Now the CEO and Co-Founder of Flo Technologies, Gabriel began his career as an attorney working in the plumbing industry. During that time he dealt with product liability claims for allegedly failed plumbing products – a crucial career step that led him to Flo.
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- Flo Technologies – Visit Flo Technologies website to learn more!
3 Key Points:
- Your slice of the pie may not be as big when you go partner with venture capital, but you’ve got a whole group of very talented, passionate people that are now on your side that can help you open doors and help grow the right team.
- People who invest in your company are not investing so you can pay yourself a 7-figure salary. People invest in your company to make sure it grows the right way, invests its money the right way, pays its people the right dollar amount… and a glorious salary won’t be one of those things.
- All cash is not equal. You have to find the right investors who share in your vision. You want to celebrate with them when things are great; and when you fall on tough times, you all have to stay aligned and be able to have those tough conversations when they come up.
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Audio Masterclass Show Notes
**Click the time stamp to jump directly to that point in the episode.
- Today’s Audio MASTERCLASS: How to Launch a Family Startup and Land Investment
- [01:43] – Gabriel shares something about himself that most people don’t know…
- [04:42] – Gabriel talks about how he and his father got into the business together.
- It’s 5 times more likely that you’ll have water damage than fire or theft to your home.
- His dad was the mad scientist of plumbing -he’s been in plumbing for over 30 years.
- His dad invented different plumbing solutions; his last invention sold over 80 million units.
- Gabriel and his dad started working together when they had catastrophic water damage in their own home.
- His dad analyzed what the root causes for the water damage was, then set out to invent a device to help avoid water damage in other homes
- When people don’t have any ideas for a business, all they need to do is look around. There are obstacles, challenges, and struggles everywhere, and you might just want to create a solution.
- His father was able to invent a device that could find leaks anywhere in the home, shut off the water, and even pro-actively find problems before they turn into leaks.
- [11:39] – How did Gabriel know they were ready to raise capital to run their business?
- The pain point is way too big; we needed a lot of capital to get the land grab.
- Being very curious and having a network gave me opportunities to spark conversations that led to great advisors.
- You have to get good advisors. You’ve got to get people who know more than you do and who are willing to make introductions for you.
- You’ve got to build a great team.
- [17:03] – The best recommendation for finding great advisors…
- Start with your own network.
- [18:17] – What’s a good percentage of equity to keep in your own family business?
- It depends on the business. It depends on how much capital you need, and how much momentum you get.
- [19:48] – The benefits of getting an injection of capital
- It makes you much more disciplined.
- Gabriel and his father invested a tremendous amount of their time, which is their greatest resource
- People who invest in your company are not investing so you can pay yourself a 7-figure salary. People invest in your company to make sure that company grows the right way, it invests its money the right way, pays its people the right dollar amount… and a glorious salary won’t be one of those things.
- [24:52] – What investment size means.
- You always want to raise more than you think you need.
- Venture capital not only helps build confidence on the business development side, but it also builds a lot of confidence in your team.
- Perception can be reality.
- [27:25] – Gabriel’s experience when it comes to deciding the right investment size.
- Fund raising is hard.
- You need to have a lot of different conversations, especially if you want to be raising the right money from the right people.
- All cash is not equal. You have to find the right investors who share in your vision. You want to be able to celebrate with them when things are great, and when you fall on tough times, you all need to stay aligned and be able to have those tough conversations when they come up.
- You’ve got to have thick skin. You’re going to get a lot of no’s before you get a yes.
- [29:41] – Gabriel shares one thing we should be thinking about when we design a pitch.
- It’s about telling a story.
- Be able to tell your story and be able to explain why you’re the one that’s going to take this huge opportunity and get that market share.
- [31:39] – What happens post-fund raise?
- Keeping in contact with your investor is important.
- You need to immediately think about when your next fund raising is.
- 100% of the reason why startups fail is because they run out of money.
- You have to think about the things that will get you to the next level.
- [34:05] – Gabriel’s parting piece of guidance:
- Your slice of the pie may not be as big when you partner with venture capital, but you now have a whole group of very talented, passionate people who are on your side, and who can help you open doors and grow the right team. It will give you a better chance of reaching success without having to dig deep into your own pockets.
