All Things Startup: 43North, Pitching, Investing & Scaling Your Company | #AskGaryVee Episode 197

- On this episode, India is not here and I talk startup life. (upbeat hip hop music) - [Gary] You ask questions, and I answer them. This is The #AskGaryVee Show. - Hey everybody, this is Gary Vay-ner-chuk and this is episode 197 of the #AskGaryVee show. Staphon, how are you doing? - [Staphon] Good. How are you? - Me too, man. Really good. Good weekend fantasy baseball draft was this weekend. That was a lot of fun. We drafted here, right here. I was right there. Did really well. Really excited to be back on a normal show. This is slightly a little bit less normal. First of all, India is not India today. Why don't you tell the Vayner Nation who you are. - Hi everyone, I'm Sam. I'm a senior account executive at VaynerMedia. - How long have you been here, Sam? - I've been here for about six months. - How's it going? - It's going great. - Like super great? - Like super great. - And where you from? - I'm from New Jersey. - Where? - East Brunswick. - Love it. Right by Edison. You like that? You like Jersey? - [Staphon] I knew she was going say that. - Oh, you knew that. (all laughing) Sam works on a very important account for me. Some of you might remember if you've been following my ways this is right before DailyVee and Snapchat so you may not know this but I went up to Buffalo late last year, in the middle of the football season, by the way so is tough territory. Part of an organization 43North which has an incredible, incredible program for startups from all over the world that submitted thousands of submissions last year. We worked on it last year Jordy Levy, a good friend of mine, is a heavily involved in the whole rebirth of Buffalo and that part of New York. And they're bringing amazing startups to the area and I got to judge last year the competition where we saw the best of the best. The last 13 or so startups. We dwindled it down and we rewarded a lot of money. A ton money. This episode is very much themed for that. It is very personal for me. Want to get the word out for all of you. There's so many of you that are building meaningful startups. And very honestly the submission forms and things of that nature take time so I'm telling you right now I'm trying to really help you not waste an hour. The filter is pretty real. Actually Sam why don't you get some more context and some of the nuts and bolts since you're obviously working on it of the competition? - Sure. As Gary said it's an amazing competition for startups. They're are awarding $5 million to the top. The grand prize is a million and sort of the questions today come in asking Gary what this could do for startup and how I could help you but beyond that you also get mentorship for some of the top people. - The kicker is they have to move to Buffalo for a year, right? - They have to move to Buffalo. - I don't know what's happening the winners of ours but the year before that company stayed there. They can stay or leave eventually but obviously it has to go there in the beginning, right? - Mmhmmm. - Obviously Buffalo prefers you set up shop, right? - Yeah. It's amazing some of the companies that are down there. I had no context about Buffalo before working on this account. It's an incredible area for startups in general. - 100% - Great incubator space. - Think a lot of you that know and emailed me and whether it's Chattanooga, Tennessee where we have an office or Columbus, Ohio it just seems every city is clearly recognizing the need for digital driven company talent in their ecosystem is incredibly powerful. It's the new industrial revolution. I've been very passionate about it. I got to spend a lot of time, this is tough for me because I hate the Buffalo Bills and I know it is what it is. But it's amazing how much I love the people involved in this organization. It was probably one of the better two day events that I've spent time in and I'm excited that were involved again. Couple things I don't know. I don't know these kind of things. Are people that are watching right now if this gets passed on to startups of a friend's, couple quick questions, one, your startup can be in motion. - Mmhmmm. - You can be in a place where you use this million dollars, and this is my advice this is why I'm asking this, this is a setup, could use that million dollars instead of going getting funding from somewhere else. So many of you have companies, I'm getting tens of thousands of emails a month of people that you have companies that are looking to raise money that already have some traction, I highly recommend those companies enter this competition 'cause you can subsidize that grand prize for that. You wont dilute your company as much plus instead of wasting all that time pitching after VC it's in this ecosystem but you have to have the scrappiness and the mentality of willing to go and understand that you're moving to Buffalo for that year and this competition. Number two, because I know it kind of rounds up later in the year, is there a link that Staphon and I can have now? Are people are ready to submit now? When is the submission period started? It started already and ends May 31st. - Oh crap so we need to get it-- - It's getting close. - Okay. We can have the link up already to go. Great? Anything else? - I think that's it. - Are you read some questions? - I am. - Good, let's do it.

