John Corcoran: 09:16
Right.
David Rose: 09:16
Right. Work really hard. Go hard. But have people around you who you trust, who will tell you the truth, or when it’s time to maybe make a pivot or make a directional change altogether.
John Corcoran: 09:27
Now, a lot of your career has been spent in North Carolina. And you said that it’s a lot harder for someone who’s not located in, you know, say, Silicon Valley or the Bay area or something like that to raise money. So talk a little bit about what those challenges have been like for you being, you know, from an outlying area and how you’ve overcome them.
David Rose: 09:47
Yeah. There’s a lot of this same investor I’m talking about who gave me the great advice I pitched him pretty early on when I was CEO of a company. And he said to me, he said, David, I really like you. I like the story. I think this is going to be really big, but we’re not going to invest in you.
And I said, why not, Mark? And he said, well, because we don’t have another single portfolio company in North Carolina, and we’re very active investors. We go to monthly board meetings, and I’m not going to get on a plane once a month to fly across the country for a board meeting for your company, so we’re not going to invest for that reason. Only, you know, so there’s real challenges where if you’re outside the Bay area, outside New York to raise, that’s one of them, you know, access to investors like you’re not going to run into people at you’re.
John Corcoran: 10:30
Going to bump into them at Starbucks. Yeah, yeah.
David Rose: 10:32
You’re not going to run into those investors serendipitously. So yeah, it can be a real challenge outside of the region. And, you know, we work with companies like my company right now to help companies expand into the US from overseas, mostly venture backed tech companies, and they almost all want to raise capital here. So we kind of have them face that same problem. If you’re coming from Germany or the UK and you want to raise money in Silicon Valley or New York, you’re going to face some of those same challenges. So we’ve kind of developed some methodologies to kind of help, some learnings to kind of help them hopefully be more productive in their fundraising than I was early on from North Carolina in mine. Yeah.
John Corcoran: 11:11
And one of the things you’ve done is just reaching out to other founders that have certain investors and asking for an introduction that sounds a little bit, a little bit crazy, like, like maybe maybe it, you know, like, why would someone who’s never met you before, why would they say yes to that and offer to introduce you to their their investor? Talk a little bit about how you manage that to work.
David Rose: 11:36
Well, one of the things I learned early on that’s kind of unspoken in the venture capital community is and look, let me give those guys a break for a second. I can’t imagine what the inbound email volume is for a managing partner at a tier one VC firm.
John Corcoran: 11:52
Oh, crazy. It’s. It must get 50 emails a day. Yeah.
David Rose: 11:56
Oh, 50. 50,000. I mean, it’s.
John Corcoran: 11:57
Pretty.
David Rose: 11:58
Ridiculous, right? So I’m empathetic to their journey. But as a founder, I’m trying what I’ve learned. One of the real important steps I’ve learned is you really need to get a personal introduction that really goes a long way as far as getting attention from the right partner at the firm. So there’s a whole process.
You know, finding the right firm, finding the right partner. But really, one of the secrets is getting a personal introduction to the right partner. And you can have a process where you, you know, ideally you would look on LinkedIn and say, oh, you know, I want to talk to this partner. Oh, look, John’s John’s a tier one connection with him. Let me ask for an introduction.
But if you’re in North Carolina, you know, or the UK, you might not have that same network built out. So you have to start thinking about other ways in. And I tried traditional methods, whether it be through hey, who my Silicon Valley bank helps with introductions or the law firm I’m using my help with introductions, but you kind of run out of those kinds of. That tier two I would go to is start looking at the portfolio companies of a particular partner that I want to invest in and reaching out to them directly. And I was really pleasantly surprised, like one of the things I always look back on from my time as a CEO in the venture backed world is how many CEOs of venture backed tech companies that I reached out to cold and asked for introductions to their investors?
How many of them helped me and just never meeting me, never knowing me, me reaching out to them, asking for help, an introduction to their investor and them actually doing that. That was hugely helpful and hugely valuable. To get that personal introduction from a CEO of a portfolio company. And what I found is that those CEOs are generally pretty empathetic, you know, to other CEOs’ fundraising plight. They know what a terrible, hard process that is. And they’re more willing to help than you might imagine.
John Corcoran: 13:42
Yeah. Now tell us about some of some of these experiences with these pitch days. So Silicon Valley Open Doors was a big one that you won and then later Google Ventures.
