VALUATION AND NEGOTIATION SECRETS LECTURE AT WILSON SONSINI GOODRICH & ROSATI (WSGR)

Video Transcript

Mitch Thrower:  I'd like to ask everyone just to close their eyes for one second.  It's been a long day.  We're all here at night, which is a great place to be in San Diego.  You're in a law office.
And now, with your eyes closed, please stand up.  Take a stretch, deep breath, shoulders back.  We may actually have to stand up a few times during this presentation.
And I need to think about, is there anyone here who is graphically talented with great handwriting?  If you are and you believe in your handwriting, if you can raise your hand.  Okay, you guys can sit down.
So, with great handwriting, if you can stay standing.  Yay.  And we're gonna need one more volunteer, and if you can just stand over by the glass, that would be fantastic.
Unidentified Woman:  Okay.
Unidentified Woman:  You need another volunteer.
Mitch Thrower:  Another volunteer, okay, great.  Make sure these pens work.  Sometimes, they're--one of the things I'll talk about is you always want to be able to explain yourself graphically, and if you're not very good at writing things down, especially in front of a venture capitalist or someone you're trying to explain the situation and why your valuation is what it is or why your team is so great or what it is you're producing--someone asked me a long time ago, if you were gonna get married to one specific talent, what would it be, and what career would your wife be in.  And I'm now engaged to neither of these, but it was either a graphic designer or an attorney, because as an entrepreneur, you need to be able to communicate your ideas or protect them, and a lot of that has to do with the things I've been through.
So, I've been on all sides of the valuation equation, all sides of a negotiation equation.  I'm gonna try and get you as much as I can in as short a period as we can.  I can send you this deck afterwards because I'm gonna go at lightning speed through some of the concepts.
And my motor skills, even at their best, are far slower than your mental processing skills.  So, if you're thinking about life, and then in the back of your mind, you're thinking about what you're gonna do after this, that's okay.  It's because your brain is much smarter than my capacity to communicate to you.  So, that's why I'm gonna go really fast.  So, sit up and take notes maybe in an object oriented programming sort of way.
Also, if you could at the bottom of your page just draw a line, if everyone could draw a line and write the letter Q, and that's for questions.  And so, what I would encourage you to do is ask questions.
You can pull a chair up over there, too, because I'm gonna have you kind of put something down and then kind of go back.
So, valuation and negotiations - we've done incredible things as a human race.  We've launched ourselves to the moon.  If you think about how bazaar that concept is, there were a lot of valuations and negotiations involved in that because effectively we found ourselves on earth, we found fire, we figured out a way to put it in a box, put a chair on top of the box and launch ourselves to the moon, right, and make the fire come out of a very small hole in a very pressurized fashion.
And how many decisions and how many negotiations had to happen in the course of human history?  It only happened in 100 years or less.  In fact, it was one human lifetime when we first lifted mankind off of the planet and then we put ourselves on the moon.
You are now at an incredible opportune moment in history to generate value, not only for yourself but for the world.
I met today with an incredible entrepreneur up in the Bay Area.  In fact, I almost didn't make it.  My flight was delayed.  But, he was motivated by this force of aligning your interests of your company with the interests of the world or the interests of the greater good.  And he's a very good investor.  His name is Matt Barger.  He was a Deputy Chairman of Hellman and Friedman, one of probably the most successful private equity companies in history.  If you want to look at it, it's HF.com.
They had equity holdings in NASDAQ.  They had all of these interesting holdings.  They did the Double Click Deal.
So, Matt was probably one of my number 28s, and you'll see in this slide deck, I talk about number 28.  Those are the people who are your number 28 on the Chutes and Ladders game of life, and if you land on number 28, you get to go all the way to the end of the game.  It's better with the visual, but we're not there yet.
So, Matt actually was the person who said to me, you need to align your interests.  And at the foundation of all negotiations, of all term sheets, and the foundation of all valuation discussions, it's aligning your interests, aligning your interests with your investors, if you're managing a company, it's aligning your interests with the team members that are at the business because you're going to need to move in the same direction.
And if--at the moment when interests are no longer aligned that you'll start to see negotiations go haywire.  You'll start to see people going different directions, have a different agenda.
So, here are some of the things I wanted to take you through.  First, I'm gonna go at rapid speed through my background and some of the things I've worked on, so that'll give you primarily the questions to ask me.  So, that's really why I want to tell you about my background.  So, I'm trying to stimulate conversational questions about experiences I went through.
Then I'm gonna take you through the timeline of a negotiation, clear communications, sign here.  In fact, we're gonna come back to these, so let's not double it up.
My first business was a company called The College Connection, The Rail Connection.  I started it in my dorm room to sell Eurail passes to college students.  I had no negotiation of investment, didn't really take any outside capital.  So, for me, it was all boots up.
The business was putting posters up on college campuses and then distributing Eurail passes to college students through postering in the college network.  My negotiation at that point was with events, college campuses.  It's a different world.
We produced a book called The Passport.  We sold Eurail passes.  This is what we were making money on, the system of really students going to Europe.
And that actually was the trigger for my career in getting to the point of understanding the web, and we migrated all the Eurail passports online, which is what we did here.
These are quick points - fail fast, fire faster, fast pivot in the direction of revenue.  I got involved in the sporting world, so I started a company called The Active Network, active.com here in town.  I'm one of the cofounders.
We went public this year.  It's an amazing business.  And in that level, I've been involved in a bunch of negotiations with both venture capitalists, companies we've been acquiring.  I know there was one specific example I'll tell you right now, which is really relevant and very important for you when you're negotiating term sheets.
We had a building in La Jolla we were renting, and we had tables on the roof, and we were coding database of all these events.  This is back in 1997.  Event directors for marathons and triathlons didn't even have something called a fax machine, much less an email.
So, we put all these events in the database, and just down the street was Enterprise Partners.  Has anyone heard of Enterprise Partners in Southern California?  One of Southern California's largest venture capital firms, very successful at the time - in fact, they were enormous.  They're no longer around, but they were enormous and a great group to work with.
And so, we had sent in a business plan because I wrote a business plan for Active, which was first called Race Gate, Race Planner, Race Interaction, Active USA and then Active.com.  And there's a whole 'nother discussion in there about what you're calling yourself and what your business name is.  I would argue it doesn't matter.  Just fly a flag and run until you grab a different flag and keep running.
But, Ron said no.  Enterprise Partners said no.  We sent them a business plan.  We submitted it.  And I wish I still had the letter from Carrie Stone [sp], who's also a San Diego entrepreneur now.  And she said, no, we're not interested in your business plan for participatory athletics, we don't think the market's big enough, we don’t think people are gonna use the web to register for athletic events.
