952 - Helping Founders Raise VC The Right Way w/ Stéphane Nasser

Mat Sherman (00:00.974)
I like the cold opens are fun because I don't know. I just started listening to All In like a year or two ago and they do cold opens and I'm just like, we're gonna do cold opens here. So we're doing a cold open. How's it going Steph? How you doing?

Steph From OpenVC (00:14.755)
Hi Matt, you're doing great. How about you?

Mat Sherman (00:17.71)
I'm doing awesome. I feel very excited to be back on the podcast grind. I didn't do much of it in 2024, but I'm doing three interviews this evening, which I am excited about, because the last time I did three interviews was like 2020. So I'm like, do one of the crazy stuff again.

Steph From OpenVC (00:34.839)
It's day one again. Yeah, it's great to be back. Thank you for having me.

Mat Sherman (00:39.022)
Oh, 100%. I actually want to look back. I feel like you were you within the first 100. Yeah, you were you were 20 20 interview right after COVID started. Interview. No, hold on. You were where? Open VC. When did I interview? Yeah, that was that 20 21. A long time ago. Well, I.

Steph From OpenVC (00:54.787)
Well, that was a long time ago. That was years ago. I was in Portugal when we did our interview at the time. And now I'm in China.

Mat Sherman (01:05.293)
So you were in Portugal, now you're in China. I feel like you've been in China for a little bit. I feel like we've chatted a few times over the last year you've been in China. When did you move from Portugal to China? And really, why did you make the move for people that are following along?

Steph From OpenVC (01:11.736)
Yeah.

Right, Yep, yep.

Steph From OpenVC (01:21.923)
Yeah, so after I left the US, where I used to work, I spent two years traveling around Europe with my wife. We're lucky that, you know, our laptop is our office. So we got to live the digital nomad life for two years around Europe. That's when we spoke for the first time. I was in Portugal at that specific time. And when China reopened after Covid,

We moved here because my wife is from here and she hadn't seen her family for three years because you know how it was during that time. And so, and since we never left, I guess we just like it here. So we keep traveling occasionally, but now China has become our headquarters for the past two years.

Mat Sherman (02:10.295)
Do you feel like you get much exposure to the tech or startup side of China? From what I hear, I haven't seen it, but China's killing it. Everyone's learning STEM. There's so much going on. Do you see much of that where you live, or is it hard unless you're in those companies or in those universities?

Steph From OpenVC (02:30.209)
Yeah, so.

Not where I live because most of the time I'm actually in the countryside, right? In a small town of five million people. So there's not much tech over there, although it's slowly coming. But yes, otherwise, just because of the nature of what I do, I get to interact with a bunch of founders and investors here. And I'm not deep in the Chinese tech space because to be deep, you would have to speak Chinese, which is not my case. And that's one of the first thing you notice that in China, there are two tech

There are various the main one which is the Chinese speaking Mandarin speaking Texan and then there is a small sub segments that is that has usually You know mixed teams with one foreigner and one Chinese co-founder and those guys speak English and They are usually focused on e-commerce or cross-border fintech, know remittance and this kind of stuff So you have a small subcategory startups that speak English and

and there are a couple of accelerators for the cross-border projects. But both of it, they speak Chinese, it's all in Chinese, and well, I hear like I have second-hand information, but I'm not that connected in that way.

Mat Sherman (03:47.406)
Yeah, that makes sense. Super interesting. As someone that's lived their whole life in Phoenix, Arizona, I've always intrigued to just know what else is out there. Obviously I've traveled, obviously I've been to the Bay Area a trillion times and stuff, but I do have an urge to live somewhere else for a year or two, but maybe that'll come after the kids are out of, kids are in college or something, because now I'm probably rooted here for 20 more years. So, yeah.

Steph From OpenVC (04:06.765)
yeah.

Steph From OpenVC (04:11.587)
Yeah, well, we did exactly like you said, like we don't have kids yet. And so that's why we traveled as much as we could. But, you know, maybe we don't travel so much in the future. We'll see.

Mat Sherman (04:16.576)
Yep. Yep.

Mat Sherman (04:23.981)
Totally, totally. So there might be a ton of people listening that didn't listen to the last episode. And for those curious that want to go back, that was episode 714, which was recorded in June 26, 2021. So for those that weren't listening to that, what are you doing? What is Open VC? Just kind of share maybe what you do now, how you help founders, how you help investors, and we can dive into all the fun parts about that.