- Visit Flo Technologies website to learn more about Gabriel’s business!
JLD: What’s shaking, Fire Nation? JLD here with an audio masterclass that’s going to be very enjoyable to listen to because it’s all about how to launch a family startup and land investment which means getting an injection of venture capital. I mean, I learned so much about venture capital this episode and I hope you do as well. I brought on the founder of Flo Technologies, Gabriel, who began his career as an attorney working in the plumbing industry and during this time he dealt with product liability claims for allegedly failed plumbing products; a crucial career step that led him to Flo.
This company’s fascinating; how he got to the idea with his father is absolutely outstanding as well and we’re going to be talking about how to know if you’re ready to fundraise for your family startup and when’s a good time to actually seek venture capital. We’re going to be talking about considerations for that venture capital, about the investment size, the experience, things to avoid, how to design your pitch, what happens after you raise money, and so much more. So, don’t go anywhere, we’ll be right back after we thank our sponsor.
Gabriel, say what’s up to Fire Nation and then share something interesting about yourself that most people don’t know.
Gabriel: Hey there, Fire Nation. Excited to be on the program so thanks for having me, John. Interesting thing people don’t know? Well, I had an absolutely horrendous stutter when I was a kid. A lot of people have seen the movie, King’s Speech. My speech was pretty bad when I was in fifth grade specifically. I remember it reaching a boiling point where I could not even say my name in front of my class of 20 something kids. But I worked on it, I challenged myself, put my mind to it, and now as my wife will tell anyone, she can barely shut me up. So, that’s pretty interesting.
JLD: Now, if you had to share one thing you think was maybe the turning point was it just repetitive practice or was there was something kind of special?
Gabriel: I did a lot. I started doing a lot of public speaking. I ran for student council which forced me to do a little debate in middle school and then I eventually was the president of my middle school and had to give a speech in front of the whole school. I had a bar mitzvah growing up. For those that don’t know, that’s a Jewish rite of passage and so I had to read the Torah in front of my congregation. There was a bunch of those kinds of things where I pushed myself and I was like, “Hey, if I can do this in front of these people, I just need the right tools.”
JLD: So, was it kind of a psychological thing too like you had to get over kind of the mental side of things?
Gabriel: Big time. I think your mind is running really fast when you stutter and it takes a second to kind of process all of the things that you want to say before your mouth starts running. And I think part of it was just I was always kind of a confident kid so I wouldn’t say I was very nervous but yeah, I think there was some element of nervousness. I don’t know. I kind of rambled there.
JLD: No, that definitely was a ramble but what I will say, your wife is right. She can’t shut you up. But no, but seriously, what I will say to that is it is one of those things that I’ve seen with other people who I’ve talked to and who have dealt with that with either fear of public speaking or some kind of speech impediment. It’s just as much mental and psychological as it is actually getting the right mechanics as well. So really interesting, Fire Nation. I mean, public speaking is such a terror and a fear for literally everybody. Anybody that says they’re not scared of speaking in public has either done it a zillion times or is lying to you.
It’s one of the two. So, just recognize it’s a game. It’s a game of both the psychological, the mental, and the actual mechanical side. But what I want to talk about, Gabriel is the audio masterclass that we’re going to be diving into today which is how to launch a family startup and then land investment. And by while we are talking about landing investment, I’m not talking about actual land. I’m talking about venture capitalist, stuff like that. So, I would really kind of maybe like to know a little bit more about how you and your father got into this business together and actually first off launched this family startup. Tell us a little bit about that.
Gabriel: Yeah. So, my dad and I started Flo Technologies in 2015. Flo is a water monitoring and control device for your home. One device you install on the main water supply line proactively monitors the whole water system to help you avoid leaks and catastrophic water damage which is the leading cause of preventable homeowner’s insurance claims every year. A lot of people don’t realize that, but it’s five times more likely that you’ll have water damage than fire or theft to your home.
JDL: Wow. Combined, huh? That’s crazy.
Gabriel: Yeah. Yeah, yeah. So, our story starts back in – well, I guess it starts many years ago. My dad is kind of a mad scientist of plumbing. He’s been in plumbing for over 30 years and a lot of things that bored me for a really long time but he had his own manufacturing plant when I was a kid and I worked there in the summers and he invented a bunch of different kind of plumbing solutions. His last invention sold over 18 million units so my dad, he’s a mechanical engineer by trade but he’s just a curious guy and he’s always coming up with different things. So, there was a number of things in his past that kind of led him to inventing Flo but our story together kind of started about 10 years earlier where we had a catastrophic water damage claim in our own home.