So, I wish I still had it, and I could frame it next to the $5 million check that we got three months later.  But, what happened was they said no, and what that did was an amazing thing because then we had participated in Connect, which was San Diego's entrepreneurial incubating--it's a helpful thing.
I would argue that, if you ask for help rather than money in all negotiations, you're gonna go faster, further and more successfully.  So, ask for help rather than money, and that's what we did with Enterprise.
I went to Ron Taylor, and it really is--I'm gonna talk about psychology as much as I'll talk about the actual direct dynamics of valuation and negotiations because all valuations and all negotiations are psychology.  You'll learn the tools of these things, but it's psychology.  People invest in people.  People use relationships to invest in people.
And if you think that you're gonna be able to find someone who's gonna fund your business at the TB Bar and Grill versus hanging out at the pool, grabbing coffee at the Four Seasons in San Diego, then you're wrong.  So, place yourself in the right place to get the people with the results that you're trying to achieve.  Be cognizant at all times of who you're surrounding yourself with personally, professionally, etc.
Back to the Ron Taylor story, Ron then was at a panel similar to a presentation in Connect where he was sitting there evaluating our business.  We were going through Connect.  I was--we were explaining, here's what Active is all about, and this is what we want to do.  And then Ron basically was [unintelligible] help our business.
I went up to Ron next door.  This is a good friend of mine Steven, who's left his family in Ottawa to come and visit us for some transactions that we're working on together in an investment side.  So, this is Steven, everybody.
And I went up to Ron and I said, okay, it's no longer a confrontation.  I am not there asking you for money, right?  What's one of the toughest things you do?  Ask someone for money.
Just turn to the person next to you and ask them for $1,000.  Just say it.
Unidentified People:  [Unintelligible crosstalk.]
Mitch Thrower:  Now, that's uncomfortable, right?  Now, I want you to turn to the person next to you and say, if you give me $1,000 today, I'll give you $2,000 tomorrow.  Go ahead.
Unidentified People:  [Unintelligible crosstalk.]
Mitch Thrower:  All right.  That incredibly slight change in your psychology of how you approach someone for money will change forever the course of your entrepreneurial career.  If you ask somebody for money in the hopes that you're gonna get something from them, rather than--I mean, you're the entrepreneur.  I'm sorry to inform you, but you're the person that's gonna make somebody incredibly wealthy.
By the year 2015, the entities I've been involved in in San Diego will have paid close to $1 billion in payroll tax, not to mention how much that people have invested over time have made or the salaries that have been paid.
The position you're in is one of giving, not of taking.  So, reframe it, first of all.
So, I met with Ron, and instead of saying give me money, I said, hey, you have already said no to this venture, let's look at it together and give me your advice.  When you ask for advice, it's ten times more powerful than asking for money.  So, that's a great way to open up negotiations.
So, I had an idea.  The timeline for Active, and fast forward--started it in 1997, '98, wrote the business plan, we raised $5 million from Enterprise Partners back then.  It was a crazy time, right - '97, '98.
We unfortunately had the first of our very difficult dilutive experiences.  Venture capital has been dubbed vulture capital at times.  If you are in it at the wrong time with the wrong people, they can really wipe you out.
There's something called the term sheet.  You've probably studied it.  If not, I'm sure you will.  That's the language you need to understand.  You need to understand liquidity preferences.  You need to understand control provisions.  You need to understand change of control provisions.  Those are all things that you will study, you will study them by the book, but then you'll realize that none of them really matter because the next person to give you capital will change all the things you've agreed to previously, anyway.
So, you will fight tooth and nail, you will fight so hard to achieve certain things that really won't matter, anyway.  And unless you have positioned yourself to go into the next stage of negotiations from a capital providing standpoint now.
So, it's not about the current negotiation you're having when you're taking money from folks to make them capital.  It's about three or four steps down the road.  So, I would encourage you to think about that.
So, we started this company.  I can remember when I approached John Pleasants, who is now at Playdom at Disney, to try and convince him to invest in participatory athletics rather than--he was at Ticketmaster at the time, because you can only sell so many things to the Britney Spears fan, but when you have somebody who's running a marathon or a triathlon or playing golf, literally, you can sell them a host of things.
So, know your leverage going in, and your leverage going in is what their needs are.  What is Ticketmaster's needs from a growth company?  What is the investor looking for?  You want to know exactly what they're looking for because it's not just the NPV of your present cash flows or of your future cash flows that's gonna sell your business.  You need to know how to model it.  You need to know things about modeling.
But, that's just because the investor's gonna look at you often and say does this guy speak the language of figuring out how to track and pivot.  And if you don't know the language, then you're gonna have some issues, or you need to surround yourself with someone who does know the language.
So, I started the company.  There's actually--that's me way down here somewhere.  Iron Man Canada - I participated in this crazy sport called triathlon.  I took my shot at the beginning of Iron Man.
Going really fast here - transactions, Paris Marathon.  This was interesting to me because everything here isn't garbage.  It's actually the doorway to revenue--sponsor, selling the people a bottle of water, selling the Nike logo on this garbage bag.  Everywhere around you are clues to creating revenue.
And when you're negotiating with people, in their life are clues to how you can motivate them because what you're trying to do is motivate someone to do something in a negotiation.
Your ideas can change the world.  No matter what happens, keep going.
Gonna go really--I'll explain that one.  Information rich exchange, which ends in financial transactions - that's the magic of the web business, information that's exchanged ending in financial transaction.
And then, also, this is something I love in business is find a reliable, renewable, high margin, low maintenance revenue stream, reliable, renewable, high margin, low maintenance revenue stream.  That's what you're looking for, right?  You don't want to have a high maintenance revenue stream.  You don't want to have any of the others.
And you also, in this world today, you want to find massive data aggregation.  You want to find a way to become a mini Google to be able to create data.
And so, teach your organization how everyone relates to the bottom line.  Firm your calculation.  Find a networkable common.  Now, this is a key that will unlock forever a doorway to achieve the valuations you want and to get negotiation terms that you're looking for, and what that is is the comma.
So, I want everyone to say your name, say your full name.  Mitch Thrower, one, two, three.
Unidentified People:  [Unintelligible.]
Mitch Thrower:  Okay.  So, now I want you to say, I'd like to introduce you to, and then your name.  I'd like to introduce you to--.
Unidentified People:  [--Unintelligible.]