Steph From OpenVC (04:49.679)
Yeah, so I co-founded OpenVC, an open platform that helps founders connect with investors. And we're a software company. We're not a service company. So, you know, we're not going to race for you, but we're going to provide you with access tools and supports to help you as a tech founders, access investors, have all the tools put together to power your race, and then avoid the big mistakes and,

That's the support part where founders need to know how to do valuation, pitch deck and all that stuff. So these are really the three pillars of what we do. We launched off, what's it, four years ago now. It started as a side project that we launched on product hunt with a Luka, my co-founder. And honestly, we...

had no plans. I just had this list of investors hanging in an air table and I was like how can we make this open and collaborative and that's how it started. Put it on Product Hunt, it was a very bad product objectively but people loved the concept.

And we got a super strong start because of that. Because people just look at us, we love the mission, we love the idea of having this community-driven investor list where anybody can contribute. And so for two years, we've built that as a side project while working on the side. And I think it was last year, or two years ago now, that we went full-time. Yep, two years ago that went full-time.

and since then it's been growing as a full-fledged platform for startup fundraising.

Mat Sherman (06:37.144)
So a few things to dive into here. One, congrats on going full time on it. I know it's not recent, but it's a very hard space to build in, but it's such a needed product. There's so many treacherous paths that founders can go down when they want to raise capital and start a company. just knowing that you've been able to do it full time and sustain and grow is really important. I'm curious.

How do you, like when you serve founders, I feel like sometimes on Twitter, you know, I do this too. There's like, some people think some tough love, they may like come to you and they may say, hey, like, you know, you can help me raise capital.

great, here's $10 a month, give me money or something or connect me with investors. And it's obviously a much, much more nuanced process than that. And you know that because you're the co-founder of Open VC, but oftentimes founders don't realize how nuanced this whole process is. So how have you kind of, for lack of a better word, protected Open VC, so when founders come, they know what they're getting, they know what they're not getting, and it's just kind of like,

represented well to the thousands, tens of thousands, maybe hundreds of thousands of founders that are coming across it every year.

Steph From OpenVC (07:58.371)
Yeah, that's an excellent question. And I mean, you're the first person to really ask me that question because you've been in the same space. So you know exactly, you know that this is the number one problem that people don't think about. Yeah, it's a harder.

Mat Sherman (08:07.947)
Yes. Well, yeah, it's...

It's a hard one and for people but before you answer I'll give I'll give a little for people that that maybe that are new to this podcast I had a company called seed scout for I it for four years. Unfortunately, I shut it down last month But Steph and I were like in similar spaces doing similar similar things not the same thing but like working on Solutions that would that serve the same market in different ways And I made the decision to shut mine down last month for personal reasons and other reasons But I've always been a fan of Steph and what he

Open VC actually that's why we had him on the podcast three or four years ago. So now I'm just like all in on like great how can we get Open VC like out there more because you know Sea Scout's gone so it's like but I know Open VC is a great a great option so that's like a little context for people that aren't aware of that but yeah feel free to go ahead and answer the question.

Steph From OpenVC (08:58.787)
Yeah, and it's reciprocal. been, I mean, we've been following each other and I really like what you've built with Seed Scouts. So it is truly a big obstacle when you want to help founders raise funds because...

Well, just throwing a few things here. Number one, most founders are not fundable and most founders should probably not raise funds. So, which means that your job, if you truly want to help them, is to probably reject 80 % of your users or 80 % of your potential clients. that puts you in a very difficult position as an entrepreneur. And number two, varies the human aspect of it, psychological aspect, is that some people

don't want to hear that. They want to, they think that for whatever reason they should raise and if you tell them maybe you're not ready, maybe you get more traction before whatever, they will hate you.

And not only that, they'll also accuse you of whatever, you're trying to steal my idea, or you're scamming me because you took my money and I expected results. And these are honestly just people who are naive or immature and you know, it's a journey. so, so that's, that's, that's a big picture for anybody new to that, to that fundraising space. You're going to have a lot of,

people who want and very, very few who will succeed because truly the success rate is low for the whole industry. It's not specific to your product or my product or anybody. It's just what it is. Okay. And so you have to deal with that because 99 % of founders or first time founders who've never raised and they just don't understand the rules of the game. So how did we solve that? We've done two things. One.

Steph From OpenVC (11:01.231)
Our core product is an online platform that connects founders and investors. And we put several systems in place to prevent the bad founders of the, and when I say bad, it's not a judgment, you know, it's just founders that are not fundable yet of who should not speak to that investor to speak to them. So you're going to try to reach out to an investor. We review every submission manually. Right.

