Ashley MartisStartupFuel

00:00 Welcome to Who Are These Investors. Podcast Shorts featuring interviews with investors in Canadian startups. Welcome to Who Are These Investors. I'm the Startup Coach, founder of TorontoStarts, one of the largest startup communities in Canada. And with me today is Ashley Martis of StartupFuel. Welcome Ash. Hey, how's it going Craig? Thank you so much for having me on the show. How do you position yourself in the startup ecosystem? So we [unclear] a traditional venture capital fund. We support both side startups and investors but mainly we sit on venture capital funds as an advisory board helping them with their management. So everything from scouting,

00:35 due diligence, valuations of companies and helping set up the portfolio management. And so we look to build a portal that allows companies to find which funds which our clients are and position themselves perfectly for the right fund. So what is the stage and the average size of investments that you work with? So mainly it's emerging fund managers who deal in pre-seed and seed stage companies. So anywhere from ideation all the way up to seed. So can range from 150,000 checks as the minimum all the way up to about half a million dollars. And

01:08 what are the people on your platform, your partners? What are their traditional preferred exit timeline? Mainly around four years is the average for traditional. I can go a little bit earlier and a little bit less than that when it comes to higher up near the seed side. When series A's around the corner they may want to exit right away. And the other ones a more deep tech that takes research, takes some time and IP developed can be up to seven years. Are your clients capital fully deployed or are they still looking for investments? Nope, not fully deployed, still looking for investments with multiple funds following

01:39 up, specifically looking in clean tech, fintech companies, SaaS, enterprise and as well small to mid-sized business SaaS, cybersecurity and agri-tech. So do your clients like to lead an investment round or join an existing round? Our clients have a mixture of some of them are emerging fund managers. First time fund managers, some of them are more established. The emerging fund managers we recommend to be follow on, learn of the ecosystem and participate. The more established groups lead and also follow, but mainly they will lead the deals and be the one in charge of diligence.

02:11 Are there any terms you require when investing? Not necessarily per se, but first right of refusal for follow on especially for the early stage is really important because allowing the fund manager the option to put in more capital from their fund as the company is growing is a good faith on both sides, helps the founders get access to more capital to grow. At the same time, they have the choice of saying we're not putting in every company, but we'll pick and choose the ones we believe are a good fit. So that term, first right of refusal on an okorata rights and the next

02:41 investment is important. What is a red flag for you when a startup is pitching or negotiating? First of all, lack of product market fit is a huge red flag, putting up potentials but little to no actuals. You don't need necessarily revenue, you don't need anything, but you need some sort of indication of traction and that could be users, it could be letters of intent and stuff like that. Companies who come to a table with a napkin on a back of a paper idea, people don't invest in that anymore. And then finally, the other part is overstating TAM, the total addressable market. Understanding

03:12 the size of what your market is, as entrepreneurs, people love and myself love to go and to be very big and very broad because they think that's what's venture backable only. But starting off and saying, hey, look, I understand my initial target of it's going to be TAM, it's going to be smaller, but we have the option to go into these other markets larger TAM shows a lot more professionalism. What one thing do you like to see in a pitch that you don't see very often? IP or a path to defensible IP? And again, when I say IP, I don't necessarily only need patents or copyright to trademarks, but networks, connections, client lists, things that any

03:47 new competitor coming in the space who's trying to do the same thing as you won't have access to be able to do. So just recommending of how you plan on collecting this IP and making a core part of your Nord Star KPIs growing, but then at some point converting that into a potential patent process, utility patent, or some kind of a defensible moat that if another company wanted to acquire you, now that patent becomes a big portion of what they'd be looking for. So IP, huge part of where venture capital invests in.

04:17 What do you wish more founders understood before negotiating investment terms? So I really think market valuations. This is something that's becoming very big now. We're not at, you know, 1990 or 1995 or even 2000 anymore. We have 20, 30 years of research of startup industries and every sector, whether you're in AI, whether you're in fintech, has industry averages of what companies raise or what valuations in your local sector. So if you understand that a VC fund, in order for them, on average, they like to take about

04:48 10 to 30% ownership. So if you look at that number, look at how much you need to raise this capital, you can automatically do the math and see what your industry average should be and work backwards to what you raise. So this time, I understand that gives you not only confidence to know what you're saying in front of investors, but in the back of the mind, it's for us to look at the company and say, if I got to take you to the next stage, you got to be able to grow because we don't show a down valuation. So by showing a good industry average, we can say, oh, there's been a greater rate of return on these deals. What do you look for in a startup?

05:20 Passion for the problem and the reason for why that team is the one to solve it. There are millions and millions of entrepreneurs all over the globe solving many different problems. And in some cases, you don't even know that there's some people out there solving the same problem you are. Why is your team, yourself as a founder and the people you brought around you, your board members, your employees, co-founders, contractors, why are you the group to solve this problem? What makes it different for you and how does that tie well into the passion? This shows that in the ups and downs of the startup lifecycle, if you

05:52 are passionate and resilient and you have the right team to back it, you can face any challenge and get through it through grit, determination, and a reasonable way to solve the problem. What should startups reach out to you and startup fuel? Well, raising capital automatically, anybody can go and list themselves as a company on the platform whether they're actively or possibly raising. But if you are actively raising capital and you have found a big product market fit trigger, let's say you signed a big pilot project, you got a couple of customers that hit certain MRR in range for you. That's the

06:24 best time to come to meet an investor because you're peaking their interest. And it's best way to come with something in hand because you also get a somewhat of an advantage at the table of negotiation. What's the best cold outreach technique you've seen by startups? Oh, the coolest one I've ever seen is helping portfolio companies. So going and looking into an venture capital funds website, looking at the companies they've invested in and saying, hey, I can help this portfolio company do X, Y, and Z, whether it's in talent, whether it's in technology, in partnership or sales. If you come and you approach them and say

06:56 you do that, obviously the investors are going to be like, yeah, let's definitely work together. And then in between, you're like, by the way, I'm also raising capital. It just works to be your giving before you're asking. And that's always a great position to be in. Fantastic advice. If people want to find out more about you and StartupFuel, where do they go? StartupFuel dot com. That's simple. If you're an investor, a startup, an accelerator, a catalyst, come on there. This is the new home for the ecosystem. Thank you for being on. Who are these investors? I really appreciate you taking the time. Thank you so much for having me on and everyone at home. Keep hacking hustle.

07:28 This has been Who Are These Investors? Find out more at WhoAreTheseInvestors.com and follow our live events at TorontoStarts.com slash events.