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VC10X - VENTURE CAPITAL PODCAST

Venture Capitalists (VCs) & Angel Investors share their investing thesis, screening process, value-add, exits, and more. Hosted by Prashant Choubey (@ChoubeySahab)

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Democratizing Access to Capital w/ Jason Kirby, MD, Thunder

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Jason Kirby is the Founding Partner & Managing Director at Thunder. A platform that connects capital raisers to the right capital allocators using AI and human relationships. Thunder serves startups raising $1-$20M for their Seed/A/B+ rounds or GP raising $10M+ for their funds.

We talk about:

  1. Jason's story & why he started Thunder?
  2. How Thunder helps founders & VCs raise capital?
  3. How does Thunder market to founders, VCs, LPs to join the platform?
  4. How does Thunder make money?
  5. How Thunder stands out from Investment Banks & other matching platforms?
  6. How to optimize your company for an exit?

Jason's story & why he started Thunder?

A bit about my background, Serial entrepreneur while in college, started my first business, turned out to be pretty successful. So gave me the opportunity to travel the world, get exposure to lots of other entrepreneurs in the ecosystem, but realized running a small business wasn't for me.

Got into the startup world, raised some capital, ended up getting involved in a couple of different VC backed businesses, raised about 40 million in the last several years for a couple of different companies, had a couple of exits, and most notable was selling a tech company to Walmart, a company called LiquidSky. Amazing experience, learned a ton.

Got into some of my own angel investing and LP investing, backing fund managers and other companies, and just quickly realized, having gone from the founders sort of executive side of raising capital to them being on the capital allocation side, there's definitely some gaps that I feel the market really lets down. A lot of wonderful and great entrepreneurs as well as a lot of investors not getting either the data, the information, or the access to allocation that they're looking for. So I decided to kind of partner up with my buddies over at Interplay Ventures, which would be Mark, Peter, Davis and Kevin. I've known them for a little while. About five years or so when I first got into the New York startup ecosystem and we both kind of have the same sentiment and decided to join forces and launch what we call Thunder. Which is a tech enabled investment bank which is set out to solve this very problem of streamlining the fundraising ecosystem by having a proprietary network of double opt in.

So VCs, LPs and founders all opt into the network and then we use AI to identify who has a higher probability of investing in who. And so at the corporate premise of what we offer today, that's essentially it. But that's kind of the story from my background to Thunder in a nutshell.

How Thunder helps founders & VCs raise capital?

We have two experiences. So you either a capital raiser or you're a capital allocator. So that could be a founder raising capital from VCs or VC raising capital from LPs. So when you're a capital raiser, you publish your information and our AI makes a recommendation to the relevant investors capital allocators onto the platform. To consider reviewing your information and reaching out to you directly so that's free to be on the platform and to have access to that, all you have to do is publish information, keep it updated, and as you make updates, the scores in our AI will update and change and recommendations will change to the investors.

We do not allow founders, or in this case capital raisers, to reach out to capital allocators. So we protect the privacy of our capital allocators. And in most cases, a lot of founders, they have access to a list of VCs, they'll just spam it and just like constantly harass them. And that doesn't really help the ecosystem at all. In fact, it hurts their efforts. So by giving the power into the hands of the capital allocators, it creates a more fluid ecosystem.

There's a lot less activity because of that, because there's a lot more selection in the process, but it creates a more genuine connection, it leads to more successful outcomes. If you're a capital allocator, you get to see the deal flow rated and sorted and filtered based on your investment criteria. Every investor sees a completely different recommended list of companies. There is no equal match or equivalent match on the platform. Everybody has their own unique scores. 

How does Thunder market to founders, VCs, LPs to join the platform?

We acquire users on a couple of different channels. So number one is word of mouth. We're still early, we're still relatively young, and most of all of our relationships is what drives in our users. So VCs recommending founders to the platform, whether it be their pork is actually going out to raise the next round, or the founder met VC. And the VC wasn't a good fit based on their thesis, but fell as a good company and they referred to Thunder. And the reason why people join is basically it's a very simple experience to basically get additional exposure for VCs to reach out to you. So instead of you chasing down the investors, the VCs reach out to you. Like I said, that's our free experience. That value proposition is really high. It takes 5 minutes to kind of update and populate your information. And then from there, if you're attractive to VCs, they reach out to you, creates a much more constructive dialogue, saves a lot of time streamlines the process. 

How does Thunder make money?

We monetize through our White Glove service. So when we look at all the companies we got about 1200 companies, close to 400 VCs now and about 200 LPs in the network. And what we've learned is our AI basically scores every single company in the network and we are able to kind of identify who are the best opportunities of the best companies and most likely raise capital through our network. We reach out to them and we basically help them get warm introduction so they're not able to reach out to those VCs directly, but we have that relationship with the VC and we can make the recommendation personally. So we put that in front of the VCs and it'll be anywhere between ten to 40 introductions that we'll make depending on the scores that our AI recommends in our engine. And so that's our core value add for the select few companies that go through our ecosystem that we handpick and with the systems our AI to make those recommendations to our VC network.