And we pass or fail it. When we decline it, we provide feedback. Okay, this is why we rejected your submission. This is what you should improve. And we refine that process over time so that people have actionable feedback. They don't feel too hurt. I mean, it still happens, but at this point, I don't care anymore. And...

And then they can try again, right? When you reject, it's not a hard no. It's okay, this is the stuff you need to improve. And when they do and they try again, it's for their own sake because, know, honestly, we're not trying to be mean with people, but if the deck is just terrible, then it's not in your interest that we send it to the investor. And that way, what happens is we also protect investors.

because investors learn that whatever they receive from OpenVC has been filtered, has been screened, and is reliable. And because of that, they pay attention to the deal flow we send them. And on average, we have 40 % reply rate, 4-0, which is really good for an automated self-service platform. So that's the first thing we do.

Mat Sherman (12:37.133)
It's incredible because I feel like the cold email, the reply rate to like a standard cold email to someone without any help, like a platform or anything, is probably like under 5%. Maybe it's under 2%. So for those listening, 40 % is bonkers. So congrats to you on getting there.

Steph From OpenVC (12:54.831)
Yeah, thank you. It took time, right? mean, every quarter I run the numbers and I see the, you know, now we're at the point where we kind of plateau at 40%. And so we fight hard to get the extra two, 3 % every quarter to get a little more. So that's number one, the screening. Number two, we automated as much stuff as we can to prevent founders from making mistakes. For example.

Mat Sherman (12:58.126)
He

Steph From OpenVC (13:24.685)
For a long time, founders had to write their outreach email themselves. And a lot of them, they just make common beginner's mistake. They're to write super long emails, you know, talking nonsense. Again, just because they've never done that before. It's not something that you do in your, in a normal life, right?

So we automated lot of things where you have this AI now. AI has been great for us. AI can help you draft. We just ask you some key questions and we draft a good cold email for you that you can still edit before sending. Yeah, and a lot of little things like that in the process where we... How can you say that in English? We prevent you from making mistakes...

Mat Sherman (13:57.996)
Love that.

Steph From OpenVC (14:11.787)
unknowingly, as much as possible. So there is the screening, which is the bad side, and there is the productization of knowledge. So what a consultant could have done with you, helping you refine your outreach, the targeting, all that stuff, creating the shortlist, we've productized that, so it's done for you, kind of. That's number two. And then the last thing is just, we produced a lot of content.

a lot of content about how to all the tutorials, how to build a pitch day, how to value startup, how to do this, how to do that. And it's helpful. Originally I did that because, you know, people would message me like, Hey, why did you reject my pitch deck? Why should I do better? And I was tired of repeating the same advice. So I just put together a list. And then I realized that for all the founders, they will not raise maybe now, but maybe they're raised in a year or two years. It's a, it's a journey for them. It's a learning journey. And so.

If I'm going to reject 90 % of my users, I need to give them an alternative path. And that's going be, okay, guys, maybe OpenVC is not going to help you raise, it's going to help you learn. And so for you, there's going to be a masterclass, there's going to be workshops, there's going to be this and that and that webinars, tutorials, playbooks. And so we, over time, we built this.

really large library of content, which is super detailed. It's all very actionable. It's not inspirational stuff. We're not going to tell you stuff that makes you feel good. We're going to give you very, very operational, like step by step, one, 1.1, 1.1a of how you build your pitch deck or all the stuff. And...

That's also how we help people because, and we help ourselves because now we reject people, but we tell them, okay, this is what you're supposed to do. And then they read that and then they get it. Okay, actually I was super far from where I was supposed to be and it makes sense. And then some of them learn and leave and live and learn.

Steph From OpenVC (16:17.167)
improve and others give up because they are not serious in the first place. And then they realized the amount of work they just was, I wanted to play founders. Actually it's not that easy and I'm not going to get money. Okay. I'm just going to do something else with my life. So, and maybe they come back later, but I'm happy because now we don't say yes or no, we say A or B right. Raise or learn. And it's a much better message for people.

Mat Sherman (16:43.694)
That's incredible, as you alluded to, and as I mentioned, I built in this space for a while, and it's so hard to know what a founder...

needs and more importantly communicate that to them in a way that they like, you know, they hear in a positive way. And I think just the reframing solely of like not a yes or no, but an A or B tells you everything you need to know really about a founder. Because if A is funding or not funding, but A is access to the platform, then okay, if B is access to learning, if they're probably like a good founder, even if early, they will be super stoked, right, to learn through B. And if they're, you know, not super stoked, then they just maybe throw a fit. It doesn't mean that they're

like a bad founder, maybe they're a bad founder today, they're early today, but maybe they come back in a year or two a little more refined. I remember when I first started, like I was a freaking nutcase, like was like back in 2015, I was absolute, I was a horror, I was a nightmare as a founder, and you just learn, you just learn and you get better over time.

