Latest / Success Story with Scott Clary / Lessons - Raising Money and Funding Your Startup | Charlie Feng - Co-Founder of Clearco

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Lessons - Raising Money and Funding Your Startup | Charlie Feng - Co-Founder of Clearco · Success Story with Scott Clary

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  So that is probably the biggest pain when it comes to keeping your business going.
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  But the model you took is very different.
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  And I think the model you took is very novel.
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  And I think Gleerco has a pretty good name and a lot of people know it.
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  But for people that don't explain what a traditional, for people that have never raised money
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  before, explain what the traditional process is for a founder who's looking to go get money.
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  And then explain why Gleerco is different and maybe why you chose to do it differently.
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  Yeah.
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  I saw a little bit about kind of the landscape maybe before Gleerco.
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  And now this new generation of alternative capital that, you know, we're pretty excited
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  that this new kind of class of assets, the asset class has kind of more risen up over
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  the last couple of years.
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  So traditionally, as a business owner, you have two choices.
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  You could either go to the bank and get debt.
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  So you put, you know, it's usually personally guaranteed, unfortunately, you put some kind
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  of collateral on the line, whether you have a factory or, you know, a property, you put
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  that on the line and you get debt.
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  So essentially you get liquidity from a fixed asset.
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  And then the other way is you get access to capital by raising equity, which is what you
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  see on TechCrunch and kind of all the traditional raising capital people call it.
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  And that is by trading away a portion of your company.
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  So let's say you give away 20% of your company to venture capitalists and they give you
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  X amount of money to hopefully build your business, right?
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  And they're hoping that you'll make it big.
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  So are you?
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  One thing we realize is that two interesting factors.
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  One is for a lot of the new generation of businesses, these kind of online digital businesses,
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  they are almost by definition asset light, right, like an e-commerce store.
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  They don't have a factory.
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  They don't have these physical assets or an open or something to kind of collateralize
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  against.
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  So going to the bank is oftentimes not an option or kind of what we see as kind of an advantage
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  being asset light is actually seen as a disadvantage in the, in the face of kind of getting money
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  from the bank.
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  And for a lot of these businesses that are e-commerce, for example, these digital businesses, they
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  are already generating revenue.
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  They're businesses we're talking about that are not.
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  So a lot of the businesses that we're funding are these revenue generating online businesses.
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  They already kind of done the R&D where they already have the product there.
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  And they kind of know that for every dollar they put into Facebook or every dollar they put
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  into marketing advertising, they get two dollars out on the other side, right?
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  So then to give away equity every time you're running a Facebook ad is not the best trade.
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  So that's kind of what we started to figure out, like, is there a different way to fund
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  these businesses?
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  That's been more efficient.
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  And I think our belief is always that around the idea of what is the most efficient way
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  to capitalize or fund your business?
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  So if you are an R&D heavy business, we're doing AI and new technology from a, you probably
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  should raise equity.
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  We partner up with a lot of VCs and we think equity is great.
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  It's truly risk capital.
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  It's for things that are in that zero to one phase.
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  And once you're kind of going from that one to 10, you're scaling things, sometimes
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  that doesn't make as much sense anymore.
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  And that's why we built clinical.
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  Are there any other lessons or learnings, things that you've succeeded at or failed
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  at and have learned from that zero to one phase?
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  So we sort of spoken about Founder Marketfit, Product Marketfit, First Hires.
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  What about scaling from zero to one?
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  What does that process look like?
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  What's the testing process, the experimenting process, channels that you should try when
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  you should give up on channels, if you should at all, like, what's that whole mindset
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  of scaling?
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  That's tough too.
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  Yeah.
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  I'll first talk about, I'll talk a little bit about experimentation, because I think
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  I spent a lot of time doing that.
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  Before I start talking about a story where a mistake I made quite early on that I've
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  taken with every other business I built, which is not charging your customers early enough.
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  And kind of going back to that idea of, you measure a person's intentions by the actions
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  they make rather than the words they say.
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  And I think that's very true when it comes to this marvelous product that you've built
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  and the question is, well, does anyone ever want it, right?
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  Because I think for my first company, a first product, I remember kind of doing a lot
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  of customer development interviews, talked to a hundred people, I got a lot of people
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  on wait lists, I got a lot of people who said, no, I like that.
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  I think which ability is great.
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  All these kind of strong positive words of encouragement.
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  And then what it hit me is that I didn't ask them for their credit card, I didn't ask
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  them for to pay for anything.
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  And then when I did, when we finally spent months to build a product, it turns out that
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  a lot of the positive words were, they were caveated with kind of other reasons why they
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  couldn't pay or why they were still missing this one feature or why I was still missing
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  this something.
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  And kind of maybe realize that the, in the early days, what you really care about is learnings.
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  You're trying to maximize the quality of learnings and kind of the quality of learnings,
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  quality of feedback and charging because, you know, when I was kind of starting my first
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  company, I always thought that, you know, I want to, I don't want to charge people money
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  because they're my early supporters, they're oftentimes friends or people I know.
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  And as a result, I don't want to, you know, take money from them, right?
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  And it's not so much about charging people for the sake of making a dollar, making money,
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  but it's really about how you maximize your learnings and charging people, it's one
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  way to increase what they, they increase the learnings, right?
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  And it's really about how do I maximize the efficiency of my feedback?
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  I have a certain period of time.
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  Companies don't die because of, companies usually die because founders give up.
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  Companies die because you run out of time.
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  Money is your most valuable asset when you're building a business and that's your one
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  phase.
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  And the, the important thing is how do I maximize the efficiency of every day or month I spend
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  doing that?
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  And sometimes, for example, you're working in the enterprise section of businesses, like
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  if you're working on a six-figure, potential six-figure deal in the future, you might not
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  want to charge your first customer, your inaugural first customer, you know, six figures.
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  But even charging them a $0 invoice is actually quite good because what it does is that for
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  that large enterprise, if you're charging, if you're making an enterprise of over a hundred
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  or a few hundred people sign and do a $0 invoice, it actually makes their legal team to review
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  the invoice and makes the finance team, you know, they have to do all the procedures,
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  right?
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  And it makes them actually have to commit, even though they're not paying any monetarily,
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  it's a much higher commitment than just kind of a pilot with literally no strings attached.
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  And I think what you're trying to do is, again, maximize your life.
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  So this can be done via charging people, asking them for the credit card and you'll see,
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  you know, people's real reasons and excuses come out.
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  Or you could, you know, you do another way for consumer apps is you really measure how
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  they use that.
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  So you don't care so much about the number of signups, you care about the daily usage
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  for the time they spend on the app, and things like that.
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  So, very smart, yeah, very much asking people for the credit card really all.