David Rose: 13:51
Yeah. So we were, you know, I did a lot of stuff in the Valley for a North Carolina company. So, you know, we like you mentioned we were a Google Demo Day finalist and we got to demo at TechCrunch disrupt, and we were the overall winner at Silicon Valley Open Doors, which completely blew me away. So for Google Demo Day, we are part of the Google Tech Hub at the American Underground here in Durham, North Carolina. And there’s kind of a bake off, and it kind of comes down to, I think like eight companies or whatever, make the finals.
And once you make it to Google Demo Day finals. Google really brings out, you know, brings out all the resources to help you. They bring in pitch coaches and designers to help with the deck. Your pitch is vetted by a managing partner at Google Ventures. They really get you ready to pitch in your deck and the story and that whole thing.
So you’re really prepared. And because we were a Google Demo Day finalist, they had a last minute cancellation at Silicon Valley open doors. So somebody I knew knew somebody there, and they invited me to come pitch the Silicon Valley open doors because we’d made the Google finals, and I got there and I immediately felt like I was way over my head. I mean, it’s really impressive. So you’re at the Computer Science Museum and all the judges are all from, you know, light, speed and excel and all those sorts of things.
And the company pitches. I’m watching the other companies pitch. I’m like, oh my gosh, I’m way over my head. These companies are awesome. And we ended up winning. Like, you could have knocked me over at the end. I’m six four. I’m really tall. And at the end they have all the 34 CEOs get on the stage and I’m standing in the back because I’m really tall and I’m figuring I’m just here for the ride. And at the end they said in the overall personas. And I was like, what?
John Corcoran: 15:27
Wow.
David Rose: 15:28
So it was a great experience for sure.
John Corcoran: 15:29
And so there’s a lot of work that goes into these things. Well, first of all, what stage is a startup when they participate in these? Are they kind of like seed rounds? Do you have a working demo? Or do you just have a wireframe already?
David Rose: 15:44
You know, we were you know, I mean, one of the things like if especially if you’re not in the Bay Area or New York, you have to kind of have to show more market traction to get attention from investors. So at this stage, we’d already raised $1 million in angel funding and we already had, I can’t remember how much revenue, probably approaching $1 million in overall revenue. So we had some good market traction, some, you know, kind of product market fit signals. So you know, kind of pre we are post seed kind of raising a round at this at that stage.
John Corcoran: 16:10
Okay. And then did you find that participating in these competitions really put you on the map. Did it change everything? Or you know what was the reaction like afterwards.
David Rose: 16:22
You know, one thing I have learned, I’ve had a bunch of big events happen to me as a startup founder. And one thing I’ve learned is like, none of them are make or break, like there’s nothing like no one event. I used to think that, oh my gosh, I made it to Google this one.
John Corcoran: 16:39
If I get on Shark Tank then everything will change.
David Rose: 16:41
It’s all downhill from here. And it’s not. It’s an accumulation of all those sorts of lucky breaks and good fortune and hard work. So there wasn’t, like, one where it kind of turned it all around. But cumulatively, you start building up a reputation.
And I’ll never forget what I was feeling after we made a Google Demo Day and we’d already gone through kind of the pitch refinement and the deck refinement, and I was feeling pretty good about it, that the pitch had already been vetted by Google Ventures and gotten the thumbs up. I came back and this is a prep for that. I came back in one eye, so I was the overall winner at Silicon Valley Open Doors. Well, the actual pitch event at Google wasn’t for like ten more days, so I just stayed in the Valley. I’m like, oh, well, I’m just going to stay and fundraise. You know, I’m going to go make a bunch of pitches because I can open some doors now that I have some credibility and I’ve won.
John Corcoran: 17:30
And refine your pitch, too. Yeah, right. Yeah.
David Rose: 17:33
Feeling good about my pitch. And it was pretty humbling because I remember, like, I spent days on Sand Hill Road and like basically every person I talked to told me my deck was shit. My pitch was shit, my product was shit, and I didn’t know what I was doing. I’m like, well, wait a minute, I just won Silicon Valley open doors. I’m Google blessed with all this.
And you know, what I learned is it’s kind of what I tell entrepreneurs now is it’s a bit of a sport. Like when someone comes in to pitch, it’s a bit of a sport to tell them how bad their deck is and how bad their pitch is. And what I would I remember to specifically like I would have one VC tell me you’re saying this story all wrong. You need to do x, y and Z. So I go home that night and change the whole deck and tell XYZ story, and then go back and pitch it the next day.