Mitch Thrower:  Comma - you got it, right?  Everyone that knows you has a comma that's associated with you.  Mitch Thrower, triathlete, Mitch Thrower, Founder of Active, CEO of Bump Network, whatever that comma is.  You need to find a networkable comma.  You need to be able to be a triathlete so that I can be on the starting line so that I can meet Matt Barger, who loves triathlon, so he can invest in Triathlete Magazine because he loves Triathlete Magazine, he's been reading it for 20 years, so that we can generate for him a 253 percent return in a short period of time in an area he's passionate about because if you're tied into someone's passion and you can connect on that level, there's something that develops, which is probably the most important force in negotiating--negotiations, and that is trust.  The most important force is trust.
And I would tell you that I think trust has a half life of about 12 days, which means, in theory, people trust you.  If they haven't heard from you for 12 days, they will start to stop trusting you, which is why, in many cases, if you are ever taking money from people--and you probably won't follow this direction because it's really, really hard--please, no matter what you do in all your entrepreneurial adventures, send out incredibly detailed, very precise, open communication to your investors, even if it's bad news.
We send out quarterly updates to the investor groups at the Bump Network, and ask them at the bottom, here are all the problems, here, how can you help us.  And those quarterly updates have served us in so many ways - very important.
So, be more than a business plan because a business plan is only gonna tell you so much.  And most investors that are gonna look at whatever business you're creating are gonna say, great, but I know you're gonna change that business plan and what you're working on 10 times before you actually generate revenue, maybe one time.  Maybe you won't change it, but probably you will.
So, if you spend an enormous amount of time telling the investor this is why you need to invest because this plan is gonna be the end all be all, and it's absolutely gonna be the way it is, the investor's gonna take a step back from you and say, you know what, you're a little too attached to something that might not work.  If you're gonna tell the investor, hey, we're trying to figure this out, can you help us figure this out, can you give us some advice, and you're open to input--I mean, people have been successful for a reason, right?  Most of the time, it doesn't come from a lottery ticket, although I happen to know someone whose brother won $1 million in Power Ball, so--but, that's something that's critical--so, getting involved in something.
Also, be very aware as you go into negotiations--for example, let's say you're a founder.  What do you think is more powerful, being a founder or a CEO?
Unidentified People:  [Unintelligible.]
Mitch Thrower:  Okay.  Anyone believe that a CEO's more powerful than a founder?  Okay.  And you know what?  You're gonna find people that believe both.  And the reason is there are different earmarks that venture folks will have, and it depends on the venture folks.  If they're a founder, entrepreneur, venture capitalist, they're gonna have a very different impression than someone who comes out of Mackenzie [sp] who look at founders as incredibly annoying people that are too tied to their idea and are unwilling to pivot or unwilling to manage the organization effectively with something called process.  You know, that's something that's really, really important to understand.
So, I always say, pioneers, be aware of the Indians and the settlers when you're negotiating.  This will translate into term sheets, which we're gonna talk about in a minute.
But, what does this mean?  This is a Gary Larson cartoon, bummer of a birthmark, Hal, and there's a target on this deer's chest.  This is what happens to you as a founder in an organization, it happens to you as a CEO, it happens at any level of a company when you're in control or in a position of influence.
And you can always anticipate when you go out into the field--like, I'll tell you a quick tidbit of information.  It--you go out, and you blaze new territory.  You open up Active Europe.  You leave Active Network back at home, and you go and you open up a whole new territory, and you take down companies, and you generate 3 million in revenue, and you kill all the Indians, not--and I'm also part Indian, so I apologize for the reference point here, but you go out and you basically take the--take it down, and you create a massive network, and you're totally focused here, the last thing in the world is you don't remember that there's settlers behind you that want the land, and they've got knives and rifles, and they have--that's what you have to be really aware of.
And that--many times, venture capitalists are the settlers, and the pioneers are the entrepreneurs.  And many times, they negotiate to be able to win the new land, to be able to create new territory, but they completely forget.
One of the investors that I believe you're gonna listen to--his name is Brian Mesic from Anthem Ventures.  I think it was him, and I'm not sure, but he'll tell you many other great things--he said, you want to be in an investment relationship with someone who's in the foxhole with you handing you bullets.  And it might have even been Ken.  Everyone, I'd like to welcome Ken Potashner who is here.  He's one of our board members at Bump Network and an incredible entrepreneur, taken three companies to a billion plus.
So, if you have some questions--and at this discussion, I'm gonna open to questions, not just to me, but to Ken, as well.
But, you want to be in a foxhole with someone who's handing you bullets, not ripping your boot off.  And I've been in that foxhole with both investors.
So, moving forward, everyone is overwhelmed.  Trust has a half life of 12 days.  When you're thinking about your investor relations, everyone's overwhelmed.  This generation is a really interesting generation to manage, the me generation, the instant gratification generation.
I--time and time again, folks will walk in and I'll say, what's happening with that deal, and they'll say, oh, I sent them an email.  And steam will magically come out of my ears, and I'll say, well, wait a minute, you sent them an email?  Have you called them?  Have you texted them?  Have you showed up at a conference where they're gonna be, etc.?
It's like action is not email.  If you looked at my email right now and saw there were 8,000 inbox emails of which I can just sort through some of the things that come during the day, and you're trying to achieve something in someone else's life, email may not be the most effective way to get something done no matter how well you write and no matter what you put in.
Another quick little tidbit - I always put photographs of things that investors are interested in in the emails I send them.  If you can find someone who's interested in the oceans, you can develop an understanding.  Now is a great time to be in business because you can find the secrets that motivate the entrepreneurs and that motivate the investors.  What are they interested in?  And you can blend that in your communication back and forth.  It's really a human interaction when you think about negotiating leverage.
I'm working on an entity now called Bump, Bump Network.  We're effectively AAA 2.0, twice the benefits, half the cost.  And we also have a membership platform similar to the Active.com registration platform, but instead, we allow you to manage a set of membership benefits and registration so you can effectively--let's say you are the Honda Auto Club--put your own private white label membership program into your customer base.  That's kind of what we're working on now.
And again, this is all about generating questions in your mind, finding a way to give back.  Join a foundation, do something that people love to do.  We distribute soccer balls around the world.  I had a conversation on an airplane today with someone who, the only thing we talked about was sending soccer balls to Afghanistan because he was very motivated from a peace perspective.
And I know in the back of my mind this is an incredibly wealthy, successful, integrity based entrepreneur that, at some point, we could have a business relationship, but it's all about this.  It's all about something else.
So, sometimes, the fastest way forward in a negotiation is this way.
Let's see here.  I'll just go--finding number 28.  That was what we discussed before.  Find the entrepreneurs, find the investors, find the venture capitalists that will be a number 28 for you.  You will always have the venture capitalists say we're a strategic investor, we're here to help you, we're gonna get in the trenches and duke it out with you.
I've probably had in the 40 or 50 venture capitalists that we work with, and some of the top ones around the world, maybe two that have actually been helpful, right, maybe two.