- [Voiceover] Taylor asks, "How does the startup know "when to add staff? "What positions are most critical to line up first? " - Taylor, and by the way before I get into your answer Taylor, obviously this is a startup themed episode in honor of the 43North competition. Taylor, I think that there's a lot of ways to go about this. I think you reverse engineer the founders of the company. So there's a lot of things that are needed. Financial understanding is needed. Marketing understanding is needed. Product understanding is needed. There's a lot of needs when you're a small company. I think what you need to do is first you hire as soon as you can afford to. There are startups that I know that are literally paying their founders and CEOs way too much money because they want to take the money home. You've got to start spending it to invest in your business but not more than you have. So if you make 30 or $40,000 a year as an entrepreneur that's plenty. You're building an asset for yourself for the rest of your life. It's better than making 100 so you can take that 70,000 and go and hire your head of marketing, hire a project manager, hire whatever needs you have. Who to hire is actually quite easy my opinion. You hire around the thing that you most need that you yourself can't most provide. I don't hire salespeople very quickly in my companies. I don't hire HR people very quickly. We didn't have a HR department or a sales staff for the first five of the seven years of VaynerMedia and everyboy thought that was so crazy because those of the things that I did. Those are things that I could do with my hustle. But we did have a CFO and a legal person very quickly over our means because those were shortcomings. I think AJ could have probably learned it on the job but those are things we didn't have as much of. I think when you hire first is the thing you need to round out your team with even if it's not. Let's say sales is more important than legal but you're great at sales I think you still fix legal even though it's less in priority because by doubling down on a person you're still zero here and you might just gain 20 to 50 percent here, where maybe your hustle and your efforts could just be the part that gains. I think that sometimes people say sales of the number one thing for this company but even though I'm great in sales I'm gonna hire second person and won't get to that I find that to be a vulnerability. I would say up your game by 20 to 40 percent and allow you to fill some of the other needs that can become vulnerabilities on your team. Cool. - Second question is a video submission. - Let's do it. - Come from Ace at Painless1099. - I know this guy. Ace, just so you guys know, very nice job, Ace was one of the finalists, one of my favorite finalists. Look how swaggy he looks. This guy is awesome you're about to see. He was probably the standout personality for me in the competition.

- Hey Gary. Ace from Painless1099. Really quick question, you and other VCs see a ton of deals come across your plate. My question is what are two or three things that makes one pitch stand out from all the other ones? Thanks Gary. - You got it. It's gonna be a good episode. We haven't done a lot of startup stuff. It's been very entrepreneurial. This will be good. Ace what stands out ironically is the way I just set up you and this question, for me the jockey the she and he that are pitching me are normally 80% of the equation. So many of you have heard that the classic story of basically I knew I was going to marry my wife five minutes in. If I'm willing to make my biggest life decision predicated on my intuition, I'm definitely going to let it do something so secondary like investing. The same way I hire. I'm a funny hirer. Everybody used want to actually watch this Alex, Alex. This is ironic timing. This is Alex Klein. Alex get in here. You're making an appearance on the #AskGaryVee show. - Alright. - This is literally crazy timing. - Okay. - Because I was about to say something that is a story that involves you. Alex Klein, my brother-in-law, Lizzie's brother who happens to do a ton of recruiting from his own firm for Vayner is this true or false because we got to go fast here I don't want you to like I feel like you would take up too much time. - True or false-- - True or false, did you Alex remember had a recruiting firm that would make a commission if we were to place somebody. Got it that's of his business works. True or false you liked it better when I interviewed people because I almost hired everybody versus everybody else at VaynerMedia? - True. And false. - Okay go ahead. Because? - Well, I think it works out better. Long term for everybody, better with this kind of process that's in place now-- - Instead of me just shooting from the hip? - Yeah. - Let's get to actually my point. Is it true that I'd be more likely to hire somebody after a seven minute meeting and just make a decision. - 100% - Okay, cool. That's it. Thanks, brother. - Later. - See you later. - Bye. Big Mets loss opening day, sorry. - Tough David Wright. We'll see. - The funny thing is he happened to be walking by. Love the serendipity of all that. That's the punchline, I hire in four seconds. I make decisions based on my intuition but a startup has to have an idea in a genre that I like. If you're doing E-sports, if you're doing VR B-to-B, if you're doing fully integrated brand direct consumer package goods, if you doing things I believe in and I like your style, very quickly then that something I'm going to be open up to. If you have those same things and I don't like your style, I'm definitely out. And if you have something that's not in my wheelhouse that I believe is going to make money but I'm in love with your style I can be intrigued and sold into you. The ones I get my deals are usually genres I like and I liked the jockey the CEO, I believe that she and he can navigate even changing it along the way because that's what happens in startups that's my intuition. Some people that get my money is I don't know this much about the space or passionate about it but I think you're a superstar. You have to be better than the first group. The things that don't get are the things I don't like or don't like that genre and definitely I don't like the individual. I don't think they're going to see it through. Thanks Ace. Let's keep it, Alex Klein making an appearance. That's a lot of new characters on today's show. - From Niall. - Niall.