Steph From OpenVC (17:46.127)
You are 100 % right. because this is everybody's journey. Like we all, I've been there and I know many founders who've been there. When we start in that space, we're full of shit and we're full of ourselves.

And then we meet other people who made it or who failed. And over time we learn, but it's a very slow process. It's a learning curve. you know, there's difference between knowing something and understanding something. And when people tell you, know, fundraising is hard, yeah, you know it as an information, but you don't really get what it means, you know, to raise, like where the bar is. You don't really get it until you've walked that path.

and you understand it in your flesh, right? The challenges, the difficulties, and it makes you more humble. And that's why at the end of the day, when a founder gets angry, I don't really care anymore, angry at me, mean, because it means that they are just at the beginning of their journey and they haven't learned humility yet.

And it's very little. And I'm just in that part of their journey at the very beginning where they need to get a few doors in their faces. So they will learn, so this is actually. So they will come down and they will grow up. But it's just because someone who, you know.

doesn't know how to handle rejection. It just means they're very mature, just means they have very little experience. And it's the first time or second time it happens to them. And so it's unpleasant for us on the receiving end, right, when we get angry emails. But it's also part of our role to help people climb that learning curve, right, that psychological, emotional learning curve as a founder.

Mat Sherman (19:48.462)
I have a little bit of an inception question. when you started OpenVC, you didn't know what it would turn into. Like you said, you just had this list and you wanted to launch it and see what would happen. And you've since grown this thing to something that's pretty special, in my opinion.

So if you were to look inward, when you launched OpenVC, how much, like of everything you know now about this industry, you know, take 100%, everything you know, how much did you know when you launched OpenVC versus how much have you learned through doing this work from, since you launched OpenVC in the last three, four years? If I frame that question correctly, because I have my own thought from Seed Scout, I'm curious to hear yours.

Steph From OpenVC (20:32.879)
I think I had a lot of correct but very blurry intuitions. So I kind of knew that it would be hard to monetize. And that's why we did a lot of things the way we did them. That's why we kept it as a side project for two years, because we knew this would be hell to monetize. That's why we didn't try to raise VC money, because we knew this is not a VC fundable case.

And, and having seen, and over time this was confirmed because, uh, just, you know, working on that space, uh, you, something that is an intuition becomes a conviction. Uh, is it how you say in English conviction or becomes a, you know, something that's you sure of, right? A certainty, uh, intuition become, okay. Um, but, um, yeah, so that was right. But then, um,

Mat Sherman (21:21.067)
Yeah,

Steph From OpenVC (21:32.511)
Some things were, well, I, so here's the thing. I entered this with very few hard certainties. I was not like hardcore, like this is things should be and this is how I'm going to build it. None of that. was like, okay. I didn't even want to, I was like, I just closed my previous startup that I had failed and I had this investor list. Okay. How about I create a tool I like creating for the community? How about create a tool for everyone to use? Let's see what happens.

Right. So no, we only really became, it only became serious to us when we got the product of the day on Procterhunt. And we're like, okay, people really love it. And then product of the week, product of the month. Like, okay, then maybe we should spend time on this. But it was kind of pulled from our hands. We didn't go at it. And so I didn't have much certainty, but I did spend a fair amount of time in that space before. So I knew, like I knew investors had too much deal flow already and they don't really care. Right.

Mat Sherman (22:15.991)
Totally.

Steph From OpenVC (22:29.785)
you're not going to sell them DealFlow because they don't care. Even if you have the best deals in the world, they still don't care because it's going to take 10 years to prove that. even then, half of them will be, more than half will be dead as investors by the time you're correct. so, and the other half will be successful with their own deals. So your deals will have made no difference to them. Yeah.

Mat Sherman (22:39.979)
Yep.

Steph From OpenVC (22:57.359)
Another intuition, just to give you an example. I believe that data doesn't really matter at the early stage, at the very early stage. And I see a lot of projects try to gather a lot of data on early stage startups, like creating very detailed startup profiles and stuff like that. But when you're like per-revenue or even up to seed, there's so little data that...