Super powers - this is--we're not gonna do this lesson, but I always talk about how, you know, you really have super powers, you have super strength, you can breathe under water, but we're creating our own super powers.
So, if you can just a moment, everyone stand up again real quick because it's good to have breaks.  Deep breath in.  And now I'm gonna get specifically into the topic, which is why I'm here, and that is negotiations--go ahead, grab a chair, relax.
So, that's my background to generate questions and also to give you some sparks of ideas and thoughts.  Now I want to talk to you about the timeline of a negotiation.  When do you think the best time is to get a job at a company?  Who should you go to?
I always tell new people that are looking for a job to find an intoxicated HR manager, find someone who is completely wasted.  And I don't mean alcohol.  I mean an HR director at a company that just received an amount of funding that's far beyond their expectations, and they don't even know they need to hire you yet.
It's sort of the same thing with venture funds and venture capitalists.  I'll see people go and pitch to a venture group, and they have no clue that the fund has nothing left of their what's called dry powder.  Dry powder is how much is left in the fund, how much are they still looking to deploy, how does it match their overall goals in terms of the life cycle of the fund, because if you think about a venture capitalist, they're taking money from their private investors that have a timeline that have to then receive a return.
So, where the life cycle of a fund is is a big determining factor when you're approaching a venture capitalist.  It's also a timeline from a negotiation, oh, so you're gonna try and buy business.  If someone's been working at a business for a really long period of time, and they want to get out, you can use the timeline to your advantage because perhaps--let's say they have a number in their mind.  They want to sell the business for this, but you know you want to pay this, or you have this much to pay.  You can basically flip the timeline and say, okay, in the future, we will pay you this given these certain conditions - the whole concept of a leveraged buyout.
When I bought Triathlete Magazine, I didn't have any money to buy this magazine.  I'd sold my first company for a pittance.  It was a wonderful relief for me and a great opportunity.
But, what happened was I was able to do a leverage--they leveraged the buyout with me, so they gave me money over time.  I then took that money and approached the owners of Triathlete Magazine and I convinced them, will you let me buy this magazine and turn it around.  It was a three month dinners, discussions, meeting the family, homework, understanding the background of the magazine, what was going on.
Life is not a walk in and pick something off the shelf experience.  You can't walk into someone and just get stuff done like that.  You have to understand.  You have to be willing to do that homework, willing to establish the relationship, willing to go the extra distance to really get to know these people.
So, they finally agreed, and then it was a decade experience of buying 1 percent, then 2 percent, then 3 percent, ultimately 50 percent, and then doing another transaction to buy the other 50 percent.
And what's interesting is, in the very beginning stages of the negotiation when I approached them and I said, Jon Claude, I'd like to work with you and buy this magazine, please, I'm a young entrepreneur, it's my dream to get involved in publishing that has to do with a sport that I'm in love with, which is the sport of triathlon, will you sell me up to 50 percent of the magazine over time.
And the magazine was doing poorly, so of course, what's he gonna say?  Sure, go ahead.
Then, as we were more successful and the magazine became more successful, and we started to improve the value of the magazine, what happened?  It's a classic case of, again, if I give you $1 million, can I keep half a million.  See, he knows.  He knows what happens.
People will say, traditionally, if I give you $1 million today, can I keep half.  Okay.  Now, if I hand you that $1 million and we don’t have an agreement, what do you think is gonna happen?  It's a no - not always.  It depends on getting everything in writing, and even when you get everything in writing, it isn't always in writing, because if it's in writing, and you've agreed, and it's on a contract, oh, my goodness, you've got the negotiation, the term sheet is done, these are the terms, by golly, these are the voting rights for our company going forward.  Oh, we need more money.  What's gonna happen to those things you've just fought so tenaciously for?  They're gonna go straight out the window.
And so, it's all about the people.  And that--if there's an underlying theme to this presentation that I want to share with you guys, it's all about the people.
There's a book out called The No Asshole Rule, and understanding people's motivation, who you're working with, what their background is, run a background report--there's an organization in New York call The Bishop's Report.  They ran bishops on us from Enterprise Partners in the early days to find out everything about us.
Find out everything about the person you're working with, and trust instincts if you think something is not right.  You really--you probably do it all in the dating scare if you're out there dating.  Who in here is single, right?  That's always an uncomfortable question to ask.  Like, ah, ah, maybe, what does single mean, define your term.  But, that's done a lot - that's why the same understanding and knowledge and research to be able to give yourself that power.
So, the timeline of where a fund is, the timeline of where an entrepreneur is--clear communication.  That's an incredibly important part of negotiating and also the term sheet.  I've signed term sheets where, after studying term sheets and studying deal documents for a decade, I had no clue that that meant that.  My attorneys, some of the best in the world, at times have had no clue.
And I can remember, there's also a guy, I won't reveal his name, but he was working for a very large company, and he used to be like this, Mitch, you've got to come see this, oh, my gosh, look at these term sheets, you're not gonna believe them, BS we put in this term sheet of all the stuff we really don’t want, and we're gonna fight like mad to get it.  You know the stuff we really want?  It's back here, right?
So, clear communication and understanding what people's true motivations are in a negotiation, it's a cloud, it's the fairy dust, it's all of these things that happen that you really can't imagine happening.
And so, let's go about sign here--this is a unique thing.  This is a kit, and I've had debates with people about the power of this kit in raising money.  And I'll tell you, this is an investment kit for the Bump Network.  We actually have raised about $2.2 million--actually, about 2.5 now as of today, so it was a good day.
Unidentified Woman:  Congratulations.
Mitch Thrower:  Thank you so much.
So, here is a PowerPoint, right?  I had an argument with a 24 year old in the office.  He's like, why are you sending out documents, why are you sending out paper, it's all digital, what are you thinking, come on, you don't need to send that out, why do we need due diligence books in paper on the shelf.
Trust me, you need printed due diligence books that need to be on the shelf, you need to be able to touch and feel some of the things that people are investing in.  Now, if you're approaching another 22 year old and you hand them this and say read it, maybe that's not the right approach.  But, most folks out there still want to see deal docs, they still want to see copies of the documents they're signing.
But, the most important part of this crazy kit in terms of raising money, you can see it in plain sight, and you probably have no clue which it is, and some of you may be guessing it, is this.  This is one of the most powerful forces in raising money.
And I'll tell you a story about France.  I'll tell you a story about France.  I went to France to raise money for Active Europe, and there was one investor, and my goodness, it was fun.  We pitched, we interacted, we went to private gardens.  It was a lot of fun.
And then I realized after about four months of, tell me more about the business, that they were just having fun, right?  It was like the cat with the little--cats are the only animal on the planet that are known to play with their prey before they kill it, right?