I was in law school at the time so I was living at home and the entire family was in New York for the weekend. We live in LA and I came back to our home in Los Angeles. I opened the front door and I’ll never forget. It looked like it was raining in the middle of the living room. I mean there was water coming down from the second floor. It took 10 seconds for my eyes to adjust to what was happening in front of me. It was incomprehensible. But there it was. There was one water connector on the second floor from a toilet, a 25 cent part that broke off of the main water supply line and water running uncontrollably for three days throughout the whole home.
It was two weeks before my sister’s wedding that my dad was throwing. I mean it was a horrendous occasion for a number of reasons. I had to end up living in a hotel for six weeks because my room was entirely flooded. It was really bad and that had a pretty profound effect on my family. After having an incident like that because my dad, having had the experience that he had come from where – I didn’t really explain this background, John so maybe we can find a way to bring this back in but –
JLD: Sure, bring it in right now.
Gabriel: Yeah. So, my dad was an expert witness for the plumbing industry for many years. Over 10 years he analyzed over a thousand water damage claims in people’s homes. So, when there’s a home owner’s insurance claim in someone’s house, they’ll typically file a claim with their homeowner’s insurance. Their homeowner’s insurance will pay that claim but then the homeowner’s insurance industry will then file what’s called a subrogation claim against who they think is ultimately responsible for that water damage. So, in many instances, they would claim that the plumbing manufacturer manufactured a bad device. So, they would sue them for negligence or product liability or what have you.
JLD: Okay, pull a little bit out of the weeds here and take us to the punch line.
Gabriel: So, my dad analyzed these water damage claims for over 10 years and he realized what some of the root causes are and after we had the water damage in our own home, set on the path to invent a device that would help avoid this in everyone’s home going forward. He wanted it to be cost effective enough that you can get it in everyone’s house.
JLD: So, one thing I want to step in here and say, Fire Nation before Gabriel continues is this is what we’re talking about. When people come to me over and over again and say, “John, I don’t have an idea for a business. I don’t know what to do next. Where’s my big idea? Etc., etc.” You need to look around you. You need to say, “Hey, what are things I’m curious about? What are things I’m passionate about? What are my skills? What is my expertise in?” There are obstacles and challenges and struggles that are in every one of those areas and you might just want to create the solution and that’s exactly what Gabriel is getting to here; hopefully quickly; about the solution that his father got to. So, pick it back up, Gabriel.
Gabriel: Yeah, so my dad had this really specialized experience. He had this pain point and he decided that he was going to invent the solution to this problem. And I patted him on the back. I was practicing law and doing other things and I said, “That’s great, Dad. You go do that.” And he’s always working on funky stuff in the garage but fast forward to 2015. I was done on with my last startup. I was working on a restaurant company that I was running corporate operations for and stumbled into the garage to kind of see what the old man was working on and here he had done it.
I mean I knew the pain point really well because we experienced it ourselves but he invented this one device that could find leaks anywhere in the home, could shut off the water, can act proactively and find problems before they turn into leaks. I was like, “Dad, this is incredible. What are you going to do?” And the first thing on his mind was to do what he did with all of his previous inventions which is just to license it to a third party company and it didn’t take long for us to kind of agree that any company we would give this to would find a way to screw it up. If we give it to a plumbing company, they’re not going to understand the technology inside and internet of things –
JLD: So, I’m going to guess right now, Gabriel. You guys decided to launch this yourself?
Gabriel: Boom. There you go.
JLD: I got there.
Gabriel: Yeah. So, we decided to do it ourselves and it took a while of me and my dad kind of debating the right way of going about this. Well, I wouldn’t say we just decided to do it. My dad tried to talk me out of it for a while. He’s like, “Here you are. You have a successful corporate career. Why are you gonna quit your job and focus on this thing that I invented in the garage?” But I had a lot of faith in my dad and the product that he invented and I saw the opportunity. So, when we did quit there were a lot of things that we had to decide like who was going to do what. I was not going to run a company with my dad as co CEOs because as brilliant of an engineer as he is and as successful as he had been in business, this was a different kind of business than he had ever operated.
