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Guest: Anthony Venus, the founder and CEO of fast-growing accounts receivable solution YayPay.
Episode in a Tweet: Anthony Venus of YayPay identifies 5 questions you must answer before raising venture capital money.
Quick Background: Getting BIG requires big cash. But the venture capital landscape is more crowded and competitive than ever. How is your company going to stand out from the masses of wannabe entrepreneurs? Do you have a vision that will tantalize investors? The right numbers to secure the right investment? The right plan to capitalize on that investment? The right team? The grit and determination necessary to make BIG happen?
On today’s show, serial entrepreneur Anthony Venus talks about the genesis of his new company YayPay, how he determined when the company had achieved product-market fit, and the steps he used to raise $8 million in venture capital money.
Transcript: Download the full transcript here.
Key Insights from Anthony Venus on Securing Venture Capital Funding
1. What problem does your business solve?
One of Anthony’s previous companies had problems in the back office. Their sales and marketing software were top notch, but getting paid took forever.
“We had a lot of outstanding receivables,” Anthony remembers. “I used to roll up my sleeves as the CEO and dig in with my CFO and the finance team and try and do anything we could to bring it in faster. It certainly was a pain point.” Not to mention a waste of Anthony’s CEO time.
Years later, in 2015, Anthony and I were among those attending a Singularity University lecture on artificial intelligence and machine learning. Anthony recalls on the podcast that specific moment was when “The lights went off, and I started thinking about, ‘I wonder what would happen if we could apply that technology to the back office?’”
This is a great example of the importance of lifelong learning, as in this case, it led Anthony to start a new company.
2. Do you have enough traction to impress serious investors?
Anthony used his own cash and small loans from friends and family to bootstrap YayPay and get the product to a point where he could present it at TechCrunch Disrupt, bring in some more talent, and refine the product. The concept was good … just not good enough for big VC firms.
“The first road show, I went out and spoke to VC’s in Boston and New York City and San Francisco and really we were too early,” Anthony says. “We had about three customers signed up and wire frames, and none of them were live. I guess we were very much in a hurry and I believed in it. But the first road show I would say was really a failure. It didn’t work.”
Among the most common concerns Anthony heard from VC’s at this stage were about his understanding of the market. Investors didn’t just want to know what YayPay was, they wanted to know how it was going to differentiate itself and compete.
So, Anthony did what he had to do to take YayPay up to the next level. He lined up some more small-scale injections of cash, did more research, fine-tuned the product, and when it was ready, went live.
3. Are you ready to put in the legwork?
Now the real work started!
“There was a six-week period from mid-April to the end of May 2017 that I literally did over a hundred meetings,” Anthony says. “Some weeks I did 10. Others I did 20. And there were some weeks, more than 30 meetings per week. I stood up at events. I would talk to literally anyone who would speak to me from New York to London to all up and down Silicon Valley and tell the story to anybody who’d listen.”
All that hustle and bustle shot YayPay up Crunchbase’s list of the fastest-rising startups, all because Anthony’s tireless efforts were driving people to search for the site. From there, fundraising snowballed into what, for Anthony, was like a dating process. “You’re going to kiss a lot of frogs until you find the right match. The ones that understand your business, all of your business model, the ones that are also the right investor for the stage that you’re at.”
Your vision and your values will be key to swatting away the frogs. Never compromise on either when you’re considering an offer from a potential investor. An injection of cash from a firm that doesn’t want the same things you want for the business might solve some short-term problems, only to set you up for long-term catastrophe.
4. Are you continually refining your product – market fit?
Building up a small but very enthusiastic consumer base was key to Anthony securing an initial $5.3 million raise. But he admits that at such an early stage they barely had a whiff of true product – market fit. To get there, Anthony and his team kept refining the product, and kept researching their market and consumer base. They also sent out user surveys that asked, “How would you feel if YayPay did not exist or you couldn’t access YayPay tomorrow? Would you be very upset? Would you be somewhat upset? Or you couldn’t care less?”
“If you get over 40% of your users saying that they’d feel very upset that you weren’t around tomorrow, you’ve got product market fit,” Anthony says. So we did that test and we did get over 40% of the users saying that they’d feel very upset. But what was very interesting was once we did the analysis by cohort, we found that if the company was $500 million in revenue and above, something like 80% of the users said they’d be very upset.”
In other words, as your business grows and becomes more valuable, it will become more valuable to your core customers, and hopefully, create even more of them.
5. Do you have the best team in place?
Once Anthony had his capital secured, he turned to the next priority: building out the best team possible.
“I went from being Chief Fundraising Officer to Chief Recruiter,” Anthony says, and wow, did he take that role seriously. He flew to Detroit and spent a weekend with one candidate’s family – even winning over the crucial support of his wife! He took another trip to Philadelphia and told the woman he wanted to be his Chief Product Officer, “Listen, I’m not leaving until you join.”
Listening to these kinds of stories from top CEOs like Anthony is why I get so annoyed when struggling CEOs tell me, “Mark, I can’t get the best person for this job.” Not only CAN you do it, you HAVE to. How can you get your business where you want it to go without the right people doing the work? As Anthony says, “You put the fuel in the tank, which was the funding. You put the right people on that bus, which was great hires. And then we point that bus in the right direction and we motor forward.”
- Be ready. If you don’t have strong market data and a growing customer base, serious VC’s won’t take you seriously.
- Get fit. Keep iterating on your product until at least 40% of your users say they’d be very upset if your product went away.
- Hire up. If you think you can’t afford top talent at an early stage, then you’ll never get to the next stage.
Transcript: Download the full transcript here.