Now, that has all kinds of ramifications with venture capitalists that we probably don't want to go into, but this situation was a clear indication to me of a very powerful truth, and that is if I say, hey, let me tell you all these things about the business, let me tell you all these things about the business, okay, I've got to tell you this, this is what's happening, and this is what's happening, oh, let's talk, what do we do?  We'll talk about this, this is what's happening, this is what's going on, this is what's happening.  Asking for the check is one of the most powerful things you can learn how to do, and asking for the check on terms that you are prepared to accept, because until that moment, until you say, is this something you would like to invest in, or better yet, if this was something you'd like to invest in, what level would you invest in an investment like this, and what kind of terms would you look for in an investment like this.
There's a dating concept of people that go out on a date, and they don't say, will you go out on a date with me, they say, where are we going to dinner Friday night.  The question that you're asking someone in their mind is very powerful.  Will you invest with me?  Well, should I, should I not, what's going on?  If you invest with me, what terms would you like?  Well, I'd really like these terms, that, etc., etc.
You're dealing with a human super computer, which will respond to the questions you ask it just like the super computer will.  So, be aware of the fact that you're programming minds when you're negotiating and when you're talking about terms.
Okay.  So, geographic valuations - this is actually pretty interesting.  How much time do we have?  A few minutes?
Unidentified Woman:  We have ten minutes.
Mitch Thrower:  Okay, perfect.  So--.
Unidentified Woman:  --And then we'll do Q&A.
Mitch Thrower:  Perfect.  I'll blaze through these.
Geographic valuations - you will find that there are different valuations.  I've seen term sheets where someone has said, you want to invest?  Great, we'll give you money.  Here's the term sheet if you move to Palo Alto.  Here's the term sheet if you stay in San Diego.  No joke, I've seen that, not from our ventures, but I've seen that.
And some of it is some investors like to be able to walk down the street and talk to you, and there are different characters of investors.  There are angels, and I'll tell you that angel venture--angel investors have all kinds of characters and motivations.  Then there are venture capitalists.  Then there's private equity.
My favorite world is private equity because private equity is going to find businesses with existing operations, maybe put them together, they're gonna look for a smart deal, smart people, and they're gonna bet on the horse and the jockey.  Venture capitalists often are gonna bet just on the horse because they're gonna want to flip the jockey, bring in their friend from Mackenzie or whatever their place may be, and they're gonna change the team.  You are interchangeable to a venture capitalist with your dream.
So, other things about geographic valuations - this year, I had a friend who was raising money in Connecticut, and I'm literally in Palo Alto, and I'm on the phone with him talking about a term sheet.  He's on the phone with me talking about a term sheet in Connecticut, and we're going back and forth with what was proposed.  And I thought, oh, my gosh, are you kidding me, this looks like 2005 from a negotiating standpoint.  But, it was back East.
So, a lot of times, where you are geographically will impact the valuation that you're able to negotiate based on what the chemistry of that environment is, if there's free cash flow.
Another thing is watch the markets because there's a psychology of watching the financial markets as you're approaching investors.  What are they doing during the day?  Sometimes, they'll check their stock portfolio.  And if it goes down 10 percent and you have $100 million, you're gonna feel a little bit less apt to invest in an angel venture, right?
So, there's a whole bunch of things you need to be aware of, and that's one of them.
The other thing is, geographically, you'll note that--I'll--and this is another true story.  I sit there with David Siminoff [sp], who is--his wife is number five at Yahoo, he's really tied in to a lot of the folks at Google Ventures.  And we're up there in Palo Alto, we sit down at the University Café, and I bring out something--I swear, I could have been bringing out like something, the plague or something, but I brought out a PowerPoint.  And he's like, put that away.  What are you doing?  I don't want to hear a PowerPoint.  I don't want to see a PowerPoint.  I want--if you can't explain it to me on a napkin, and you can't tell me about this big vision and be really concise about what you want to achieve, then we shouldn’t talk.
And then, on the other hand, I go to New York, and I sit down with a very similar profiled person, but they were a New Yorker, and they asked for a PowerPoint, a business plan, diligent docs.  They asked for basically the entire set of a ten volume essay on what we were going to do in the future.
Geographically, you'll find different things in people.  And that's also people will be different.  So, it's not always geographically.  But, on the East Coast, I've always interacted with investors that are a lot more concerned about details at a business that we know is gonna change as entrepreneurs, and those details will change.
And then, also, geographic negotiations - that's kind of tied to what I was just saying.
The roundtable - that's back to the approach where you don't want to approach someone and ask them for money.  You want to always come up and ask them for help.  You want to be working on a project together, which builds that force called trust.
Five bullets - okay, so where's my--tell me your name?
Ms. Melanie:  Melanie [sp].
Mitch Thrower:  Melanie.
So, if you could just write the number 25 and the number 50 halfway through the glass.  Oh, that's gonna be illegible, huh?  Oh, okay - 25 and then 50.  And in between that, draw five spaces, five boxes in between there.
Is this a whiteboard wall?
Unidentified People:  Yeah.
Mitch Thrower:  Oh, it's a whiteboard.  Gotta get Marty to paint his walls.  That's terrific.
Ms. Melanie:  Five lines?
Mitch Thrower:  Or just five little blocks, right?  One, two, three, four--that's perfect.  It's like hangman, okay?  This is a great analogy.  I love that you did hangman.  That's good.
So--and then, actually, for your careers, I would argue that you have ten places on the hangman map, and those ten places--you can grab a chair--you can assume that, before you're 25--and hopefully, you will be incredibly successful before you're 25, and you'll go the Mark Zuckerberg route - probably not, statistically speaking.
And then, after 50, right, there's a different life cycle.  You've got families, you've got kids, you've got structures, you've got time, you have a different--but, you have knowledge, which is probably the most powerful thing that you gain over time.
But, in this--actually, it should be 75--sorry about that.  Hold on a second here.
Ms. Melanie:  Right here, 75?
Mitch Thrower:  Let's just change the--yeah, and then write 50 right here.  That's the way it should look.
So, in this period, you effectively--and it really varies, depending on your cycle.  Some people say you have a seven year bullet, a 10 year bullet, an 11 year bullet.  It took me to do the Triathlete Magazine deal ten years, Active ten years, Competitor Network and Competitor Magazine, one year, right?  Hopefully, Bump, three, five years--you learn to condense the cycle.
But, if you look at that and you say, well, after 75, hopefully, I'm retired and doing something different.  And let's say you just have a 50 year period upon which to give five ten year bullets for your career.  That gives you five entrepreneurial runways, five entrepreneurial runways that I say are core entrepreneurial runways.  And so, you have five bullets in your gun.  You probably have more, but I just want you to think about that, think about that for just a second.