JLD: And it seems to be like you guys have different skill sets too. I mean you had been through law and a lawyer and these things and your father was an inventor doing these funky different things. So, you guys launched the company. You obviously have some legitimate success because I want to get pretty quickly here to the next point which is you turn a corner. You’re obviously generating revenue with the company and you decide, “Hey, it’s time to kick this into high gear. It’s time to raise some money.” What made you decide to do that and how did you know that you were actually ready for an injection of capital?
Gabriel: We knew really early on that we were going to need a lot of capital to run this business. Your first point, we did have very complementary skill sets so I feel like that’s a necessary. We can’t be stepping on each other’s toes constantly and second-guessing each other’s decisions. So, my dad being the engineer and more the product focus person and me the focus on fundraising and kind of corporate operations and sales and how are we going to grow this thing and get it into everyone’s homes. That was a great start because we both had opinions about the other one’s core expertise but we really did have complementary skills sets.
On the fundraising side, it didn’t take long for me to kind of make the determination that this was not going to be a traditional family owned business where we were going to try to keep 100% of the equity and just blood, sweat, and tears and just try to grow it organically. This is an IoT product. We’re in the middle of a smart home revolution. The problem point is way too big. It’s billions of dollars a year and we were going to need a lot of capital if we’re going to get the land grab. And when I refer to the land grab is, every home is potentially land for us to grab.
Gabriel: To go install a Flo device and I knew already that there were some big the public companies that were already looking at this problem. It was too big for people not to take notice.
JLD: Yeah, let me break in here another second because Fire Nation, just think about this land grab concept for a second. I mean what’s happening with Alexa and Google Home right now? Guess what? If Alexa wins this land grab, who’s going to actually start winning when you want to order something from your smart speaker? Well, obviously Amazon’s going to win with Alexa; Google will win with Google Home. There’s so much money that even in my home here down in Puerto Rico, I have Nest, I have Lutron for lights. Nest is for my thermometer. I mean my thermostat; I have Dios which is for my sound system.
It’s just nuts how quickly and how smart our houses are getting and the land grab is legit. So, keep rocking, Gabriel.
Gabriel: Yeah, absolutely. And so, just plain off of what you just said, I mean we put ourselves in the category of this is what you need for your water like you have the Nest for your thermostat; you have maybe a Ring as your front doorbell. You have all these other smart home devices, yet the biggest problem space is actually in water and here we have a solution that can not only help prevent all catastrophic water damage to your home. It makes the entire home smart.
So, we really felt that this was an opportunity that needed a lot of capital, a lot of resources outside of just me and my dad so it didn’t take long for me to determine that we needed a venture backing and that’s a different kind of company that you’re growing and one that’s not typically a family business.
JLD: Right. Absolutely. So, you guys decided to go out and start making that happen. So, what was the next step? I mean, where do you actually go to take step No. 1 which would be like, “Hey, we need some money” or “We’re looking for some money”?
Gabriel: Yeah, one of my skill sets I think and I’m a very curious person and I also don’t think I’m a category expert in anything so being very curious and also having a network which is one of the values that I bring to the table, I quickly just started asking people questions and one conversation led me to another which got me to some pretty great advisors. Looking back on it, I was really blessed. For example, Jamie Siminoff from Ring who just sold to Amazon for a billion dollars is also from LA and happened to be one of my first advisors and investors in my company.
I sought out people that knew a lot more than I did about not only raising venture capital, how to build the hardware business, how to build the software business, how to do a business development and working with insurance companies. And these conversations just led me to some really great advisors which was the best place to start. So, Jamie Siminoff from Ring, a gentleman by the name of Saeed Amidi up in Sunnyvale, California is one of my advisors. He runs a startup incubator called Plug N Play. They made the initial introductions to a lot of great insurance companies that I ended up working very closely with. USAA is one of our investors.
JLD: Ooh, love that.
Gabriel: Actually invested in our first round, our seed round of capital so they were one of our first venture investors. And so one really important thing, if I was to be giving advice here, is one, you got to great advisors. You got to get people who know more than you do and are willing to make the introductions for you and two, you gotta build a great team because they are really investing – what venture capitalists are looking for at that really early stage which is your first round of venture capital is they’re looking to invest in a team.