- [Voiceover] Niall asks, "Ideas alone can only get you far, but "once you gotten off the ground, what does an investor need to "see to investment in a startup? - Well I think investors all act very differently. There some black-and-white binary investors who are looking for math to add up, right? Here are your sales, here's your cost of acquisition your monthly burn just pure financial decisions and then other investors are betting on the hypergrowth. You've gone from 0 to 50,000 users in two minutes, I predict that you're going to go to 5 million users. You're not making any money but you're going to grow faster and you're going to hit a home run and I'm okay with the burn and the financial issues 'cause you're going to raise more money as you get bigger and bigger so you're betting on hard-core financial principles or you're betting on the anticipation of hypergrowth. I think one thing to keep in mind is once you're off the ground people have something to judge. So I think a lot of people get away with getting investors just on ideas which I think is a vulnerability to the whole ecosystem. But it's funny I've always been fascinated by companies that are making money and have a year's worth of data often times aren't as sexy as the idea because investors get romanced in the upside without any practical data versus well I already know you've done for a year and so I think a lot of youngsters have been crafty in getting investment before they have a product which I think has led to a much higher return of failures which I think people need to become more practical and so I think, just for everybody and for you, once you have some data be prepared to be grilled a little bit more because people have something to judge. I think that's great and healthy and needs to be more the standard. - [Sam] Cool. Next video submission. - 'Kay. - [Sam] It is from Caitlin and Christine from Plum. - Yes I remember these gals. They were awesome. HR love it.

- Hi Gary. For an early stage startup that just received 500,000, 600,000 or $1 million in capital, what are the critical things they should be looking to address? - These guys have a great company. Let's make sure we link up both Ace's and their company and Plum's company in my description. Staphon make sure you team up with Sam on that. Well look I mean first and foremost, you don't blow it. The amount of people that have blown through their five or 600, million in cash because they didn't have a strategy of what they were going to do with money is unbelievable. It's unbelievable how much cash and wallet is just burning for so many startup founders it's quite said. So I think you have to have a real plan for it and again no different than the first question on this episode, you have to have a strategy on where you're going to deploy it. What are your biggest needs? To me I like to invest in things that bring back dollars in the midterm. I don't need the short term but longest term. I think sometimes people are too... It's funny, ideas are shit until execution I like to say a lot because I think most founders get caught on one side or the other. Some founders take $500,000 and they want that 500,000 to make them 800,000. It's all transactional. Sales, conversion. Other founders start thinking about what their company needs in three years. In three years, we're going to need video editing software so let's buy that now and you didn't get to three years. By the time that you spent all the money that was what created this scenario you never getting to those three years from now. I think much like marketing in the year that you live in, day trading attention, some of my marketing principles, I deploy in my operating principles. What is the most important thing with that money right this second that isn't short-term sales turn 500 into 600,000 but what is not the were going to need this in three years so let's spend it? By the way furniture and rent and all these things that's where people waste money. AJ and I started this company in a conference room of another company. This is not a super fancy office. Right? Yeah. It's good. I'm happy about that. This is actually pretty fancy compared to where we were a year ago so like people just waste money on a lot of things that don't matter. Now, it can't be so screwed up here that people don't want to come here. But we don't need $8000 recliner chairs for everybody and that's what a lot of startups do. It's crazy. They spend more time and energy on like how fancy this coffee machine is gonna be than actually building a god damn business. So what you do with it? You better know what to do with it or your startup is in deep shit. Don't ask GaryVee, I hate third person, don't ask me. Figure out what to do with it. Make it practical as hell because that money will disappear fast and the only thing that will disappear faster is your hopes and dreams about your business if you don't know what to do with it. You like that? - [Sam] I loved it. - [Gary] It's real right? - Yeah. - Jersey. - [Sam] Jersey.