I’m like, oh no, that’s all wrong. You need to be telling the story that I’ve changed it three times before, so you kind of have to incrementally get better and learn and take incremental improvements. But yeah, I think a lot of people mis underestimate the amount of effort it takes to raise a round of funding. I mean, what I tell people now is to get your first term sheet, whether you’re based in the Valley or based in North Carolina or based in the UK, you should really expect 100 no’s before you get your first term sheet. That’s kind of standard or more.
John Corcoran: 18:43
Yeah. Yeah. Do you find that things have changed now with access to zoom and things like that, or does it still have to be face to face?
David Rose: 18:52
You know, I haven’t really, you know, I think kind of I haven’t really pitched as a CEO, you know, since the dawn of zoom. I would imagine my expectation would be that you can cover a lot more ground as an investor or an entrepreneur in 20 minutes. Hey, let’s see if this is a potential fit for the investment thesis with our fund pretty quickly. So I think you can probably cover a lot more ground. But I mean, one of the things I kind of come back to time and time again is, you know, there’s such a personal relationship between the investor and the founder that is so critical. You really need to be in person to develop those, right?
So you can give a pitch in person. But it’s those in-person interactions, those, you know, kind of off camera interactions that are so, so critical to building that trust and rapport and credibility on a one on one basis between the investor and the founder that I think are just, you know, super important. Yeah.
John Corcoran: 19:46
Do you have any memories of a pitch gone disastrous, or have you blocked all of those mentally out of your head?
David Rose: 19:56
Oh, I’m sure there are. I’m sure there are, frankly, hundreds of them that went really badly. I can do a lot of those. I don’t remember a specific pitch that went horribly. I remember a pretty specific venture, a company I was in that kind of stands out like, you know, there’s a bunch of bad experiences or challenging experiences, of course, in the entrepreneurial startup journey.
But I do remember one thing: I’ll try to remember the details the best I can. But it was basically where I was the VP of sales, so I was on the exec team, but I wasn’t the CEO. But we raised a $5 million round of funding, so we’d already raised some seed. We raised $5 million, a round of round of funding, but it was tranched. So they basically said, okay, we’ll give you 2.5 million now and then based on milestones, we’ll give you another 2.5 million.
And so we had all the milestones. No problem. Went back to the investor and said, hey, you know, we’ve had all the milestones. We’re ready for the other 2.5 million. And this was during a kind of the.com meltdown. Right. And so this.
John Corcoran: 20:57
Is 2000, 2000 then.
David Rose: 21:00
2001 kind of kind of timeframe. And we didn’t really understand. I understand it now, the fund but this particular fund was structured as a capital cost. So it wasn’t a captive fund where they had a big pot of money, they made investments. They basically rang up the phone to their investors and said, send your money.
John Corcoran: 21:14
Got it, got it. They were probably having trouble getting their investors to send their money in.
David Rose: 21:18
The problem was they weren’t hitting their milestones for the capital call requirements, so their investors were no longer obligated to invest. They had money, but they didn’t tell us that because it’s running us through hoops. And long story short, they basically say, okay, well, we want you to do X, Y, and Z. So here’s $100,000 for this month. But we’re going to charge you for it.
The terms are bad at the end of the day. Like we did that dozens of times. The company ended up at the end of the day having a really nice exit, but they bridged it to death. Like the founder walked away with less than 1% equity at exit. We were bridged on a weekly basis, so kind of my big learning from that is never, ever, ever do a tranche deal.
If someone commits money. Have them write the full check. Either they believe in you and your product and your team, or they do not. Don’t. Don’t get halfway married on this thing. Like if you’re if you’re going to come in, let’s let’s do it all. Don’t don’t ever do a tranche deal was my big takeaway from that.
John Corcoran: 22:11
Right, right. And what have the last few years been like with investing? You know, with the startup world because, you know, during Covid, it was a weird environment. There was a lot of money that was being poured in from venture capital, from investors. And then it kind of dried up in 2024.
David Rose: 22:32
Yeah. Great question. So, you know, the last couple of years we’ve spent a lot of time in Europe. So like our kind of specialty, our ICP is helping European venture-backed tech companies launch and scale in the US. So I kind of have more of a slant on that view from a European market perspective, more than a domestic market perspective at this point.
But I think what’s kind of common in Europe we see is, you know, there’s seed kind of money available for companies who have good product market fit signals and traction and revenue and those sort of things. But there’s limited later-round money in Europe, in the UK and Europe. And so it’s a pretty common phenomenon that a company will raise a seed round, maybe an A round. But after that, they pretty much have to come. You have to come to the US. And of course there’s, you know, I’m old enough now where I’ve seen the hype cycles come through multiple times in whatever the.
