Lessons - Raising Money and Funding Your Startup | Charlie Feng - Co-Founder of Clearco

So that is probably the biggest pain when it comes to keeping your business going. But the model you took is very different. And I think the model you took is very novel. And I think Gleerco has a pretty good name and a lot of people know it. But for people that don't explain what a traditional, for people that have never raised money before, explain what the traditional process is for a founder who's looking to go get money. And then explain why Gleerco is different and maybe why you chose to do it differently. Yeah. I saw a little bit about kind of the landscape maybe before Gleerco. And now this new generation of alternative capital that, you know, we're pretty excited that this new kind of class of assets, the asset class has kind of more risen up over the last couple of years. So traditionally, as a business owner, you have two choices. You could either go to the bank and get debt. So you put, you know, it's usually personally guaranteed, unfortunately, you put some kind of collateral on the line, whether you have a factory or, you know, a property, you put that on the line and you get debt. So essentially you get liquidity from a fixed asset. And then the other way is you get access to capital by raising equity, which is what you see on TechCrunch and kind of all the traditional raising capital people call it. And that is by trading away a portion of your company. So let's say you give away 20% of your company to venture capitalists and they give you X amount of money to hopefully build your business, right? And they're hoping that you'll make it big. So are you? One thing we realize is that two interesting factors. One is for a lot of the new generation of businesses, these kind of online digital businesses, they are almost by definition asset light, right, like an e-commerce store. They don't have a factory. They don't have these physical assets or an open or something to kind of collateralize against. So going to the bank is oftentimes not an option or kind of what we see as kind of an advantage being asset light is actually seen as a disadvantage in the, in the face of kind of getting money from the bank. And for a lot of these businesses that are e-commerce, for example, these digital businesses, they are already generating revenue. They're businesses we're talking about that are not. So a lot of the businesses that we're funding are these revenue generating online businesses. They already kind of done the R&D where they already have the product there. And they kind of know that for every dollar they put into Facebook or every dollar they put into marketing advertising, they get two dollars out on the other side, right? So then to give away equity every time you're running a Facebook ad is not the best trade. So that's kind of what we started to figure out, like, is there a different way to fund these businesses? That's been more efficient. And I think our belief is always that around the idea of what is the most efficient way to capitalize or fund your business? So if you are an R&D heavy business, we're doing AI and new technology from a, you probably should raise equity. We partner up with a lot of VCs and we think equity is great. It's truly risk capital. It's for things that are in that zero to one phase. And once you're kind of going from that one to 10, you're scaling things, sometimes that doesn't make as much sense anymore. And that's why we built clinical. Are there any other lessons or learnings, things that you've succeeded at or failed at and have learned from that zero to one phase? So we sort of spoken about Founder Marketfit, Product Marketfit, First Hires. What about scaling from zero to one? What does that process look like? What's the testing process, the experimenting process, channels that you should try when you should give up on channels, if you should at all, like, what's that whole mindset of scaling? That's tough too. Yeah. I'll first talk about, I'll talk a little bit about experimentation, because I think I spent a lot of time doing that. Before I start talking about a story where a mistake I made quite early on that I've taken with every other business I built, which is not charging your customers early enough. And kind of going back to that idea of, you measure a person's intentions by the actions they make rather than the words they say. And I think that's very true when it comes to this marvelous product that you've built and the question is, well, does anyone ever want it, right? Because I think for my first company, a first product, I remember kind of doing a lot of customer development interviews, talked to a hundred people, I got a lot of people on wait lists, I got a lot of people who said, no, I like that. I think which ability is great. All these kind of strong positive words of encouragement. And then what it hit me is that I didn't ask them for their credit card, I didn't ask them for to pay for anything. And then when I did, when we finally spent months to build a product, it turns out that a lot of the positive words were, they were caveated with kind of other reasons why they couldn't pay or why they were still missing this one feature or why I was still missing this something. And kind of maybe realize that the, in the early days, what you really care about is learnings. You're trying to maximize the quality of learnings and kind of the quality of learnings, quality of feedback and charging because, you know, when I was kind of starting my first company, I always thought that, you know, I want to, I don't want to charge people money because they're my early supporters, they're oftentimes friends or people I know. And as a result, I don't want to, you know, take money from them, right? And it's not so much about charging people for the sake of making a dollar, making money, but it's really about how you maximize your learnings and charging people, it's one way to increase what they, they increase the learnings, right? And it's really about how do I maximize the efficiency of my feedback? I have a certain period of time. Companies don't die because of, companies usually die because founders give up. Companies die because you run out of time. Money is your most valuable asset when you're building a business and that's your one phase. And the, the important thing is how do I maximize the efficiency of every day or month I spend doing that? And sometimes, for example, you're working in the enterprise section of businesses, like if you're working on a six-figure, potential six-figure deal in the future, you might not want to charge your first customer, your inaugural first customer, you know, six figures. But even charging them a $0 invoice is actually quite good because what it does is that for that large enterprise, if you're charging, if you're making an enterprise of over a hundred or a few hundred people sign and do a $0 invoice, it actually makes their legal team to review the invoice and makes the finance team, you know, they have to do all the procedures, right? And it makes them actually have to commit, even though they're not paying any monetarily, it's a much higher commitment than just kind of a pilot with literally no strings attached. And I think what you're trying to do is, again, maximize your life. So this can be done via charging people, asking them for the credit card and you'll see, you know, people's real reasons and excuses come out. Or you could, you know, you do another way for consumer apps is you really measure how they use that. So you don't care so much about the number of signups, you care about the daily usage for the time they spend on the app, and things like that. So, very smart, yeah, very much asking people for the credit card really all.