Even though your product might be a fantastic idea; I think ours was is and is and even though you may have great product-market fit and whatnot; they’re going to be a million challenges that are thrown your way between the time that you’re pitching them and by the time hopefully you have some kind of very positive exit from that business where they’re actually seeing money back.
JLD: So, let me pull you back to that first point though. You said find great advisors. What would be your best recommendation on how to start that process?
Gabriel: You just gotta start with your own network, look at your LinkedIn, look at where you want to go, look at the kind of capital that you need to raise. Not all cash is equal. I think the way that a lot of startups look at it for their first round is they’re just trying to get money any which way they can. I challenged myself to really think about who is the best capital for this business? Who’s the smart money that’s going to not only get my foot in the door with who I need whether that’s on the business development side or the venture capitalist side or whatnot or just finding talent that I really needed for my business?
Who is going to be the best investors that were going to help me get to the next level? And so, having capital is one way of really aligning with very smart people. So, all of my advisors I gave some equity interest in our company which vests over time but I also asked them to be investors in the company at the same time and I gave them favorable terms and all of my initial advisors were also investors in the company.
JLD: Now, I know there’s no magic number, but what would say is a good idea to keep as far as percentage of equity in your own family business? I mean is it just as simple as saying over 50% or is there actually a better number or is that just not even really something you can answer?
Gabriel: Yeah, it’s not really something I can answer because all businesses are different like hardware businesses which ours is is very capital intensive so we will definitely own less than 50% of our business. There’s no question about it. Would I prefer to own over 50%? Absolutely. But I think it just really depends on the business and how much capital you need and how much momentum you get, how much you can justify raising money at a higher valuation. But the way that I’ve always processed it is I’m trying to grow the pie and what’s good for growing the pie overall; raising the sufficient amount of capital that we need to keep that dream going is what I was focused on and that obviously, no one likes a dilution, no one likes not owning as much as they can of their business but as long as I keep growing that pie, it’s going to worth it for everyone is how I process it.
JLD: So, Fire Nation, we’ve been going through just some really important things here when you’re starting a business, growing a business, especially if this is a family business like some things to consider. We have a lot more things and we’re going to be talking about in the second half of this interview. We’re going to take a second here; we’re going to thank our sponsors. We’ll be right back.
So, Gabriel, we’re back and I want to talk specifically right now about some of the benefits to venture backing as a family business. I mean there are obviously some negatives to it and there are obviously some positives which is why you went down that road. So, let’s focus on the positives right now. Let’s talk about the benefits of actually getting an injection of capital into your family startup.
Gabriel: One, I think it makes you much more of a disciplined. Having really smart investors behind your company like we got Crosslink Capital who is a great venture capital firm out of Silicon Valley. We got USAA which is just a phenomenal but insurance carrier and a financial institution. They really help bring a level of discipline to the company. They helped us set up our business in such a way that we could partner with an enterprise level of a companies and frankly, that we would be taken seriously as well. I think when I first walked into the room with not only many venture capital firms but insurance companies I wanted to work with or retail; when it was just me or me and my dad and we’re this father and son business; people weren’t sure whether to take this seriously or not.
But once we had household names, financial institutions, venture capital firms that had invested in the company, I think that people started looking at our business differently and realizing that we were going to take this business to a certain level and that obviously some people had done their due diligence on the company and thought this was worthwhile if they were investing millions of dollars into it. So, it really helped to elevate the conversation. It was very helpful for me and my dad as well. I mean me and my dad are still a father/son at the end of the day so when we were able to bring in sophisticated kind of venture capital into some of the conversations that we were having about directions to take the business, they helped us process where we want this business to go.
But ultimately we still control our board. It’s our decision but they also acted as great advisors about what we need to do in terms of how to grow the business to a certain level. Also, I think one other thing if I can just throw this in there. I think for us it was a much more conservative way to grow the company and I know that a lot of people don’t look at venture capital as conservative. Certainly, my dad didn’t at the beginning either. He was very much against it when we were first having a conversation about this but here we are a father/son team who is investing a tremendous amount of our time which is our biggest resource into this company and ultimately if it didn’t work out and we didn’t have venture capital funding, we would not only be out all of that time but we would have invested a significant amount of our own money into the business.
