In today’s episode, we talked with Vadim Slavin, Portfolio Advisor at Hatchet Ventures about creating and cultivating relationships with investors and how they think about investing in startups.
In today’s episode, we talked with Vadim Slavin, Portfolio Advisor at Hatchet Ventures about creating and cultivating relationships with investors and how they think about investing in startups.
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Hatchet Ventures website: https://www.hatchetventures.com
Hatchet Ventures LinkedIn: https://www.linkedin.com/company/hatchet-ventures/
Chet Lovegren’s LinkedIn: https://www.linkedin.com/in/chetlovegren/
Connect with Vadim Slavin on LinkedIn: https://www.linkedin.com/in/vadimslavin/
Listen on Spotify: https://tinyurl.com/36ub3fpy
Listen on Apple Podcasts: https://tinyurl.com/ystuxubt
Listen on Google Podcasts:
1, 2, 3, 4. Are you a founder, co-founder, aspiring entrepreneur, or just someone who loves to hear about how companies are built? Then join us as we talk with founders and CEOs who have been there and done that. Welcome to the Founders Formula Podcast. Sponsored by Hatchet Ventures and now your host, Chet Lovegren
[00:00:30] Chet: Welcome everybody to the second installment with Vadim Slavin. For those of you that listen to episode one with Vadim, you know that we are having such a great conversation that we let the tape run. So without further ado, we're gonna jump right into that episode.
I'm, I'm kind of curious to get your thoughts on this. Like, so you said obviously second time founders. Raise money faster and that makes sense, right? Then you put, and then yeah, you put that tag on it. Successful with how easy it is to create a narrative on the internet these days, and how many companies really like one thing that surprises me, Having a services based business and working with companies, I met companies I've never heard of doing three to 4 million in annual revenue.
You know, like it surprised me how fast you can make 5 million in annual revenue and nobody knows who you are. Mm-hmm. , how do you validate that? They're like, what would you as an investor say that validates them as a second time founder? Is it an acquisition by another successful company? Is it looking through their, their statements and revenue that they had before they.
left the company or you know, like why would somebody leave a company if it was successful and they didn't sell it off Right. And look for to do a new venture. Like what are some of the things that you look at when you're looking at a second-time founder that you can say they were successful in their last venture?
[00:01:48] Vadim: So first of all, uh, what I've observed is that if the first-time future successful founder starts with a deep understanding of the problem. The second time, a formerly successful first-time founder starts with customers, not just the problem. And that's probably why you haven't heard of those successful companies because they don't need to do press releases.
They don't need to do marketing. They come from the background where the customers are there saying, listen, I need this built. This is a problem that I have. This is how much I'm willing to pay for it. Can you go build this for me? And then you start from. , um, how do you identify those? Well, you don't really need to identify them cuz you already know them or as an investor you don't know them because they come to their previous founders, right?
So it's really hard to invest early on in a second time. Formerly successful first-time founder because they come to their investors that they delivered return to and they say, Hey, here's, here's something else I want to do. Uh, let's do it. Um, in fact, , even those first time founders that weren't successful, but as long as they were not successful for a good reason.
Should not have a problem raising funds from their, uh, previous founders. Uh, when there was, uh, there was a startup that came to us, um, in our portfolio, monthly Ventures that said, listen, we realize that this is not the problem we wanna solve. We wanna, uh, return some money to investors, um, because we're just, we just don't wanna, you know, spend all the money that we raised, it's the right thing to do, so we're just gonna return some of it.
And we're. No, don't. What else do you want to do? Like, is there something else you want to do, um, that, uh, you know, that you think is more worthwhile? Um, so the founder said, you know, we wanna take some time. We'll come back. Um, but as an investor, um, you are, you're concerned more about the opportunity. than with the numbers, you know?
Um, to get your fund to perform at like two x three x, which is actually an enormous success for a fund, um, you need to think about a large, large portion of your portfolio to go to zero. And a small, small, small portfolio go to 10 x or more. Uh, which means that if somebody comes back and says, I wanna return 40% of what I raised from you, you're like, well, Um, no, the, uh, the opportunity, um, the opportunity is worth more than that 40% that we've already written off anyway, right?
And as long as there's a, like I said, good reason to have failed because, hey, we learned all we could and there isn't a market, or you know what? We just cannot deliver the value, um, uh, uh, for the margins that the customers are willing to pay for it. You know what? Their technology is just not. , um, as long as you know, you didn't fail because you, you were lazy, uh, or because you didn't wanna listen or whatever, that prior relationship with a, with an investor will pay off later anyway.
