Todd and Friel on Fundraising

Todd Nief's Show

Fundraising for your business is often a stressful, opaque and time-consuming process. I’ve gone through it on a minor scale in order to take on a lease and build out a building for South Loop Strength & Conditioning - but my good friend John Friel is currently in the process of attempting to raise venture capital for his start-up Art in Res. Venture capital is a whole different animal, so we discussed the process of applying to Y Combinator, understanding the various incentives of different investors, the obstacles to the hypergrowth that the venture capital model demands and - my favorite part - the distinction and overlap between fans, nerds and utilitarians when it comes to art, musical equipment, sports, and coffee.

Check out more from John and Art In Res here:

• Instagram: @johnfriel | @art_in_res
• Website: www.artinres.com

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Show Notes:

• [01:21] Going through the Y Combinator application process required “stepping back” and looking at the entire structure of Art in Res – rather than getting caught up in the day-to-day, in-the-weeds aspects of operating the business. It also required understanding how to “storytell” to investors – which seems to require different skillsets for finance people and venture capitalists.
• [12:30] Why play the venture capital game rather than bootstrapping and attempting to create a “lifestyle business?” What will it take for Art in Res to grow to a scale that would justify venture capital investment?
• [24:15] How much money should you actually raise during the fundraising process? There seems to be conflicting advice regarding being frugal – but also raising more money than you think you’ll need. And – the cognitive biases that make it necessary to game the system so that you can signal a constant and impressive upward trajectory.
• [37:31] Thinking about the incentives of venture capitalists and why they want to invest in companies – and going down a rabbit hole to parse out the difference between nerds, fans and utilitarians. And how art collectors, coffee snobs, music gear heads and sports fans all probably follow a similar archetypal structure in terms of their enthusiasm for esoteric knowledge.
• [53:45] How to potentially tap a latent market for art collectors – and understanding the psychology of potential consumers in order to create a marketplace on which commerce actually takes place.

Links and Resources Mentioned

• Y Combinator
• xhbtr
• “WeWork I.P.O. Is Withdrawn as Investors Grow Wary” from The New York Times
• Pets.com
• Gumroad
• “Reflecting on My Failure to Build a Billion-Dollar Company” by Sahil Lavingia
• Blue Bottle Coffee
• Containers Podcast