That was a huge risk to take so I think it was more conservative in some ways that we can raise venture capital, pay ourselves. I mean certainly not that any kind of a glorious salary but enough that we can at least cover some of our own personal expenses while we’re growing this business. And then if it didn’t work out, then yes, we’ve lost our time but at the very least we were covering expenses with the venture capital that we had raised on a personal level and if it does work out, then there’s still going to be plenty of an upside for us and our investors. So, in that way, I think it’s a more conservative way to grow.
JLD: I like how you put that too. Not a glorious salary because Fire Nation, I’ve seen a lot of people have the mindset, “I’m going to start a company. I’m going to raise some venture capital and then start paying myself a million dollars a year.” And guess what? People that are going to invest in your company are not investing so that you can pay yourself a seven-figure salary. That’s just not happening. They’re investing in the company to make sure that that company grows the right way, invest this money the right way, pays his people the right dollar amount, and glorious salary will not be one of those things. It’s not a glorious salary. You wanna add to that?
Gabriel: It’s definitely not. I mean I may sound a little nasally right now because I’m working very hard on my startup. I travel a lot. While I started this company, I had twins. They’re now up at 18 months old and I have a wife and so I’m working really hard running a lot of different directions and certainly the amount that I’m paying myself – I mean really just on a personal level, I still operate at a net loss every month even with the amount that I pay myself but it’s not a conversation that I’ve chosen to really push on with my board and my partners and stuff because I really set the bar for the 25 employees that, full-time people that we have working on this project now. And as the CEO, you’re also the chief cultural officer of the company and I want to set the salary bar at such a level as a CEO that everyone is still very hungry.
We have an aid of a commission structure in place. Everyone that works for the company has stock options and gets equity for joining and that’s really what we’re all working towards. We’re really working towards growing that pie.
JLD: So, let’s get into some more specifics when it comes to venture capital. So, let’s talk investment size, kind of break down what that means and how you approach that.
Gabriel: One of the lessons that I learned from my advisors early on is that you always want to raise more than you think that you need. So, when I was doing my first round, this is back at the end of 2015, beginning of 2016. I thought that I needed to raise about a million and a half because that was how much I thought was going to carry me to the next phase, the next milestone where I could raise again. I was wrong. I ended up raising three and a half million dollars in that round. Part of the reason that I did that was because 1), I got some really great investors that I wanted to bring in and have them vested and helping us build this dream, but 2), I took the advice of my advisors and always raised more capital than I think that I needed and that was a really great decision.
I mean we ran into longer lead times than we originally expected when we were first developing our product. I wanted to be opportunistic with hiring and to hire the best people that I possibly could and now I have – my whole support team came from Tesla, my data scientist came from Apple, so on and so forth and I just wouldn’t have been able to hire these people if I didn’t have the right amount of capital. And by the way, when I said that to venture capital instills confidence in people in a business development side, it also instills a lot of confidence from your team. I would not have been able to recruit the kind of people that I brought on to help grow Flo without raising the right amount of venture capital because people do use it as a proxy.
How much you raise people use as a proxy for how successful you are. It’s not true but it certainly is one of those indicators that people look towards.
JLD: It’s one of those that sometimes perception can be reality.
Gabriel: Absolutely. I mean when I tell people my data scientist, Nick. He happens to be fantastic as a data scientist and just as a human being. He’s an amazing person but people don’t care about him as much as they care that he used to work at Apple. And that’s what sells people, that’s what people get excited about.
JLD: Well, I think that leads us into the next point that I do want to get into which is experience. So, we kind of talked about investment size, there’s maybe no perfect number but it seems like you went about 30-40% more than you initially thought you might need so that’s kind of one thing. Let’s talk about some of that experience factor you’re talking about.
Gabriel: Well, one fundraising is really hard. Anyone that says that fundraising is easy is lying. You gotta have a lot of different conversations especially if you want to be raising the right money from the right people. All cash is not equal. You really want to try to find the right investors that share in your vision and you want to celebrate with them when things are going great and you also when you fall onto tough times that you guys are going to stay aligned and be able to have those tough conversations when they do come up. So, you gotta kiss a lot of frogs before you meet the right folks that you really want to partner with and ultimately that are going to share in your vision.