So yes, it's easier to raise as a, as a successful founder, but uh, that's not a deal breaker. If you come back to your investors later and say, I want to do something. That's really helpful.
[00:05:21] Chet: So this is, uh, so this is, this conversation's really interesting to me because, uh, we don't, we don't get too many people that can both put on the investor hat as well as the founder and advisor hat.
Um, we typically get one side or the other in most cases. So this is, this is really informative and, and I, I love some of these insights. Um, I'm curious to hear your opinion as an investor. And even maybe as someone advising a first time founder, um, how much does tenure in that problem really matter? And I know you said authority on subject matter is important, but first time founder and like you said, needs the capital to get going.
Maybe doesn't even have a single customer yet. Our companies out here or or our investors out here giving companies with no revenue money if they're seeing enough tenure, experie. and track record of success solving that problem. We're talking decade plus solving a certain problem, or maybe even experiencing that problem for five years and then solving it in one form or capacity for another five years.
Is that, is that a possibility for, of course, potential
[00:06:23] Vadim: founders? Of course. Um, I think 10 years is just one. , um, small metric. You know, you don't have to be doing the same thing for 10 years after all. You know, I could ask you a question, so why haven't you raised your hand before? Why haven't you done it sooner?
Do you not believe in yourself? Will you not believe in yourself once I give you money? Um, but uh, it's about demonstrating, um, authority on the subject. Um, like. The best, um, let me give you two examples. The best in the worst. So the best one would be somebody comes to you and says, listen, I've been working for a big company and man, we spend so much time and money getting this kind of service.
There's really nothing good out there. Like I've tried, I've been a buyer of this service forever. I've been running tender for, uh, for a service providers. Really nothing like that. My company would've. Gazillions to get this done. So I know what I need to build. I know that it's possible. Um, here's some, here's a prototype that I've built and, uh, my company, like I already talked to my boss and he said like, if I leave and I, and I create this thing, um, they're willing to buy it.
Like that is like the best case scenario, right? Um, the worst thing is, um, you know what, like I was, um, I quit my company. And, um, like on my way, um, like in Uber, I was thinking, wow, like wouldn't be nice to do this. And so I spent three months paying somebody to build this, this thing, right? So, so there you go.
That, that's the comparison. Um, obviously, you know, founders, they will have something in between. There's, uh, but one mistake that, um, I think people are making when they're, when they're showing passion for the problem is, , they're equating their problems with market problems, right? And, and this is something that Silicon Valley was blamed for, uh, many times, like people.
Building things for themselves, but Silicon Valley is not the rest of the world, right? So founders in Silicon Valley don't understand what it's like to be, uh, a user, a customer outside of Silicon Valley, right? And for that, you need to not only get outside of the building, which was, which was the term we used, uh, back in the day, but also like you really need to understand the market as a whole.
And, um, the market for the, for the most part, the market is outside of silicon.
[00:08:50] Chet: Yeah, I find that, I find that interesting, um, because I, I've personally heard, I mean a CEO of Sendo, so co-founder and CEO was on the podcast and he said, look, we built a very small, uh, version of a product called coffee sender.com, where we were sending coffee gift cards, but we were account executives, and we just found a way to build it ourselves, me and my co-founder.
Um, then it got to a point where that was growing enough that. Pursued it full-time. I was helping on more the product side because I still wanted to keep my nine to five, but eventually what became Coffee Sender 2.0, which is Sendoso. It wasn't even being, being created. We just merely had slides and basically a UI that we were showing potential investors say, Hey, this is already, we're already having traction here.
We wanna take this thing off the ground. So I already, they already had a proven business model. They wanted to expand upon it. But then I meet other founders where one specifically, I won't name now, but successful account executive for eight years is creating a sales point, uh, sales point solution software.
Mm-hmm. , um, that helped solve for a challenge that he. Interacting with his buyers and not being able to correctly enable them with the tools that were provided, and there was nothing that could sync that way. And I know that he's having great conversations right now. Um, and I'm sure that two years down the road we're all gonna be hearing about his company.
Um, but he's, he's never founded a company. He doesn't come from product. He was an AE for about, you know, for that amount of time. And he just said, Hey, this is something that I'm passionate about and I have a little money to set up the ui, and now I'm mm-hmm putting the money into the ui and now I'm showing the prototype off to sales leaders getting feedback and then I'm gonna take it to investors and show them, hey, this is something.
