Michael HyattBSLS Capital

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 Michael Hyatt, who is a very active investor and serial entrepreneur, who has built and sold a number of companies, who is one of the founding partners of the Creative Destruction Lab, and is a senior advisor of Northleaf Capital. And much, much more. Welcome, Michael. Thanks for having me. Great. And I know you haven't seen any of these questions, but we're just going to jump right in.

00:33 Sure. What is the stage you invest in and the average size of the investments? Oh, look. I mean, sometimes I'm pre-seed, sometimes I'm seed, but you're asking average, I tend to do a little later stage when the idea is kind of formed and there's some revenue. And I will put as little as 100,000 into a company and as high as seven figure checks into a company. And sometimes I bring VCs with me, private equity firms. It just depends on the stage. You're a very active investor. How many investments have you made over the years?

01:05 I don't know, at least 100. It's something up there. If there's a lot, if you count all the VCs I invest in, if you count all the directs I do and the exits and private equity in real estate, it's quite a bit. We're a very active family office. What is your preferred exit timeline when investing? I would say that's the kind of cool thing about running a family office is that we don't. We're not pressuring to exit the business necessarily or we don't have a fund. So we don't have like an investment curve. We don't have like a J curve, we have to get capital and capital out to start another fund. I like to be investments in the, I know this sounds like a long time,

01:37 but the greatest investments I'm involved in are going to be like five and 10 years type, like marriages. What are some of the things that your family office does to support companies you invest in? So maybe the difference for us is that we're operators. We've built and sold companies and so we get into the guts of it. So I have pretty regular calls or zooms now with founders and we dive into the operations of the business. Okay, what are you missing? What's, look, we just did the board meeting. These are things are all green. I tell the entrepreneurs, let's not focus on the green light things. What's red? Oh, let's talk about one that everybody's kind of missing right now.

02:10 Everybody's dying for developers. Why? Because it's just a boom. They're very expensive. They're trading. How are we going to fill those gaps? It's typically we spend a lot of time around product and around sales. Is your capital fully deployed? Are you still looking for investments? No, we're still looking for investments because what happens is you don't put it on the same time. So imagine, you know, you're always making investments and you always have money coming in. Sold a couple of companies last two weeks. I mean, the company comes in and then you push money back out and you got to keep it moving. There's got to be a velocity to your money.

02:42 If not, in a couple of years from now, I don't have more money coming in because I haven't put more money out. Do you like to lead an investment round or join an existing round? That's a really good question. I like to join with VCs that I really like because I like to kind of look at a company from different angles and get different opinions because, you know, in Canada and in the US, it's just amazing VCs who see things differently. So you can always on learning and, you know, you certainly see this at the Creative Destruction Lab who's just tons of brilliant people. Whenever you think you're smart, you find 20 people that are smarter.

03:12 So I do both, but I certainly have lead rounds. I can go either way. I don't really have an eagle about it. I just want to be part of something good and I like to get behind just really good people that I can build a company with. Are there any terms you require when investing, for example, liquidity provisions, board seats, et cetera? Look, I like to be on a board. I like to be observer at least, especially if I'm there all the time because I'd like to be deep in the guts of it. I like to have a standard prep share with the standard terms that would be very kind of standard that a VC would get.

03:45 I like to have pro-rata rights. If I come in early, I like to invest later. I like to kind of share the journey with the team. What one thing do you like to see in a pitch that you don't see very often? I'd like to see a founder or founders that know that they're going to get into this thing and they're going to have to pivot because, let's be honest, there is no great companies that haven't pivoted. You either pivot three, four percent to the left or right or 180 degrees. Who knows? But if you're getting into this thing thinking that your plan is going to just work

04:17 then you're wrong. What does Mike Tyson say or what did he say about war as soon as you get punched in the face, all your plans go out the window? That's so true. I'm looking for great people that don't pivot because I know everything. Every hockey stick you're getting that revenue, all your growth is wrong. Sometimes you're better than the numbers, by the way. Not so often, but you're usually wrong, but that's okay. That's part of it. What do you wish more founders understood before negotiating investment terms? I wish they would stop thinking like founders for five minutes and pretend they had the money

04:48 and they were the investors. If they stop and actually say, if I'm an investor, what would I be doing? In the minute, let's say they sold their company for something and they had a few million bucks to invest, as soon as they become investors, they start asking the right question. Pretend you're an investor for a second and then see it from the other side and I think you can do better when you're raising money. What do you look for in a startup? I look for the market. Do I like it? I look for a product or a service that can generate high gross margins. I think

05:19 gross margins is extremely important. Let's be honest about most startups. You have capital, you have founders, you have two of the VCs and all that. One of the most important things, and I think there's a great TED talk on this and I kind of agree with it, is timing. You have to have relative timing. I think that iPad was sort of invented. Microsoft had an iPad out in the early 90s or late 80s. I had one. Totally right, but completely off time. Timing and a bit of luck

05:50 has a lot to do with it. Your ability to pick up and really what I'm looking for is founders that are just a little, that's a little bit of humility and can admit they're wrong or certainly I do and I like to have a bit of a debate about where to go with the business. One book every entrepreneur should read before talking to investors. Probably one that most people have, but I really love Peter Thiel's Zero to One. I just think he laid it out in a way that other people have not. I just think even if you just read the first 10 chapters, it would profoundly help you. Best cold outreach technique you've

06:24 seen by startups? I like a very short cold outreach with a few numbers and just a very honest approach. I get maybe 10 to sometimes 15 linkedins a day and they are just paragraphs and paragraphs of their entire plan. It's like, guys, I've never heard from you before. I don't know you. I'm not going to read this for 20 minutes. Why would I do that? Very short, very brief, very focused. When should startups reach out to you? I guess when they're in it 120% and they really believe

06:59 that capital is going to make a big difference at their stage. And if people want to find out more about you and what you're doing, where do they go? I just go to LinkedIn. You can message me on LinkedIn. Everybody seems to do that. I'm pretty responsive, but look, I mean, I can't respond to everybody because it's a lot. It's going to get overwhelming. I have done terrifically well backing people that I've taken time on LinkedIn to get to know or people I give people opportunities. I made the most amount of money, the most amount of money. I made incredible uplifts by even backing the students

07:31 from the Creative Destruction Lab. Well, that company now is called Bolt Logistics. Bolt Logistics has 1,000 employees now. I apologize to the background noise. I have three little children now so you can hear from the background. That's another thing that takes a lot of my time. Of course, I really appreciate taking the time today to be on who are these investors. It was great to talk to you. Yeah, it was great to talk to you too, Craig. Good luck. This has been Who Are These Investors? Find out more at WhoAreTheseInvestors.com and follow our live events at TorontoStarts.com slash events.