Like this kind of stuff, data-driven VC makes sense at growth stage, but for very early. It's more relationship-driven, it's more psychology-driven, right? It's emotional. And so, yeah, you want to give them a few data points to get them excited and open the pitch deck. That's what we do, right? We tell them that the founder had an exit, we tell them how fast the revenue is growing, but that's it. We don't go much further. And so these are things that we...

that I had intuition for, and we built, we watched the space, and we kind of feel we got confirmed in that direction. I could still be wrong, but I'm more confident about that than I was three years ago. Yeah.

Mat Sherman (24:11.469)
Totally. I think with Seed Scout, went in thinking I knew enough about the industry to build a product to solve the problem.

And four years later, I know less than I knew when I started. You know, obviously it's similar. I'm forgetting the name of the graph, but there's a graph where it's like, you know, this is the slope of enlightenment graph, which essentially you think you know a ton about an industry in the beginning, and then, it's a slope.

you know, you're up and then all of a sudden it gets popped to you at the bottom, you kind of level out over the next several years. And I think that, I I learned 95 % about this industry after I started Seed Scout.

And 5 % was when my last company was backed by, you know, I was backed by Jason Calacanis with my last company and I went through an accelerator and it's funny because in that moment that's everything that I knew and I thought, I'm like, oh my God, I was backed by Jason. I met Elizabeth Yen, I met whoever. Like, I know I can help founders. And it's just so funny because you need that mindset to like start a company, I think. You need that mindset to like have the confidence to go and like try to do something. But now like four years later, I'm like, I'm probably 10 times better suited.

to do that now than I was when I started, but isn't it funny how kind of things play out because I already kind of tried it. It's kind of ironic, I don't know.

Steph From OpenVC (25:29.603)
Yeah. Yeah.

Steph From OpenVC (25:35.777)
Absolutely. Yeah.

It is, it is. And, I think this is how it is very like, you are, are two founders that you are in your life. The first founder is the arrogance, ignorance, overconfidence one, right? That will crash, that will have a first failure or first battle scars. And 1 % succeeds maybe, but that's fine. But then you learn, you live and learn, right?

And when you start your next startup, because the beauty is that those skills are transferable. This knowledge and this learning curve is transferable. And whatever you do next, then now suddenly you're a repeat founder. And the connections that you've built transferable. The knowledge you've acquired transferable. The humility transferable. The skills transferable. And so if you had to build a new software product today,

Because it's not just the industry knowledge. If you have to build a new software product, you probably know a million things you would do different from before. Same with me, if I had to rebuild OpenVC today with everything I know, I would do it completely differently. I would do completely, I'm saying like a million things, I screwed up. I could have saved myself probably three years, like out of four. Everything I've done in four, I could do in one if I had to, know, to repeat.

It is what it is. And unfortunately, these are, you you cannot just tell those things to people. Like if I told myself back in the, if I could go back in the past, the problem is we don't listen. And we, even if we listen, we don't understand. Like you have to make you, I have to make my own mistakes. to make your mistakes to learn. Otherwise the experience process doesn't happen. You cannot just learn from books and podcasts. Although they are great, but

Steph From OpenVC (27:31.937)
It's not until you've felt the pain, you know, in your guts and that's how you learn. That's what I believe.

Mat Sherman (27:41.738)
yeah, I agree. I agree big time and it's like, do feel like when I started, I was more arrogant than I was. I essentially have had two companies, but all kind of in the same era of like lack of capital and just like, just like running, like trying to like pay rent every month. So I kind of, I kind of mentally consider it like, okay, from Pobloft and Seed Scout was like.

Steph From OpenVC (27:58.115)
Yeah.

Mat Sherman (28:03.209)
early, that was my 20s era, and now I just turned 31. So it's like, is my 30s era gonna look like in startups? And I'm kind of looking forward to it because I think I left a lot of the baggage back in the 20s. like you said, I kept a lot of the things that I've learned, you know, to apply for the future and any founder listening, if you failed in the past or you're failing now and you haven't shut it down yet or you're succeeding and it may fill in the future, like Steph said, this is all transferable.

Steph From OpenVC (28:28.217)
And you know, I feel a lot of people, a lot of founders overindex for their current startups, but underindex for their whole lifelong entrepreneur career. I think more and more because I've been in that space for now almost 10 years. And so I'm starting to see patterns, you know, over time, because when I started, for example, I started almost 10 years ago at Microsoft, it was, let's say Microsoft accelerator. That's when I started and

Some of the founders that I supported at the time, are at seed stage. They just got their first exit in the past two years. I'm still in touch with them. And, and so I saw, and over 10 years now, I'm starting to see some patterns with a lot of people that I met and I'm starting to understand after 10 years, how things actually work. and so, what I believe 10 years ago is that, yeah, you're young, you're energetic, you're intense.