I need it as an account executive. My boss couldn't find it. I couldn't find it. This is the value that I think there is associated with the problem it's solving. And so I love seeing that because I think that's an important thing too, is sometimes, like you said, uh, earlier in the podcast, sometimes.
um, you know, investors recognize that this is a great idea. This is the right person to do it. They have the right people around them, they just need the capital, be able to quit their day job and go do it. Mm-hmm. and also build the product because building products is, uh, it's pretty intensive, especially now that a lot of people are gonna start some former fashion integrating, trying to integrate a lot more AI because it's the hot new thing.
Mm-hmm. , we'll see what no-code AI tools look like in the future. I'll be excited to see what that looks like, but, um, I wanna approach the, um, the investing. , um, part of the business as a whole, if you are advising me or even just giving feedback on what you've seen as an investor and an advisor. Mm-hmm. , if I'm starting the, um, if I'm, if I'm looking to raise seed round, let's start there.
Mm-hmm. Capital. Mm-hmm. . What is the biggest pitfall that most founders who try to raise seed capital, first time founders usually. experience. Hmm.
[00:11:39] Vadim: Um, the pitfall as in the mistakes that they make or the, the obstacles that they, they receive. Um, yeah, the, the
[00:11:45] Chet: mistakes. The thing they do that they should have thought about before they did it because they did it the wrong way.
[00:11:49] Vadim: Right, right. Um, I think like, um, those three things that I mentioned, um, they don't put enough emphasis on, uh, demonstrating those values to the investors. Right. Um, again, problem, uh, dedication or skin in the game and the ability to execute. Um, and they get, um, um, and they get too bogged down into trying to explain, uh, the idea without going to the problem first.
And one of the indications, for example of, um, how well you understand the problem. Is how quickly you can explain it, right? So if it takes you 10 minutes to explain your idea, uh, and then you haven't even us isolated the problem that you're solving, it will come up very quickly and it will be a red flag for, for investors.
So I think, um, I think I've seen enough of that where like I'm being pitched an idea instead of a problem and a. ,
[00:12:56] Chet: does the problem need to have some form of r o ROI attached to it, or does it work just well enough just to talk about the, the occurrence and frequency of the problem in some scenarios?
[00:13:07] Vadim: Well, at this stage, the ROI is a hypothesis, right?
So what is it, what, what hypothesis do you have? And, uh, I think the best pitch is. Is about being honest, uh, with investors. You know, here's what we know and here's what we don't know. We assume and we want to validate. because the first initial stage, you know, before, before series A, before you have those e eco unit economics nailed down, um, it's all about validation of your initial hypotheses.
Like, and, and the more of those things. Here's how we can quantify this algorithm. The more of these hypotheses that you can demonstrate, you have validated early on. The better your pitch is going to be. Like, for example, um, I think this is a problem and we asked 10 people versus, uh, you know what, I talked to a hundred people and this is what they communicated to me is a big problem.
Versus, you know what, there's uh, three customers out there that told me like they're willing to pay a thousand bucks for this solution. Um, and you know what? This is just a very small representation. The same kind of a company that I can go to later and sell this product to. Um, so, so that is just an initial kind of, um, validation in the eyes of the investor that, um, you are going to do the right thing in finding that product market fit, because that's what it's all about, right?
It's iterating through the hypotheses and just throwing that MVP out there and see whether that's something that, that, uh, customers are willing to pay. .
[00:14:44] Chet: Yeah. This has been awesome. Vine, regarding our conversation, what's something that we haven't talked about that you wish to share with the, with the community?
And I know that's a loaded question, . Oh gosh. Oh, we haven't
[00:14:56] Vadim: talked about so much. Um,
[00:14:58] Chet: anything you wanna talk about? We can, we can run with it. Um,
[00:15:02] Vadim: interesting, interesting. Let's talk about, ah, here's something that people don't talk about. The mental health of founders. Hmm. That, that was a topic that, um, I think in Silicon Valley briefly, uh, rared, it said, um, it is, um, like being a, the only founder, like I, I actually.
I don't know how it's even possible, like, um, it, it is such a, such a difficult psychological thing to do the ups and downs and, um, you absolutely need to have co-founders, um, if for nothing else, then to bounce off ideas and to find that support, uh, as you move forward. Um, You know, with, with my, with my co-founders, there's been a number of these, oh my God, like, I think this is, this is stupid.
Like I wasted my five, five years on this. Like, why am I doing this? Just, just to have the other person be like, listen, let's go for a walk. Let's have some coffee. Here's all the things that we accomplish. Here are the things that we can do differently. You know, it's not all a waste. Um, and. It's, uh, it's taking such a, such a huge toll on our mental health to become founders.