- [Voiceover] Efferent Labs asks, "When assessing the "scalability for a company, "what are the things you look for? " - You know Zach, I'm not looking for much I'm usually doing that homework and living that business life beforehand. It's not hard for me, I don't ever struggle with understanding... I don't of you noticed in my face there Staphon I was like thinking about it I see what's happening. I have such a good understanding of end consumer dynamics, the marketplace, the market, the stuff I talk about for the last 10 years of my life. A lot of venture capitalists don't. A lot of business people don't but what I'm really good at is understanding demand. I understand the customer. I rarely ever struggle with being like who's going to buy your thing. I can make those connections in my head pretty easily. And so I'm not spending a lot, anything is scalable. Anything is scalable in theory because you can either humanly scale it or you can scale it with technology. You just have to understand if people want it. Do people want mattresses sent to their home? That's what people messed up with Casper and those kinds of companies. Uber. We thought it was going to be a 1% problem when we first heard it. Those early conversation were like well okay there's enough rich people. Maybe we underestimated the fact that everybody wants to buy time and we didn't understand that. Eight dollar green juice. That maybe didn't seem right to a lot of people because who's going to pay that? People are paying luxury fees now for their body and their health and so this generation the kids and not just the kids I like to make that joke, millennial's and Gen X and everybody, everybody now is more willing to spend money on their health and wellness versus an 80 inch screen television. The 1980s and 90s mentality of an 80 inch screen television and the most extensive car you could get has been replaced with 60 inch television, solidly awesome car but an extra $20,000 to buy eight dollar green juices and a one-year subscription to Soul Cycle. If you didn't understand that was happening, you missed it. Do I think people will pay $50 to go to the movies? The answer is yes. Has there been an execution that I've seen that makes me feel like that's the right bet? I haven't yet. I know Cuban's got some stuff in his world but will people pay $50 to go to the movies absolutely. Has anybody really executed the added values that force people at all income levels to do it? Not yet. But if I saw somebody pitch me, I'd be like yes that could happen. I have a good understanding for consumer to understand where things are going. How do I navigate? Do I think there is a demand currently or could be bubbled up quickly to justify the value and the lifecycle of that business or is it too early? VR consumer. Do I think enough people have VR units at home to watch seven hours worth of content? I don't and so I'm not investing the companies that are selling based on that reality because I don't think that's going to happen next 24 months. So the punchline is do I believe consumers are going to do it in a short enough time so that the business can actually make money in that lifecycle? - [Sam] Cool. - [Sam] Last video submission. - Last. - Comes from Energy Intelligence. - Yes, let's do it.

- Hey Gary. What's going on? There are a lot of reasons why startups are flocking to Silicon Valley and New York but it seems like emerging startup markets are becoming increasingly viable. What are cities like Buffalo doing right? - I think it's becoming viable because people are all buying into the dream. What they're doing right is there's more money available to invest in startups. Startups are simple animals. They want expertise, mentorship and money. Silicon Valley is going to win because a lot of developers in San Francisco and things of that nature and if you going for big, big tech ideas you need that talent. Things are Buffalo and New Jersey and even New York don't fully have the kind of engineering talent that a San Francisco has so if you got an eBay or Facebook or a Microsoft ambition well then you've got to really debate being out there to have the engineering talent. In the beginning these things can start anywhere. Facebook started in Boston. Pinterest started in Pennsylvania. You can start them anywhere and more importantly if you're doing things that are not grossly reliant on engineering talent you can do them anywhere. And the things that Buffalo and Cleveland and Detroit and Columbus, Ohio and Chattanooga, Tennessee are doing is that the rich people in those areas are starting to write checks to startups and so then it becomes agnostic. And more importantly there's such a rejuvenation of city life across the whole country so all these really it's amazing to see the cities of America go from places that were seedy, ironically, to having high ceiling lofts that are a great price and great coffee shops and cool wine bars. We're living through a very interesting time in the city rejuvenation of the United States and with that comes the natural artist and tech talent and so I think what they're doing right is the riding the wave to be very frank with you and I also think that there are wealthy 50, 60, 70 and 80-year-olds in those towns that love their town. Right? That want to see it succeed. I've even had feelings towards Jersey on this issue and I'm still fairly young. When I 70, 80 I'll definitely want to make Edison, New Jersey an ecosystem of something. I think those practical behaviors is why. It's just the evolution of the marketplace. Cool. - [Sam] That's it. - Thanks for doing your part. - [Sam] Yeah. - Enjoyed it? - I loved it. - Good. No worries. Question of the day: Tell me your startup story? This is an opportunity for me to look at the comment section of both Facebook and YouTube, do so much good for you some of you who follow me on Instagram see when I say tell this community about yourself and that's your favorite post because you get to talk about yourself. In the comment section today tell me your startup story. A. K. A. Tell the world about your startup or B tell me a story about your sister's start up or how you were part of a startup in the 90s that failed and this is what happened. Or your favorite startup. Tell me your startup story. And for all of you that are serious make sure you click the links below and sign up for the 43North competition. I don't think I get to be judge. I don't think they do back to back judges. Hopefully it works out the Jets-Bills schedule or I might just fly for the day. If any of you make it to the finals I'll shoot up there and say hey. Cool. You keep asking questions, I'll keep answering them. (upbeat synth music)