Okay, stand up for the last time before our little switching over to Q&A.
So, those are your five bullets.  Make everything about the other person.  That's really important in negotiations is listening to them.  I've sat in a room with someone where I've said maybe 1,000--or, no, maybe said 100 words and they said 1,000, and we walked out with a check because people like to share, people really like to share what they're working on.
Okay, grab a chair.
We told you the story about Enterprise Partners, the people factor.  We talked about--and I think you're gonna study sort of the net present value of the future cash flows and how that adjusts to the business, and you want to find someone who's financially minded who can take you through different illustrations of what your business is gonna be in the future.
And if you want to figure out how to make your business worth more, there's a document that you should get your hand on.  If you want to figure out how to make your business worth more capital at the negotiating table, there's a document that you should get a hold of, and that document is called a Due Diligence Checklist, and it's the document that many law firms and folks send around to businesses and say, okay, we're going to give you $5 million, here's a Due Diligence Checklist.  Show me all the signed contracts you have, show me your insurance policy, show me the signed employment letters that protect us from an employee leaving and taking all the technology, show me all of these things that are in that document.
Your roadmap that you need to read before you start a business is a Due Diligence Checklist.  I wish someone had told me that before our first venture because what's in the Due Diligence Checklist are all the things you need to pay particular attention to and all the things that build value in a business.  How many signed contracts do you have?  How many term sheets do you have?  How many employees that you know you need to hire in the future of your business, the absolute killer kick-butt person that has signed an employment agreement that you can't afford yet but has signed an employment agreement even though you still can't pay him to quit his company and join your business once you're funded?
It's like a sports team.  Get those people, and get a contract, and say, if you--if we can pay you this, will you join me.  We had a whole list of that when we went to Enterprise.  We had here are five superstars that we have agreed to bring over to our company as a result of funding because they like that.  The fact that you've been able to do the deal before you've even been funded is very well looked at.
Bandwagon - in that sense, signing contracts is a jump on the bandwagon, getting people to do things with you.  Sometimes, you have to do them for free.  The best example of that is if you have a magazine, and you're launching a new magazine, about 80 to 90 percent of the advertisements in a new magazine are what?  Free.  People follow people.  People like to do what other people are doing.  People like to invest in other businesses that other people are doing.
There aren't a lot of leaders out there from an investment community.  It's much easier to fill in a round capital than it is to find a lead for that round of capital.
Unveiling your motivations, then we talked about power of time before.
So, let's go to questions.  I hope that this was a good presentation.  There's a lot of stuff I've experienced, and I tried to throw a lot at you in a very short period of time.  It's an incredible, fun, challenging, scary thing to be an entrepreneur, and it has some wonderful rewards and some good adventures.
But, what are some questions maybe?
Unidentified Woman:  [Unintelligible.]
Mitch Thrower:  Yeah.
Unidentified Man:  How did you find--obviously, Triathlete Magazine, Active Network, those are pretty self explanatory as far as extensions of your lifestyle and your passion for extracurricular.  Other investments you've made, other companies you've started, how did you actually identify the opportunity and tie that into something that you might not have been directly passionate about?
Mitch Thrower:  Okay.  There's an investment that I made in a company called Tractor Trails, which are--if you look at the back of a truck, there is a big--what does the back of an 18-wheeler look like?  It looks like that, right?
And so, I'm riding on my bike, and this is kind of a stretch from that, but I'm riding on my bike, and I wear an aero helmet.  When I'm racing in the Iron Man, you wear an aero helmet because you want to go faster, not that I'm gonna win, but an extra minute is still pretty cool.
So, they created an aero helmet that goes like this in the back of a truck, which increases the fuel efficiency of the truck cross country 6 percent.
And so, for me, it was something that makes sense and also a relationship.  So, that was a relationship.  A couple of guys out of Stanford started the business called--the product's called Tractor Trail, and the company is--goodness, I don't even remember the name of the company.  It'll come to me in a second.
And it's relationship.  The guys are great.  I knew the plan.  I understood it and leverage.
Also, I love non-physical product companies.  I love digital assets.  When it comes to the fact that, by the end of the sentence I'm saying right now, thousands of people just processed their credit cards through something I'm affiliated with of which I'll make a percentage is very powerful for me.  I didn't have to ship a left footed shoe from a warehouse that didn't work because the person wasn't on staff and they didn't get there, yada, yada, yada, yada, yada.
So, that's something that I kind of shy away from, not only because it's a headache for me, but it's also because it's an area I don't understand.  So, I'll invest in and try and pursue businesses that I understand and that where I see value and I trust the people and things are going on.
And also, here's another thing - I want to share with you something called you scratch my back, I'll scratch yours.  You've all heard that analogy before, but it's really important in your entrepreneurial careers to partner up and interact with people where, if you do something for them, they'll do something for you.  And I'll tell you a story about a business I invested, a local business here in San Diego.
And they said, great.  And they said, hey, we really need capital, we need capital for payroll, we're not gonna make payroll next month.  Oh, by the way, if we don’t make payroll, we've got to shut the company down.
So, I came in, and I was a bridge for payroll.  How much was that?  It was $25,000, right?  Not much at all.  They then raised 3 million a month and a half later.  The whole company was successful, yada, yada, yada.
I then approached the entrepreneur who did really, really well when we were starting the new company.  I said, hey, you want to invest in this new venture.  He said no, right?  And you'd think, you'd think, you'd think that when you save somebody's life, they're gonna do something for you even if they're not in a situation where you need to save their life.  But, that was a bad character judgment on my part going in.
And so, now I'm even more in tune with the fact of, if you do something for someone, are they apt or likely or probable to do something for you when you need them.  So, those are some areas there.
Yeah?
Unidentified Man:  You talked a lot about good reasons and bad reasons, and you mentioned that two of the reasons were really helpful.  I'm just curious, what does helpful mean, and what does not helpful mean?
Mitch Thrower:  There's two investors.  One is Chris Burch, who runs J Christopher Capital.  He's one of our investors in Bump.  And he always likes to say, I want to win before I put in my investment.  And also, a group up in LA, that I'll leave their name out now, but they said, we want to win before we invest.
And what that means is they'll say, oh, you have an idea for a membership product, you're gonna process memberships and give discounts and benefits, and you're gonna make them location aware.  We have a partner over here we'd like you to go talk to.  Sell this to them, and then we'll make an investment, right?
So, there's one we see, which is like prove it, but then from a strategic standpoint, they've just given us an unbelievably lucrative contract with a client.  And when it comes to those that have been helpful, those are the people that you can pick up the phone and call them, and they'll answer, where you're actually relevant in their life, not necessarily numerically because it's very hard to become numerically relevant in a VC's life, right?  You've got to be really successful to do that.