And how we monetize is we're a registered broker dealer affiliate. We are able to charge a success fee. So we charge no fees upfront, no SaaS fees, no fees to be part of the network. Basically, if we choose you, it's the golden ticket to basically get these warm intros and assist in your fundraise. We don't make anything complicated, we just try to give you the best advice to best present your pitch and your materials to our VC network. We make those intros and if we are able to facilitate a deal to close, we take anywhere between one and a half to 5% of the funds raised. Usually if you raise about $2 million, it comes out to about less than 3% of the raise.

How Thunder stands out from Investment Banks & other matching platforms?

We're not asking for 10 grand upfront or a retainer fee, which is what's traditional in investment banking in the space now and why it's got such a bad rep. Specifically in venture is often in the early stages from seed to series B. Bankers come in charging 5-10 grand a month, usually with six month advance up fronts, plus 7% commission, plus anywhere between two to 5% of warrants. Very expensive and usually not a banker in that situation isn't really connecting you to VCs, they're usually connecting you to family offices or connecting you to hire individuals which can get you money, but you're not necessarily getting the benefits that you would typically get by having a VC on your tap table.

So that's one of the main reasons we differentiate from traditional banking and how we differentiate from typical matching platforms that are out there is matching platforms are just that they turn into giant spam bots and not bots, but you're just basically founders spamming investors or they're just a list of investors without really any opt in. So it's no better than cold email in most cases. And there's no human involved, there's no one vetting those deals, betting that those are truly venture back up opportunities.

So VCs often tune out a lot of those emails, whereas when we email a VC, it's a human. Myself or someone on our team emailing that VC who we have a relationship with, who's familiar with Thunder, who's opted in for our deal flow, and we get a response of whether they're interested in that opportunity or not. And we only set up meetings with founders that are our clients once we've gained interest from that VC already. So it's a much warmer qualified intro then they would get otherwise.

How to optimize your company for an exit?

One thing, you got to build a great company. You got to build a company that people desire and want. It really comes down to a couple things that matter the most and that's beyond having a great company because that's a non-negotiable going to have to have a company worth buying. But how you make it worth buying is having an incredible team and to not be it's one thing to be a great leader and a great entrepreneur and that's an amazing opportunity and that's where you really take things to the next level and really grow enterprise value and being overall an incredible leader that has the top leadership mindset in terms of being able to hire and retain top talent. Which is one of the most important things that a lot of VCs look for. One thing a lot of people don't talk about is a little side note on selling your company.

You might have building something that's really compelling but maybe it doesn't end up being the true venture $1 billion type opportunity and maybe you didn't hit the revenue numbers that you really need to hit. But if you've been able to acquire an incredible team. Especially in the engineering team. You can almost get almost a million to $2 million ahead in an acquisition and what's known typically as an Aqua hire. Which is kind of a safe bet for VCs as they're able to get their money back or maybe get a small multiple on the opportunity if the company kind of sizzles out doesn't necessarily have the most success. That's something that a lot of VCs look for is can you attract and retain and grow top talent because that makes the role enterprise value substantially higher. If you're often leaning on a less talented team or a younger, more novice team you might be scrappier, might be cheaper, but you really got to hit that growth rate and then you kind of have that key man issue where, you know, if you were to step out as a founder after an acquisition with the company still retain its value.

So that's something I always kind of keep in mind when it comes to building a great business. Again, going back to selling, there's kind of like these VC hype opportunities where you built a great product, you're raising insane amounts of money, and a competitor or a complimentary large business wants to take you out of the market to either reduce the risk for competition or to complement service. So there's a lot of businesses that are built to sell that look at targeting potential acquirers in the early days and looking for that nine figure exit. A lot of VCs don't really like to hear that story as much as they'll take it if it's the opportunity, especially coming in preceded seed stage because they'll still be able to get a great return if they're selling for a 9 figure exit. But when you think about selling the company, if you're not necessarily selling it from that perspective, what really comes down to is build a great, sustainable, high quality business that does get to profitability.

And like there's a lot of  content for the VC world and there's content for building a great business and sometimes they don't align. And I've been in the small business world where it's all been about profitability and hitting like 15, 20% profit margins. And then you kind of get into VC worlds like how fast can you burn cash and get more cash and kind of hit those top line vanity metrics more than building a great business. So you as a founder have to decide what's the best path for you. And is raising venture capital appropriate if you're going to try to build a sustainable, profitable business, because a lot of VCs, as much as that's a good thing to have it tames you back from growing a great business. 


Thunder website- https://thunder.vc/

Follow Jason on Linkedin- https://www.linkedin.com/in/jasonrkirby/

Follow Jason on Twitter- https://twitter.com/JasonKirby

Hosted by Prashant Choubey- https://twitter.com/ChoubeySahab

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