You want it hard and you're gonna work and it's gonna happen. Actually, now I believe that yeah, your first startup is probably not gonna be a unicorn. You're gonna do your best, you're gonna try, but what's gonna happen is if you really want it, you're gonna stick to the founder life, even if you're not the founder the whole time, right? But you start first company.

fail or small success, whatever, then you're to have a second and or a third. And that one is much more likely to be a success. And if it's a success, much more likely to be a bigger success. I don't have data to back that. It's just what I have seen around me many, many, many times. like I said, people often found this, especially first time founders, they over index for the first startup, which is fine. mean, you should have that fire in you, but just know, just like you said.

don't worry, it's probably gonna be the second or third one that's gonna be the right one. And so you also have to learn how to protect yourself and not burn out and not become completely torn. I started the first startup before in deep tech and it failed and it was painful and I lost money and, but...

Steph From OpenVC (30:46.275)
I'm back on the horse. So that's how it is.

Mat Sherman (30:50.766)
What's that, oh, from Clutch, was it Clutch Sports when Michael Jordan wrote his announcement, his press announcement when he came back, and his press announcement was two words, it's, I'm back. And then he went, came and won an NBA title. That's how it goes, right? That's how it goes.

Steph From OpenVC (31:03.768)
Yeah.

Steph From OpenVC (31:07.811)
That's how it goes.

Mat Sherman (31:09.709)
Do you have, you've already shared so many, what I call knowledge bombs on this interview, of great things that founders can listen to and think about for themselves on their own founder journey. But is there anything that you would, if you could, I don't know, I could steal a question from him, I'm forgetting who asked it, but if there's anything you could share with every founder, if you had the power to say, hey, every first time founder, you are now looking at these words in front of you, and you can't ignore them until you read them all and read it twice.

What would you share with all the first-time founders in the world if you had all their attention?

Steph From OpenVC (31:45.103)
Okay, something I've noticed is that a lot of people that successfully start VC backed companies actually have already had a small success before. And for example, they're gonna have maybe they have bootstrapped a small business, they have 5k coming in every month.

from a small startup they had before. And so maybe they had a corporate career invested in real estate. And so basically, they are in a position of comfort and a position of strength. And that goes against that, that went against my own perception at the time that, you you're gonna be a little guy working from a garage, struggling to make ends meet. Actually, those guys are...

doing fairly well for themselves when they start a VC-backed And hindsight is 20-20, right? It's obvious that if you have had previous success, it means that you've had built the skills, the network, and the cash position to do something more difficult and more risky. And so the conclusion from this is that smart founders build their own wealth first, and then they go VC-backed second, right?

And people often think the other way. No, I need to raise VC money to be able to build my product, to be able to grow, to then become rich. And it might work for some people because they might have the track record that compensate for the initial success. But for most people, you need to show some past success to get VC money.

And also because this past success will help, will put you in a position of strength, whatever you want to do. So it's a subtle thing. I'm not sure it's very clear what I'm But it's rare that your VC backed startup will be your first success. And so once you really understand that, you think differently. think, okay, how can I first bootstrap a business to 5K a month or 10K a month? Right. That's what I need to do first. And then after that, I start thinking about raising VC money for that business or another business.

Steph From OpenVC (34:03.907)
But first I need a small success. Because doing that will give me the foundations for building a billion dollar company. You don't go from the junior league to the premier league. There are steps to the game. And that is something that took me a long time to understand.

Mat Sherman (34:25.965)
Yeah, it's so true. And it's really not obvious, like you said in the beginning, but in hindsight, like I'm copying your words here, but hindsight is 20-20. Obviously ones that are raising $4 million on a napkin are ones that already have found a lot of success, not the ones that are just trying for the first time. But we don't know that if you're just looking on Twitter out here in Phoenix or Lain or whatever, right, or China. Like you don't know that if you don't have the context.

Steph From OpenVC (34:55.033)
There was this blog post I wrote called VentiCapital isn't for the poor. That worked really well. Obviously the title helped. It's bit click-baity. Yeah, of course, of course. But it was really cool because when I wrote that, I spoke with a lot founders who came from very underprivileged background, right? People who are really poor living on food stamps and stuff like that. And they all agreed.

Mat Sherman (35:05.284)
You know what you were doing there. Yep, yep.