So, you gotta have thick skin. You’re going to get a lot of no’s before you get a yes and then when you do get the yes, you want to be very careful that you’re not just taking the yes; you’re not just adding that investor to your cap table because you really need the money and you think you just need to move. It’s important to stay honest and true to the kind of company that you want to build and make sure you’re adding the right people. So, just prepare to have thick skin. That’s the best advice that I can give.
JLD: Let’s talk about designing your pitch. You could go into a lot of different explanations and examples. I just want one. Give us one thing that we should and can be thinking about when we’re designing our pitch.
Gabriel: I think it goes back to also me being a father/son team too. It’s about telling a story and our story as a family really came together around having leaks in homes and what we suffered through and why this is an important issue for us, why we have a unique perspective and having the vision for where this is going. I think one of the things that people really miss is a CEO of a company is that you’re the chief storyteller. So, you got to get really good at telling your story and why is this going to be you because I think a lot of people watch Shark Tank, they know that the sharks are going to ask them like, “What’s stopping Bosch or Google or Amazon –
JLD: From squashing you.
Gabriel: – General Electric or whoever it is. What’s going to stop them from just getting into this business and squashing you?” And ultimately, the answer is it’s about you and it’s about the team and it’s about why you’re going to be the frugal enough and passionate enough and efficient enough with the capital you have and go get that land grab in a way that another company is not going to be able to do. Again, investors are investing in you more than they’re investing in anything else so being able to tell that story and being able to explain why you’re the one that’s going to take this huge opportunity and go get that market share.
JLD: Fire Nation, you’ve heard land grab a few times. You have to have that first mover’s advantage. It’s critical and once you have it, you can’t let it go, and you got it, Gabriel and you’ve run with it. You’re currently running with it. As you said, you’re a little nasally because you’re traveling around, you got twin 18-month-olds, you’re married. I mean you just have a lot of stuff going on right now so let’s kind of talk post-fundraise because you’ve raised the money, you’re paying yourself a salary, albeit a non-glorious one but you are getting revenue from this overall venture capital injection. What happens post-fundraise that we really need to know about?
Gabriel: Well, I think one, keeping contact with your investors is really important. I send out a quarterly update to my investors. If your investors are coming in asking you for information, that’s probably not a good sign. So, it’s better to keep them in the loop but two, you need to immediately be thinking about when your next fundraise is. I know this is a terrible thing and no one wants to think about it because fundraising is so hard –
JLD: It’s kind of like when a politician gets elected and they’re thinking about the next election. I hate that.
Gabriel: Yeah, but it’s true. One of my advisors said this to me and I hated hearing it. It was one of the most painful pieces of advice that I ever got but there is an element of truth to this is that when you’re in the startup business and you’re venture-backed, your goal as a company is to reach the next milestone so you can raise more money. And there really is some truth to that where when you raise money – you put together a budget on what you’re going to do over the next 12, 18, 24 months, how long you’ve budgeted for but however long that budget is for you and what you’ve sold your initial investors on; you need to hit those milestones. And if you don’t, you may not have yourself in the right position where you can raise money again.
And guess what? A hundred percent of the reason why startups fail is because they run out of money. It’s not because people just give up on it. It’s because they were not able to keep the lights on a lot of times. So, one of the things you have to be thinking about is what are the things that are going to get you to the next level where you can continue because now you’re dependent on that capital and you have venture capitalists who want to see 5x, 10x, 100x returns on their money. So, what are the things that you’re going to be able to sell that next group of investors that you’re going to see viral growth in this product? And so it’s tough to think about. It’s a tough pill to swallow but it is part of the reality of the situation.
JLD: Fire Nation, that’s what we’re doing. We’re dropping truth bombs here. We’re giving you the good, we’re giving you the bad, we’re giving you the ugly, we’re giving you the reality of what this is. So, Gabriel, we dropped a ton of value bombs on Fire Nation today and I don’t want to go back over each and every single point so just kind of maybe pick one thing that you want to make sure our listeners really get as an overall summation from this audio masterclass and break it down for us.