John Corcoran: 23:26
Crypto I, you name it. Yeah, even.
David Rose: 23:29
Even mobile social, I mean, all those sorts of things. And so, you know, you have to kind of expect to have those rides. But look, I mean raising venture capital, I think it’s oversold as something that’s easy to do. Very few companies successfully raise an A round and even fewer because the success metrics to raise a B round are ridiculously high. And so the attrition rate from people who are lucky enough, very few companies raise seed, but the attrition rate is you kind of go on that venture journey becoming increasingly more difficult.
I think people think it’s easier from seed to A or A to B, and it’s the opposite of that. The pressure to actually show performance and product and competition and why you’re going to beat Google in this particular marketplace. That gets really hard the further you go.
John Corcoran: 24:19
And we talked earlier about the difficulties of being outside of the Bay area and raising money for your startup. If you’re from the East Coast or North Carolina, now, your CEO of U.S. Expansion partners. And so you’re helping these companies from Europe come over to the United States. Is it equally harder or exponentially harder for European companies to pitch in the Bay area and to network and build connections?
David Rose: 24:46
Well, it depends. And so we’ve kind of put together a methodology kind of based on all my learnings of doing this, you know, from North Carolina. And there’s kind of a three step process we want people to understand because I regularly because I’m trying to get some visibility in Europe, I regularly get calls from CEOs and entrepreneurs in Europe saying the first thing they ask is, hey, David, can you help introduce me to investors in the US? And what they don’t realize is if you’re in Copenhagen or if you’re in Munich, there’s a handful of venture funds in that region. What people don’t realize coming to the US for the first time is that there are over 5000 venture funds in the US, right?
Yeah. So if you call me and say, hey, David, can you help me with investor introductions? I need a little bit more to go on. Right. Yeah, that’s a tough ask. And so I think whether people are raising capital in the US or internationally into the US, there’s kind of three things you need to think about. The first is identifying the right venture funds. Most venture funds are general partners. When they go out to raise money from limited partners, they go out with a very specific investment thesis, meaning we have unique insights into a particular market and a particular geography. So let’s just call it that for the sake of argument.
We have unique insights into seed round deals and e-commerce for female athletes. Apparels are super simple and super specific. And so that’s called their investment thesis. So when they go out to raise money from limited partners they have an investment thesis. So really the secret is, as an entrepreneur trying to raise capital, find venture funds who have an investment thesis that aligns with your company.
So, for example, if I’m an e-commerce startup and you are a cleantech growth investor. No matter how passionate I am or how excited or how much market traction I have, you’re never, ever, ever going to write me a check. So kind of the first step in the process is understanding how an investment thesis works for an investor, for a VC fund with their investment thesis and then find a VC fund who has a specific investment thesis that aligns really well with your company. In one of those thesis elements is geography. There are some.
What I learned is there are some venture funds who only invest in California or only in New York City. So if you’re coming from North Carolina, if you’re coming from Atlanta, or if you’re coming from Berlin, they’re not going to invest in you.
John Corcoran: 27:07
So kind of like the investor from LA for you, that probably isn’t necessarily advertised on their website or not broadly. Totally.
David Rose: 27:14
Yeah, totally. So what you can do though is like you can go to databases like Crunchbase or PitchBook or Ship Shape and you can actually run a sort. And so you can actually look and see when’s the last time. When’s the last time they invested in my geography? What I tell entrepreneurs in the UK and Germany, for example, is if they’ve never written a check in Europe before, you’re not going to be the first.
Yeah, yeah. You move on to 5000. Move on to find another one. But one thing I did learn is I said I used to set up alerts in Crunchbase. So anytime a venture deal got closed in North Carolina, I got an alert.
Smart. If I would look at that fund and that fund was aligned, even potentially with my company, I’m on the phone to that CEO saying, hey, I see, you know, this fund just invests in you. We’re a fit for their investment thesis. When’s the next time you’re that partner coming in for a board meeting? Because I’d like to meet them.
John Corcoran: 28:09
Oh, and that worked.
David Rose: 28:11
Oh, yeah. A lot. Yeah, right. I’ve already overcome that hurdle. I already know that that particular fund has invested in North Carolina. And I know that that partner’s coming on a plane.
John Corcoran: 28:19
So what do you think it is? You think, you know, just like an openness to geography or something like that? Or that. Or maybe they had an aunt or an uncle who was from North Carolina. Like, what is it?