If you're from a personal level, or from a passion level, or just from a relationship level relevant in that person's life and that firm's and fund's life, that's a really important thing.
So, ones that will give you clients, that will give you introductions, that'll pick up the phone, VCs that will literally say, here's a business we've just invested in and send it out to ten other friends saying please join us, those are the types of things - partnerships, team members, recruiting, staffing, people that'll roll up their sleeves and make it happen.  You want to keep looking.
Whoa.  Yes?
Unidentified Woman:  So, you talked a lot about relationships and kind of fostering those over time.  So, how did you initially find your first investors?  A lot of people talk about that you were kind of touching the different VCs.  So, is that more word of mouth and from your prior relationships, or--?
Mitch Thrower:  --Yeah, I was at the classic transition between kind of this crazy digital knowledge and understanding of where everybody is and who everybody is and what everybody's investing in.  And there's a site called Angel List, which I like right now.  It's Angel List.  And there's also Cap Linked, which is another one, which is tracking investments, and people are saying I'd like to invest in something.
If you haven't seen Second Market, that's pretty interesting in terms of looking for investing in private companies that aren't even traded yet.
But, for me, the direct answer to your question is I think one of the first checks came from someone I was sitting next to in business school, and we've become great friends and been involved in different projects together.  And then I think we sort of--I was at that great entry window, because I think all investing is kind of like an entry window back to earth.  The window will open up, like something will happen in the world like the crazy dot com boom, and then a whole bunch of companies will land money, or some investor will receive a windfall, and then that window opens up.  So--or there'll be things that you connect with them on.
And for me, it was becoming a triathlete, because I went to this sport, which effectively became the new C level sport of all these obsessive compulsive crazy CEOs, CCOs, CFOs that ended up wanting to do something because they're all, as I am, obsessive compulsive, and I just wanted to do more.
Like, so I went and found all these people that wanted to go do more, and then you're on the plane, and you're there and you're flying back and forth, and you're sitting next to people, and you just start talking, and that's really where--so, I put myself in the right place, not by design.  I didn’t realize there'd be that many successful people in the sport of triathlon.
In fact, the funny story is the reason I started Active is because I was in the triathlon, the Iron Man Triathlon in the back row as a participant in 1994.  I almost killed myself.  And in fact, I remember telling the people I was with, I'm like can you check on me.  I thought I was gonna die after doing the event.  Like, can you check on me because I think I'm not gonna make it through the night because it was so painful.
And then, it was--laugh about it now, 20-some odd Iron Man's later, but it was a moment in my life where I was like, oh, my God, this is the worst thing ever.
But, I can remember sitting in the back row, and they said, and now, winning the Iron Man - this is '94 - winning the Iron Man for the grand sum of $6,000 or $8,000, and I thought--I'm gonna have to figure out another way to make money around my passion than being a professional athlete, right?  And I don't know if it was 6,000.  It might have been 12,000 or 15,000.  But, that's when I started to look around and pay attention to, if you get into your passion, and you look around, you'll find that there are funds flowing, value being exchanged, and you just want to insert yourself in that value exchange.
Yeah?
Unidentified Man:  Tell us about the sticker.
Mitch Thrower:  The sticker - why is it the most powerful force?  Because it's basically saying give me a check.
Unidentified Man:  How is it doing that?
Mitch Thrower:  Because sign here and mail the check, and there's another piece in there I should share with you is this page, which says I do hereby elect to participate under the amended blah-blah-blah-blah, I elect to participate in X amount at Y share value, and then the wire instructions, another very powerful form, because what happens, right?  I'm an investor.  I've met you at a conference.  I understand your business.  You've pitched me--maybe you've come to my office and given me an overview of what you're working on.
I'm sitting down.  I've got a family.  I've got sport.  I've got life.  I have 40 other people on my thing waiting to pitch me.  I'm trying to process things.  It hits my desk.  What am I gonna do?  I'm gonna maybe hand it to my assistant and say, can you execute these documents and send them back to them, right?  It's a way to get it off their desk.
Now, they have to love your investment, of course.  But, I'm just telling you that so many people wait for a venture capitalist to send them a term sheet.  And do you have any idea what's involved in that actually occurring?  For a venture capital group to get a partner approval for someone to find out what terms are being offered, what the liquidation preferences are, where the company is, and for someone to send you a term sheet is a monumental thing to have happen.
So, what we did, and in fact we did this with the Bump Network, is--and I know people have disagreed with me about it, and maybe I've been a little bit coy, but we sent out our own term sheet.  We basically crafted the term sheet, crafted the investment terms and sent them.
Now, we were incredibly fair, and we were very focused on delivering value and protecting our investors, which when they dug in and saw what we were offering them, they realized it was a good deal from that structure because you want to make sure not to try and pass something over on your investors, but enable them to let you make them money.  Does that make sense?  And that only happens if finances have changed hands.  That's a powerful--yeah, other hands real quick, yeah?
Unidentified Woman:  So, my question is around Bump just because I've kind of followed since you guys have launched.  And then you were mentioning something interesting that I don’t see on your site anywhere about a private label membership.
Mitch Thrower:  Yes, yes, yes.
Unidentified Woman:  [Unintelligible.]
Mitch Thrower:  It's actually a secret, and it's hidden under the URL bump/network.com, which just launched.  And people--you always--you don't really want to let people always know what you're doing because of competition--.
Unidentified Woman:  --Was that your intention from the beginning, or is that somewhat of a pivot?
Mitch Thrower:  Both, both, both.  Even in our--and the answer is we--it was the intention from the beginning to launch the next AAA and create this disruptive claim your license plate to see where your car has been and we'll sell you a AAA card because it's a high margin reliable revenue stream.
Unidentified Woman:  So, the AAAs of the world would license your platform.
Mitch Thrower:  Exactly, or companies that want to have their own AAA, or we launch our own AAA card, which is called Bumped Advantage, which gives you roadside assistance, Enterpriser, Alamo, Avis, American Airlines, movie tickets, all those discounts.  But, we make them digital.
But, that's--people always trip on a few things when they're getting to your business.  So, they're gonna come at your business to make an investment, and they're gonna--you're gonna find sand traps.
And we experienced a sand trap, which is, hey, we're building a membership company and a software company, and, oh, by the way, one of the really cool ways we get people to sign up is we track their license plate.  They claim their license plate, they see where their car was, or if anyone's sending a message or if they see a good coupon.  By the time the investor after four hours was saying, you know where my car was, how do you know where my car was, right?