Gabriel: Well, I just think if you’re deciding that you want to start a business as a family, you need to have a real heart to heart about the kind of company that you want to grow. How do you envision things going and sometimes venture capital is the right decision, sometimes it’s not. If you know that there’s that land grab opportunity that you really need to get out and get it, well go get as much market share as you can. Sometimes venture capital is going to the right answer. It was the right answer for us. Again, there are pros and cons of raising venture capital but I think some of the pros are it’s going to keep you really disciplined as a company to be thinking about the things that are actually going to make a difference in reaching that next milestone and ultimately growing the pit.
So, there’s going to be plenty of meat on the bone for all involved and I think it’s going to help you attract talent and ultimately, like I was saying before, in some ways it’s a more conservative way to grow your business because your slice of the pie may not be as big when you go partner with venture capital but now you got a whole group of very talented, very passionate, and very hungry people that are now on your side that can help you open doors, help grow the right team.
So, ultimately it will give you a better chance of reaching success without having to dig so much into your own pocket.
JLD: Well Gabriel, here I live in Puerto Rico. Every year we go through a couple of months where we’re just terrified about the next hurricane coming in and obviously our worst fears were realized last year when Hurricane Maria ripped through and did a lot of damage to the house and I can tell you, water damage was by far the No. 1 piece of damage that we have on this entire island. People are still suffering from it because what happens with water damage, then there’s mold and this happens. Water always finds a way through so this is something that I can tell you that my entire island of Puerto Rico deals with on a consistent basis.
At the very least, we have a massive rainy season and things are happening, etc., etc. So, I personally know that this is going to fill a massive void for a lot of people around the world because of all the things you talked about at the beginning about how this is just such a more common thing that damages houses than fire and theft, five times of those combined is crazy numbers. So, maybe in this kind of final little summation part here, share with us a little bit more about Flo Technologies and how if we’re interested in learning more about this company, we can.
Gabriel: Thank you, John. Just one thing I want to correct your listeners on. I’m sorry if I misstated this earlier but it’s actually twice as likely as fire and theft combined. It’s five times more likely than fire or theft.
JLD: Oh, okay. Got it.
Gabriel: So, twice as likely as those combined so we’ll just have the record straight on that. And just one more thing to set the record straight on as well because I know you started talking a lot about weather-related water damage. So, Flo Technologies can’t prevent a hurricane coming and hitting the island –
JLD: What? It can’t be like, “Yo, not this way, Maria.”
Gabriel: No. Exactly. But what we can help prevent is if there’s any kind of a rupture to that main water supply line, if there’s any vulnerabilities in it as a result of high pressure, freezing temperatures, or just things on the pipe start to get corroded and eventually they burst. Those are the kinds of leaks that we find very early on, those are the kind of water damage claims that we help avoid. So, if you’re interested in learning more about Flo Technologies, visit meetflo.com. That’s M-E-E-T-F-L-O.com. There you’ll have a whole host of information about what makes Flo Technologies the best water monitoring and control technology on the market.
And also, check with your local water utility and check with your homeowner’s insurance company because you may be entitled to rebates and insurance discounts off of your homeowner’s insurance premium for having a Flo device. You can get up to 10% from your homeowner’s insurance company depending on what carrier you have and what state you live in. So, but check with your carrier. There’s some homes like my brother-in-law got $500 back his first year for having a Flo device so it’s pretty awesome.
JLD: Well, I can tell you growing up in New England; I mean we had burst pipes all the time in those winters. Being out here in Puerto Rico with things like the hurricane and just the salt water that gets poured into your house and things like that, the corrosion of pipes. I mean that’s the things that’s happening all the time as well so just a lot of opportunities here to look into so one more time, Gabriel, what was that URL?
Gabriel: It’s meetflo.com. So, M-E-E-T-F-L-O.com.
JLD: Fire Nation, you’re the average of the five people you spend the most time with. You’ve been hanging out with GH and JLD today so keep up the heat and head over to eofire.com. Type “Gabriel” in the search bar and the show notes of this entire episode will pop up with links to everything that we’ve been talking about today. We’re talking timestamps; we’re talking the best show notes in the biz. Gabriel, thank you for sharing your truth, your experience, your knowledge with Fire Nation today. For that brother, we salute you and we’ll catch you on the flip side.
Gabriel: Thank you, John. I had a great time.
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