Very few people are actually talking about it because I think that is a sign of, uh, of weakness. People perceive that as a sign of a weakness. But, uh, I think that it's, uh, it's a sign of, of strength to be able to overcome these, these issues. And that's why finding the right, uh, co-founder is even that much more.
I. Um, because it's not just somebody that compliments your, um, your skillset. It's somebody that can provide you support in this very important, um, time period in your life. And, uh, I didn't expect that one. Huh? ?
[00:16:50] Chet: No, I, I love it. And I'm actually gonna, as we close out the podcast, I'm gonna bring it back to the beginning.
You made a movie reference to contact, I'll make a movie reference to Lord of the Rings. Frodo didn't go to Mordor on his own, right? So mm-hmm. . Find, find your Sam Weis. . . That's right. My 11 year old had never seen those movies before. We just started watching them, and I was like, how have you never seen these?
These were such a big part of, like, my life, you know? Mm-hmm. as a, as a, as a growing. . Um, so I got to share in that experience recently, which was fun. But yeah, I, I think it's, um, you, you tend to hear, and I, I've only interviewed a couple people that are their own founders. Most of the time. We get a lot of co-founders on here.
and you kind of do see a little bit of difference in the way that they talk about things. Mm-hmm. and the alleviation they have behind the problems because they know they have someone to share that load with. Someone that they can bounce off I ideas and, and just even get feedback on things and maybe even just go, Hey, I need you to tap into your network.
Cause I'm having a hard time solving for this. I know it's my end of the business, but. Let's, let's put our heads together and see if we can bring someone in to help us, uh, talk about this. And, and like you said, it's not a sign of weakness, it's a sign of strength to be able to deal with it. Mm-hmm. , um, I've always encouraged people, like, you know, you go to the gym and you work out, right?
That's the same thing that therapy is for your brain and your emotions. It's, it's working out that mental side of your life and there's nothing wrong with that. And you, and you need that. Um, you need that therapy and treatment, and you need to keep your health in order. Right. So I'm, I'm glad that you touched on that Vine As we close out the episode.
how can people get in contact with you? How can they get in touch if they have a question they want to ask, or they merely just wanna follow you on your journey as a, as a co-founder, founder, advisor, and, and strategic advisor and investor.
[00:18:34] Vadim: Sure, sure. Uh, LinkedIn, I think is the best. Um, probably, yeah, probably LinkedIn.
Um, I, I respond to almost everybody as long as it doesn't sound like a, you know, a sale of service, uh, some kind of a cold outreach. Um, if you really need help. By all means, if I have time I'll respond, uh, with something that is more than just, Hey, how are you ? Um, today for example, I joined Cabilla. You mentioned Cabilla earlier on
Mm-hmm. , uh, the founder on your podcast. Um, and there was somebody asking a question about, uh, they had a, a verification problem where Twilio charged them like $10,000 or something cuz they have problem with bots. I solved that problem before. I'm happy to help. Um, and. Maybe, oh, let's, let's help out a fellow, um, portfolio startup Cabilla, join Cabilla, find me there, , and, uh, let's get you the help that you need.
That's right. Um, Hutch A Ventures is, is trying to implement that kind of a community as well. That's why the, the relationship with Cabilla. So it's so precious because we're, we're after the same thing. It's providing that support for founders, uh, that have questions. Because you know what, someone.
probably already solved that problem that you're having right now. Mm-hmm. . Uh, so find me on Kabila, find me on LinkedIn. Um, don't hesitate to Ping Hatchet Ventures. There's an amazing community of folks. There's a lot more, uh, advisors out there. That's what makes us so special. It's not just one person with an opinion.
It's 30 40 advisors ready to help you. Um, and, um, good luck. I love. Dare, dare to do something amazing. Mm-hmm. , it takes us exactly the same time to do something mediocre and to do something amazing. Believe you me, there's, everybody has 24 hours, uh, in a day, so might as well do something awesome.
[00:20:26] Chet: Yes, it's a great, it's a great, uh, great line to close it on.
Um, we'll have, uh, links in the description and the show notes below to Vine's LinkedIn, as well as the Founders Formula Podcast in Hatchet Ventures if you're interested in engaging further. Thank you everybody, uh, for tuning into this two-part episode. We appreciate each and every one of you and we'll see you on next week's episode.
Thanks Vadim.
Thanks, Chet.