Steph From OpenVC (35:25.015)
Like these are founders who succeeded, right? Raise VC money and all that stuff. And they ultimately, man, if you're poor, you have no business raising VC money. First, improve your own personal situation. Put you and your family in the safe spots. And then you can look at something, you know, with high risk, high reward, like VC entrepreneurship. But before that, you know, just get the basics in order.

Mat Sherman (35:36.567)
Yeah.

Steph From OpenVC (35:51.247)
And yeah, sometimes you think, oh, VCs are here to give us money because we don't have money so we can build. No, they're not here for that. They're not here to compensate for, you know, inequalities. They're not here to compensate for your lack of personal connections or your lack of personal funding. And if they say that it's marketing, that's normal. They're doing what they're supposed to. They're supposed to say that because they want to, you know, build their personal brand. But as a founder, you should be...

How do you say aware of that and just read between the lines? If they say want to be a first check in your company, they're not talking to you and proven founder. They want to be the first check in the new company of Elon Musk. And this is the kind of stuff that, again, when it's your first time raising, you don't understand that. You have to go through a lot of pain to get the message.

Mat Sherman (36:50.798)
You gotta earn the insight, you don't just get it. You gotta earn it through trying and succeeding or more likely feeling if it's your first time, but you gotta get through it. Cool.

Steph From OpenVC (37:00.015)
Yeah, yeah, yeah, absolutely. You know where's this stats, unicorn founders. 60 % of unicorn founders are repeat founders, six zero, and 42 % of unicorn founders had a proof exit at 10 million plus. So now imagine the population of people who had a 10 million plus exit, which is very small.

And this small amount of people, 42 % built a unicorn. I mean, 42 % of the unicorn were from that small population, while the 58 other were from the rest of the population, general population. So that tells you the power of repeating.

Mat Sherman (37:46.446)
No, 100%. I feel like could talk to you about this for hours and hours. We've learned a lot. You've learned a ton. I've learned a ton. It's just like this industry is, there's levels to it. There's levels to the knowledge. But if someone wanted to, if someone's listening to this and they were like, wow.

this guy knows what he's talking about, I wanna check out Open VC, I wanna know if I am gonna learn or I'm gonna be able to get access to the platform or both. How can someone kinda start their journey with Open VC? What's your website? How can someone kind of access what you got going on?

Steph From OpenVC (38:26.922)
OpenVC.app and as soon as you sign up, we will invite you to take what we call a fundability test. So you're going to answer 30 questions, take six, seven minutes, questions about your team, your traction, your rounds, all that stuff. And we're going to tell you, okay, based on your answers compared with the thousands of startups we have in our database, this is how you rank today, right now.

Are you sexy for investors? And are you in the top 1%, top 10%, top 50 %? And then these are the red flags. These are the reasons why you're not top 1 % and what you can improve. So that's the first thing that we do. And back to your initial question, how do we direct founders in the right direction? This test is a big part of it.

And so just doing that you get a first you get a lot of value and this is free by the way a lot of what we do you know that a lot of what we do is free for both sides So you're gonna take the fundability test you're gonna know okay? I'm fundable and the next steps. We're gonna help you build your investor list Draft your cold email build your pitch deck all that stuff

All the tutorials right now are completely free and open. We have some, we have also a premium membership if people want some templates and some tools. a lot of what we do is just create community service, you could say. So that's for founders. And we also have some directories. We have one with Pitch Deck designers, one with...

Start-up lawyers is coming live this week. MVP builders is coming as well. We have one for fundraising advisors. So we also have directories of people who work in the space if you need some support. We basically built a lot of little tools. And thank you NoCode, by the way. I've used a lot of NoCode tools for that, to be able to ship fast. But I know that you're also a big fan of those tools.

Mat Sherman (40:35.406)
Last question before we call it a day. You just said something that piqued my interest a little bit. What's your opinion on, what's your take on fundraising advisors? I guess I could qualify as one, I guess, I don't know. But I feel like that industry is so, the quality varies so much in advisors. just tell me what's your take? Do you like it, do you not like it? Yeah, what is there to know about fundraising advisors?

Steph From OpenVC (41:03.471)
Okay, so we have to break it down into a couple of buckets. So first thing is that there's a cultural and geographical difference. In the US and a little bit in the UK, they are not very popular at the early stage, right? US VCs don't like when a seed stage startup has fundraising advisor. That's just a cultural thing. In China, in the Middle East, it's a fairly normal thing, right?