Meanwhile, his geo tag in his phone has just followed him through 14 apps everywhere he's gone.  But, that was a bit of a sand trap from our perspective because people couldn't get through the fact that, in about four years, you're gonna have digital relatives in your vehicle to the person next to you through a button in a customer relationship.  And some company is gonna be the Linked In for your car.  We just want it to be us.  We want you to be able to communicate with all the other people around you through the Bump.com platform and the AAA platform because--.
Unidentified Woman:  --That makes sense.
Mitch Thrower:  Makes sense, right?
Unidentified Woman:  I was looking at it from the, like the business investor side, but your website is so consumer facing.
Mitch Thrower:  So consumer facing.
Unidentified Woman:  And I'll be like honest with you.  I was like, I don’t get it.
Mitch Thrower:  Good.
Unidentified Woman:  So, I've had multiple conversations today with my other entrepreneur colleagues, and I'm like I'm going to hear him talk tonight, there's got to be something else that I'm not getting.
Mitch Thrower:  Right, and in fact, there is.  I'll show you the screenshot.  I'll show you the screenshot.  I'll make it very clear.
This is the actual site.  So, if you go to Bump Network, this is our home page.  If you go to Bump/network instead of Bump.com--power your membership, build royalty and revenue, create your own club.  And, oh, by the way, we have our own consumer brand, which is Bump.com, which is--and in fact, there's 3,250 people sign up a day to claim their license plate to be able to see where their car has been just organically.  We've got about 65, 67,000 users now of people out there.
So--and there's a trend.  There's an industry shifting trend in that network.
Okay.  So, back to the next question.  Does that help?
Unidentified Woman:  Uh-huh.
Mitch Thrower:  You'll see many developments in the next--no worries at all, no worries at all.
Yeah?
Unidentified Man:  So, I have a question along the same lines.  [Unintelligible.]  So, I'm trying to understand [unintelligible].
Mitch Thrower:  To us, that's a really simple question and a really simple answer, and the answer is the white labeling of a membership management software package that enables a group like The Grove in Los Angeles that has 17 million visitors to now have a membership program that gives everyone that shows up at The Grove free wireless, discounts on parking, movie tickets and on the back end have great consumer knowledge is something that they will pay a lot of money for, which generates a lot of revenue very quickly, which allows us to bring that technology into our consumer brand, not having to raise enormous amounts of capital to build that consumer brand.
So, we basically created the solid rocket boosters to the ship, or vice-versa because maybe this will be the solid rocket booster to the ship.  And that's how we've kind of framed it.
But, with--well, I'll take it a little further, and I'll share with you that you will find investors that are interested in one of the two, because oftentimes, you can show up as an entrepreneurial visionary, and people will be like, yeah, I get it, but you have like five businesses there, right?  That's that like six businesses, seven businesses.
And Kent [sp] is one of the great folks that we started to talk to and said, you have a whole bunch of things now, you really can't jettison any of them because you haven't proven that they won't work.  You need to find investors that will back you in your vision to figure out which ones will.
And there's some investors that are so fired up on you're gonna created the Linked In for your car, the Facebook for your vehicle, the fact that I can go online and talk to every other owner of a 2011 Prius and see them and get all the recall notices and find out where every Prius is spotted around the world, and I can communicate with people in kind of like a Facebook force or a Linked In thing, that's great, I'll give you a ton of money.
And then, you have investors that are like, well, an existing, revenue producing, proven software model that is gonna allow you to generate revenue based on membership sold.  So, sometimes, the investors will also pull you in one direction or the other.
Any other final questions?  Yeah?  Sorry.
Unidentified Man:  [Unintelligible], did you do strategic moves to generate more revenue before you went public or before rounds to kind of increase your valuation?
Mitch Thrower:  You always want to--I don't remember, per se.  You're always trying to generate as much revenue as possible.  Revenue is a factor in raising money.  It's a big factor.  Multiples are a factor in raising capital, but more of a factor when you're rolling up different blocks of revenue in a certain industry and you also want to understand the multiplier or the multiple.  Different industries have different multiples.  Publishing will have one multiple.  Online software as a service will have another multiple.
And people are looking at that multiple not only from what they can buy in at but what they can get out at from the standpoint of how much revenue.
So, if I'm looking at a software as a service company or a registration company versus looking at a manufacturing business, I'm looking at a very different multiple future, because as you increase revenues, so too does the multiple increase in the industry.
But, we--Active is probably a unique scenario.  I mean, we survived when many of the venture groups that invested didn't because just the time and the life cycle.  I mean, we started in '98, and we went through the '01 boom bust, the '05 crazy, the '08 crazy - so, like, need more money, need more money.
Unidentified Man:  The reason I asked that is because I personally thought I noticed an increasing number of emails you guys were sending out that was prior to right before you went public.  And so, my thought was, all right, they're trying to generate a lot more revenue to--.
Mitch Thrower:  --That's a good point.  I think--I would say that it's more the professionalization of an organization that happens as a part of getting ready to g public, which is more accountability, more P&L responsibility in each department.  I don't think that there was a conscious, hey, let's amp up revenues before we go public.  It was more of a, okay, it's varsity, we're gonna play varsity now, right?  There's gonna be a lot of accountability.  And that always drives for more--everywhere you can find revenue from that standpoint.
But, there's something also called the Quiet Period.  I don’t know if you're aware of the Quiet Period before an IPO where you're really not allowed to promote the company.  And so, that happens as a part of the process.
Yeah?
Unidentified Man:  Do you have any tips for [unintelligible] sort of pre oriented towards replacing the entrepreneur [unintelligible]?
Mitch Thrower:  [Unintelligible.]
Unidentified Man:  No, I haven't, I haven't.  We just had [unintelligible].
Mitch Thrower:  That's a great idea.  [Unintelligible.]
Unidentified Man:  [Unintelligible.]
Mitch Thrower:  I mean, the best algorithm there is just be a great entrepreneur, be one that no one wants to replace.  And the other algorithmic or rather the structure of things is we actually, in this venture, we did something that people told me we couldn’t do that I remember sitting across the table from the same guy who I asked for the $25,000 investment back after I'd made it, and he said no, that same guy, and he goes, you can't do that, there's no one, no one's gonna give you money under those terms.
We didn't sell voting shares, or we sold voting shares, and then I had them all sign them back to me from that standpoint.
And it's really, if you're looking at smaller angels, they don't really--it's not--someone who's gonna give you a quarter of a million dollar check on a 5 or $10 million venture isn't as concerned about voting shares.  But, who is are the venture capitalists that you will need three or four rounds later, and you don't want to be in a position of lack of control with them.
So, again, think chess moves later in the game than the chess move of just raising capital right now.
Unidentified Woman:  All right, thanks, everyone.
Mitch Thrower:  Great stuff.  All right, you guys.

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