play and not the discount, but it sounds.

We then see things like warrant coverage where some percentage of the principal put in is offered in warrants that can be exercised later at an agreed-upon price. We see follow-on rights at a discount and so forth. I will say that the key is to have a conversation with whoever the investor is and I’d be curious about this and say, “We recognize there’s a difference in the market and we’re willing to be creative on terms. What would be interesting to you and have that to some degree?” Also, to make sure that you’re well guided by an attorney in this space who understands the downfield implications of anything that you’re doing because you don’t want any unintended consequences. I’ll let you build on that.

I would say that’s the number one, have a good lawyer. You have to be careful that you’re not giving up things that are going to be problematic in the future. Being that I’m on the other side of the table, I’m a little bit hesitant to say certain things that I might like. I will say that follow-on rights because that’s interesting. When you’re going in particularly early, you want to get into a great team and agree if the idea is going to grow. You want to go early enough so you get a good valuation and you’re going to be able to follow on. We’re talking about things that are different and that are new. You were talking about the cap and about the interest rate and that’s the classic view of what a convertible note will have. What you’re decreasing there is the cost of doing the deal for the investor because the cap is slower or the discount is higher and then you can give all the follow-on rights.

More than anything, have a good lawyer next to you. Do the numbers and know exactly what it will mean for you in the next round so you are comfortable with the economic effect. We’re going back to one of the things that we were discussing. Know your numbers well because if you’re going to give all those rights, try to do it with not a big amount. Bring your ask to the level of something that will allow you to weather the storm and come back to the race when things are more normal. Be careful. Do not give up everything. In the end, you might end up having a company where your interest and where all of your hard work is not good enough.

I’ll emphasize the importance of having an expert attorney in this to help you do it. I’ll also add that most good investors don’t want to see you do anything that is aggressive that it impugns your ability to either raise future capital because that only puts more risk on the investment being made and/or leaves you disincentive as a founder. By the end of the run, you’re such a small part of the ownership of the business that you’re not in it with every fiber of your being. In some ways, there’s a line that most investors don’t want to cross because it isn’t in their long-term best interest. They want to get the best deal they can. There should be an uncertainty premium given and there’s going to be an expectation of it and some of the things that we talked about, from a layman’s term, make good sense.

Every investor is going to have their own triggers. The right investor is always going also to be thinking about what’s best for their investment long-term, not short-term, which means making sure that they’re setting you up for success. They should be on the same page. Going back to what we talked a bit about the mission. There’s a question from Sarah, which is, “How important do you think it is for the mission to be focused on giving back philanthropy or sustainability versus addressing a consumer need?”

We’re talking about the companies that are attractive. In a pitch competition and when you’re looking at them, the mission is what draws your attention and it has to be true. More than anything, it has to be true. That mission has to be true because where you see growth and where you see that exponential growth is with companies that obsessively go after something for a reason. Whether the way to achieve your mission is through philanthropy or through one of those things is the right way or the only way. There are many ways to go through it. It’s certainly one and it’s one that is attractive but it’s not the only one.

I don’t think it’s necessary to have that specific way of going at it. There are good companies that do that and they do it well. I would say that more than anything, your mission has to be true. It shouldn’t be, “We have the mission because that’s what the consumer wants.” Is that going to make you obsessively go after achieving that mission? Probably not. That’s what’s important. It should be something that brings you and makes you go after achieving that vision relentlessly. That’s what makes the difference.

I would agree wholeheartedly. A mission can’t be window dressing. It has to be authentic. It has to be what are the inner motivation of the team and the business as a whole? Let’s be honest, we’re building brands for a myriad of reasons, one of which is to solve a problem in the market or meet an unmet need. The other is to capitalize on solving that problem. There’s nothing wrong with being a dirty capitalist. Not everybody has to be giving back philanthropically. This is an opinion and anyone can completely disagree. The power to solve most things lies in commerce and good economic models pointed in the right direction trying to do good but doing good through good economics will create more improvement and more change than philanthropy or philanthropic efforts.

When I think about being optimistic about surviving through this Coronavirus, for me, it’s because of greed. I know that there is an enormous amount of teams going after vaccines and solutions for this. One of the reasons is that because there’s a lot of money behind it. A lot of smart people are working on it because it’s good but also because it’s greed and ambition. Many times it does work. That happening makes me optimistic. Going back to what you were saying about the mission and being true to it. It can’t be window dressing. It has to be true because it shows. People that obsessively get out of bed in the morning to achieve a mission are because they believe in it and you can see it and you can feel it. There’s no doubt.

Here’s a question, and the person writing the question titled themselves, Elliot’s better-looking brother. We know that has to be Chuck, he has that delusion of grandeur who always thinks that he’s better. He is one of those attorneys though that you should talk to for good advice because he’s creative. His question to you, Manuel is, “What’s more important, focusing on profitability and cash burn or focusing on growth?”

When we were talking about the company that is profitable and knows how to manage their cash and growing, we were saying it from the caveat that be careful with capital deployment that’s going to eat cash. When you see a white space that somebody is leaving because of the situation and you move into it, do it carefully. First, you don’t know how long this is going to take and you don’t know how long until markets come back. You cannot make a move thinking, “We’re going to get funded and we’re going to find the money. This is not the time. Maybe you will not. Whatever you do in growth has to do knowing that you have the money, the profitability, and the cash to do it. Growth comes after you think about profitability and cash burn. In the past, we had a different view, “Let’s grow and we’ll find the money.” Now, you do not know if you will find the money and you don’t know how long until you are back in the situation where you will find the money. You have to think about it that way.