David Rose: 28:29
There’s, there’s some of those things or, you know, they eventually find a deal. They just can’t pass up. It’s so great. Or, you know, they have a very specific sector thesis. And it just turns out that that, that, that, that best deal and that that particular sector happens to be in North Carolina or happens to be in London or happens to be in Germany.
John Corcoran: 28:45
But then it opens their eyes to, oh, you know, companies that are from this region of the world, whether it’s North Carolina or Germany or Denmark or whatever, you know, there’s some great companies that come from this part of the world.
David Rose: 28:55
World because they’re, they’re they’re they’re, you know, most, most venture capital partners are type A, right? They’re not going to come and spend leisurely time on the trip. They’re going to want to work, and they’re going to want to network with other investors and see what other investment possibilities are there. So once you get that first one in, it’ll really open the doors. In fact, there are over 60 US funds who have a satellite office in London looking for deal flow.
John Corcoran: 29:21
Wow. Well, and you know, it’s funny, I’m going to speak in Seattle at an entrepreneurs group next week, and I was trying to figure out a time to meet for coffee with a client of ours. And so I was using AI to find a coffee shop that was close to the speaking opportunity and the hotel I’m staying at. So have I sped up this process for you? You know, these different hacks and things like that and finding the right, you know, companies and portfolio companies.
David Rose: 29:49
Yeah. I mean, I think it really can. So there’s a couple of tools that I use personally and that I also advise, you know, kind of clients to use kind of a combination of things. So our ICP is a company from Europe who’s just closed $5 million or more in venture funding. And that’s kind of our.
So I kind of use a combination of things. So I have a report set up in Crunchbase every week I get a list of any company in Europe that closes more than a $5 million round. And then I can use a AI tool called seamless AI to look up the LinkedIn addresses of the exec team and the LinkedIn addresses of their investors. And then I use a tool called Zipify to do a LinkedIn campaign. So it will come in as a connection request, not an Inmail will come in as a personalized.
So it’s all automated. It comes as a personalized LinkedIn connection request saying, hey, congratulations on your round of funding. We help companies launch in the US. We’d love to connect with you here. And then there’s all these automations where it’ll automatically like their post or start following them or this and that.
And then if they reply, they’ll have some follow up communications. And so it’s a combination of like Crunchbase, seamless AI and Zipify is kind of an automation we have in place our firm uses, and we also have some clients that are doing the same. And then.
John Corcoran: 31:08
Yeah, I imagine you advise them to do something similar with their reach out. Yeah, yeah. David, this has been fascinating. I’m almost out of time. So I want to wrap up with my last question, which is my gratitude question.
I’m a big fan of giving my guests the opportunity to thank and acknowledge and give a shout out to. Especially to peers or contemporaries that have helped you in your journey. Or maybe mentors, who would you want to acknowledge?
David Rose: 31:32
Well, you know, we talked about this earlier and the first thing that popped into my head, we talked about when we first got on the line today, is I have a lot of gratitude to all the CEOs who helped me. You know, just they’re just they’re just going to help you call and ask them for an introduction. They do. And you’re always like, wow, that’s amazing. And I, I try to carry that forward the best I can.
If someone asks me for an introduction, if I can ever be helpful, I go out of my way to try and be helpful. So that’s that. And I think, you know, the entrepreneurial road is pretty tough. And there’s there’s a lot of low points along the way. And you know, I think kind of both my parents have been, you know, super supportive.
My whole family, my wife, my parents, my kids. You know, if I could give myself any advice looking back, I would say you’re never once going to miss a payroll for your team. I’ve missed a few myself, but never missed a payroll for my team. And you’re never once going to miss a mortgage payment. I think had I known that ahead of time, I would have taken a lot of stress off.
But to have those people in your life who kind of support you on that journey is really invaluable. And there’s just really no way to give enough gratitude for that support that it takes on that journey. Because it’s a rough ride.
John Corcoran: 32:43
Yeah, yeah. David, where can people go to learn more about you and learn more about US Expansion Partners?
David Rose: 32:50
So our website’s at usexpansionpartners.com. It’s a very descriptive URL and company name. And I’m online at LinkedIn and Twitter and those sorts of things at David Rose.
John Corcoran: 33:02
All right David thanks so much.
David Rose: 33:03
Yeah, I really enjoyed it. Thanks so much for having me.
Outro: 33:08
Thanks for listening to the Smart Business Revolution Podcast. We’ll see you again next time and be sure to click subscribe to get future episodes.