So let's focus on the US because that's where the audience is. So in the US, I would say that you're going to have two buckets. Let's say early stage and growth stage. So if your startup is like 0B, C, D, E, raising 10 million plus, it's fairly common to have some help with the raise, fundraising advisor, investment banker.

These people will charge a fixed fee plus a success fee. And so they are expensive, but usually you're at a stage where you can afford it. And they are, on average, I'd say the quality is OK to good because they are incentivized on a success fee and to work at this level, at this later stage, you need to have proven your worth.

because otherwise you're not gonna close one deal, right, once our 50 million plus deals. And you're almost competing with proper investment banks like the GPMorgan and all that stuff. So you have a little space, post 10 million and before 100 million, something like that, for independents in the fundraising advisor that still do a good job. Before that, here's what happens.

From like zero to 10 million, it's probably not very profitable for fundraising advisor to raise on success fees. Because if I'm gonna help you start a price and I'm gonna spend time and activate my network and burn my reputation for you.

Steph From OpenVC (43:06.371)
I'm going to put the same effort for a $2 million raise or $20 million. I'd rather do the $20 million. I'll make 10 times more money with the exact same effort or even less effort because at that point your startup is more fundable, there are more data points. And so that's why a lot of founders say, Hey, I want a fundraising investor that works with me on success fee only. And I'm raising 500K. Well, that's never going to happen because it just for a good one doesn't make sense. And so

You might still find some good people at early stage, but it's more common that they will work for fixed fee. They'll say, look, it's a risk for me. You're very early. The success fee is meaningless because it's going to be too small anyway. And your probability of failure is going to be high, regardless of my work. It's going to be high because you're very early.

So it's going to be fixed fee. And so it's not really for me, it's not really fundraising at this area anymore. It's more consulting or coaching. You pay someone a fixed price for consulting service and they're going to help you data room, pitch deck, investor list, outreach, just preparing with your pitch and understanding the rules of the game. I'm not against it. If you can afford it and you find someone good, you know, by all means do.

What I don't like is people who over promise, under deliver. I don't like people who prey upon naive, gullible or just ignorant founders so that I hate. But what I've learned is that there are many types of founders. You have people who have had successful career, they have money and they are perfectly fine spending 1k, 2k per month on a consultant or a coach.

good for them and I've seen cases where it worked and they've received really good help, really good advice. Why not? But as you said, the problem is there are so many bad apples, so many bad apples that you're likely to get burned. Not even talking about scammers, not even talking about just people who don't know what they're doing because anybody can call themselves a fundraising advisor.

Steph From OpenVC (45:17.005)
just like anybody can call themselves a founder, I guess. So it's a bad appellation on both sides. And the last thing to consider just because we're talking to US founders, there is something in the US called the SEC. And the SEC is the regulation authority for stock markets, and they also work in private equity. And so there are regulations in place.

You cannot raise on success fee or you cannot charge a success fee if you're not accredited or regulated or certified in the US. And so for that reason, a lot of people will...

want to help you, but maybe they don't have that certification. And that's why they will charge a fixed fee. Okay, we charge a thousand a month because legally they're not allowed to charge a success fee. And you as a founder, you're also at a legal risk if you, you know, pay a success fee to someone who is not accredited. So, and this is the, for example, this doesn't exist in China. This doesn't exist in France. In France, anybody can charge a success fee. You're fine in Switzerland. You're fine. This is really a

common law thing. So, common law country, Singapore, Australia, India, the UK, they have these kind of rules.

So, and I think just with all those points I've covered kind of the big picture on fundraising advisors. Again, they might be good ones at early stage. They're probably gonna charge a fixed fee and it's probably a tiny percentage of the whole population. So be extremely careful. Do use your diligence, you know, speak with their previous clients and ask about their portfolio because you don't want to get scammed by one of those bad guys.

Mat Sherman (47:03.661)
All right, that was extremely informative. I appreciate you sharing all of that. And we're going to end it there. If you want to check out Open VC, it's openvc.app. Any other links you want to show, you pushing on YouTube, pushing on Twitter, or is it just your website?

Steph From OpenVC (47:13.945)
Correct.

Steph From OpenVC (47:18.233)
Just go to OpenVC and we'll take good care of you. I'm on Twitter at Stefan Nasser. I'm on LinkedIn. Pretty easy to find Stefan Nasser. But yeah, all the paths lead to OpenVC. So hope to see some founders there soon.

Mat Sherman (47:34.349)
Alright, if you're listening to this, check it out. And Steph, great to have you on for part two.

Steph From OpenVC (47:38.991)
Thank you.