Here’s another cool question. We’re going to start doing some rapid-fire questions to get through quite a bit that is left before we end. This one is how do you keep investors excited about your brand if they’re not investing? There are a lot of people who are saying, “I’m keeping my powder dry. You’re too early.” How do you keep them engaged? What advice do you give to a brand in terms of staying top-of-mind with you as an investor?

You should think about the attention market share of your consumer. Continue to be exciting for the consumer and show that you can be successful and survive through this. That is impressive. When you see companies that take advantage of the situation and understand how to manage the company, that know how to manage the money, that knows how to identify that white space and maybe move into it without deploying too much cap, that’s impressive. Going back to the team, these people knew how to respond and what to do. Focus on that and keep informing. Be good at it.

This is the thing. When an investor says that they’re keeping their powder dry, let me put everybody in perspective on what’s going on. If you have a big portfolio of companies, your first view is going to be first to see that those companies have what they need. If you have some dry powder, maybe you’re going to save it for them first instead for new investment. That’s why they’re saying, “We’re keeping the money.” Another thing is happening in the case of many VCs, the LPs are asking them not to call capital. Even though they have dry powder, in reality, they don’t have it. That happened in the past and it’s happening now. The reality is they don’t have dry powder.

I’ll add quick, tactical stuff. If you’re not producing a monthly update that covers what’s going well, what you’re struggling with, and any asks and circulating that broadly to current potential investors, influencers, and so forth, you’re missing an opportunity. It doesn’t need to be fancy. It doesn’t need to be pretty but that is a way. Even if they don’t read it, you’re remaining top-of-mind. That is critical. I will tell you when you raise money, you raise money from warm relationships and not from cold relationships. The more of those relationships you keep warm, the more they’re ready the next time you raise even if it’s not this time. It needs to be quick and easily digestible to get through. There are a couple more questions. What metrics do you look for in considering an investment in an early stage bootstrap company? Is it revenue? Is it a growing customer base, etc.? I certainly have my take on that. What do you have there?

It depends on the vertical. If you’re thinking about brands who want to see the growth and depending on their channel, it’s a different metric depending on what the sales channel is going to be. You want to see growth because you want to see them being accepted by a broad group of clients. If you’re looking for big outcomes, that’s when you want to look at growth.

That’s slightly different now because there are a few other questions that are similar to that. For the sake of growth, growth is not the thing that people should be chasing because a lot of people will drive growth through ACV growth or distribution growth. Also, a lot of people make bad choices about where they grow. You get initial growth by going into the wrong retailer but that’s not sustainable growth. The number 1 and 2 things, going forward, that most funders are going to look for beyond team, beyond white space and all of that in talking about operationally is, can you demonstrate traction within the channels that you’re in? Are you in multiple channels so you’ve diversified your reach to the consumer? Related to that will be, can you do 1 and 2 in a capital-efficient way?

To add to it, when you’re talking about growth, it’s not that growth. As long as you keep pedaling the bicycle, it looks at growth but it means that the places where you started are decreasing. You have to be able to see through that. That is real growth in the channel.

There are two last questions and one will be a wrap-up question. This is an interesting one and it’s about teams. I’ll combine two questions here on this. One was, as you evaluate, you look at great white space, great opportunity, all of the things, great mission, everything lines up. The founder is a good founder but the team isn’t quite there. Do you get involved? Would you get involved as an investor and help them build out that team? Would you look at that?

Yes. What you want to see in a founder when they’re starting, there are gaps in the team because that’s the moment where they’re in. What you want to see in them is that they know what positions they need and the kind of person they need. That they are not afraid of having people that are super smart in their team. That’s important. Some people do not want anybody to outshine them and that’s bad because that means they’re not going to hire great people in their team. That’s what you want to see, people are willing to build.

A follow-up or a similar question from that comes around strategies for hiring. I’m going to answer this one. If you’ve done these things, if you’re capital-efficient, if you’re not growing for the sake of growth, if you’ve got some ability to sustain through this, now is a fantastic time to find that next great team member. Truthfully, other brands who did not position themselves well have to make difficult decisions and there’s going to be some great talent available in the marketplace. If you can do it, take that. There’s a follow-up question, where to find talent? All over. Lean into your network. Lean into LinkedIn. Use recruiters, whatever you need to do. There’s talent out there to be had. There are some other questions that I’ll get to Manuel and try to circulate back to the registrants. As a reminder, this webinar will be available to watch on our YouTube channel. The last question, and it comes from our insecure friend who thinks he’s the better-looking brother of me, “If you could give only one piece of advice to folks looking to raise early-stage money, what would be the one big takeaway?”

Go to people that you know, people that trust you and are close to you. It’s going to be easy to do it through referrals of people that are close. Second, don’t look for a lot of money. Make the round as small as you can.

I’ll say, 6 to 9 months’ worth of money on terms that excite and entice an investor and make sure that you go through your cashflow with a fine-tooth comb and identify any and every way that you can reduce discretionary expenses and speed up the conversion of order to cash. Manuel, how do folks reach you if they’re interested in learning more?

My email, Manuel@RIFFVentures.com.

Thanks for joining. I appreciate it. Manuel, it was good to see you. Have a great day. Take care.

Thank you.

Important Links

• Manuel Gonzalez

• RIFF Ventures

• Manuel@RIFFVentures.com

• YouTube – TIG

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