How Michael Diesu Closed a $2.5M Seed Round for Revenue Roll (Michael Diesu / Revenue Roll)

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Michael Diesu: the game that we're in. Is, SaaS.

It's very competitive, right? You need to move fast. You need to get market share quickly. You need to get innovations out the door and sent and shipped to the customers and that takes money.

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Jason: Life in general, but especially life as an entrepreneur is unpredictable. You think you've got it all figured out and then bam. You're forced to make a decision between two completely different paths. One path looks safe and predictable, the kind your parents and friends nod. Approvingly at the other path. What's a little bit more wild, mixed potential anxiety, and a whole lot of unknowns. The truth is every entrepreneur has faced a moment when they have to decide. Play it safe or go all in.

Today's [00:01:00] guest Michael co-founder and CEO of revenue roll. Has had to make this decision multiple times. First, when he dove headfirst into the startup world against the encouragement of many to take a more traditional path. And more recently when navigating the shifting winds of a fundraising market that went from hot to ice cold and a matter of months. The choice to become an entrepreneur seems to be working out. And in fundraising. he's been a winner. Revenue roll impressively raised their last round eight $2.5 million seed round led by innovating capital at the end of 2023.

in one of the most challenging fundraising markets on record.

Before we talk about his big wins, tough lessons and the process behind closing his seed. We need to start where it all began. Because those early days, those first decisions, they set the stage for everything that comes after.

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Michael Diesu: Yeah. Um, as a kid, I, I [00:02:00] remember being like super, super competitive still at a young age, whether that was. School or sports, um, but generally no, I don't think I was anywhere near as outgoing as I am now. I definitely was a super shy kid, and really was just focused on studies, I would say, like grades, you know, three through six, um, just super focused on just getting a hundreds on all of my tests, and like, I remember coming home with like a 95 once, And, uh, my dad was like, why didn't you get a hundred?

And that's like when it, like my brain at, you know, third grade, what is that? Like age eight or nine was like, Oh, got it. Yeah. Perfectionism. That's good.

Jason Yeh: Yeah.

The crazy thing, Michael, is that you don't look Asian at all. I can say that because I guess the listeners know that I'm Asian. No, but that's like a, that's a That's a parenting style that I'm, I'm, uh, I'm very accustomed to.

Um, can you tell me a little bit about your parents? Like, were they role models on the entrepreneurial side?

What were they like?

Michael Diesu: yeah, my dad owned, [00:03:00] um, still does owns an exterminating business for nearly 40 years now. So ever since I was a kid, um, he was an entrepreneur, had many employees. Um, so definitely always looked up to him in that way. And. I think what I really in hindsight what I liked was that he was always still available.

You know, he was still at all like my games. He would still like take me to practice. Granted, he would work super late right in order to make up for that. But that didn't really like hit the forefront of my mind again until I started my own business. But that him being able to make his own schedule and structure his own life while providing was It was definitely, um, you know, an ideal that I strive for.

Jason Yeh: Super cool. So, um, you were, you were a bit shy growing up, but you did have this like entrepreneurial role model to look up to. Um, did that, Did that kind of, um, push you in a certain direction as you got older? It was in the back of your head that you would always start a company or, [00:04:00] um, did, did some sort of thing push you in a different path?

I'm always curious about that.

Michael Diesu: No, I mean, not to go back to the Asian parents thing, but like, they just basically were like, Oh, you're just going to be a doctor, right? Because you're smart. And like family members and friends, like just assumed, like, you know, that's what you're going to do. You're going to be a doctor. Cause that's what smart people do.

And, um, Not to cut ahead through childhood, but like in high school, like I was just like, cool, that's what we're going to do. So applied to like, you know, 20 something schools to be a doctor, um, ended up not wanting to do that. Thank God I applied to a school on my own accord for economics and my own, you know, what I really wanted to do deep down.

And I got in, um, and was able to like at the very last minute, make the right pivot. Um, and you know, go the way I wanted to deep down.

It's

Jason Yeh: That's, that's awesome. I mean,

Michael Diesu: but it's, it, I feel like just, that's how society was [00:05:00] structured. Like, you know, there's, US doesn't, it doesn't encourage entrepreneurship as much as, as one would think, right? They're not even teaching us

Jason Yeh: I certainly,

Michael Diesu: or how to do anything.

Jason Yeh: yeah. I mean, it's a crazy parallel to my background. Um, certainly it was driven to always get a hundreds and the expectation was that you just go to the best school that you can and get the. Like most prestigious academic style job that you can, you know, that's a doctor on one side, but it's also a lawyer on the other side. Um, and so, yeah, and I didn't have the entrepreneurial, uh, role models in my life. Um, so the fact that you, even with that role model where it's sort of driven down this one path was, is fascinating. Um. Usually, I don't touch on this because I like to jump to the company and fundraising. That's what we talk about.

But do you mind sharing a little bit about what switched in your mind? Like, what was the thing that got you to start working on Revenue Roll?

Michael Diesu: Yeah, [00:06:00] um, I think there's a couple steps in between, right? So I went to NYU and realized I wanted to be in business and I wanted to, you know, go out, um, into corporate America, which was a little different than what I had originally thought earlier in life. Um, went into strategy consulting, worked my way up there, you know, got the, the usual promotions and worked there for five years.

But that whole time I was kind of frustrated and like deep down I think like a little like angry that I wasn't working for myself and like I didn't really want to work for anybody else anymore like I knew that like the last couple years. Um, but other ideas had come across my plate from colleagues, from peers, um, old, like, um, classmates, but nothing really stood out, until my co founders, Alec and John, explained to me their vision for this business.

Um, it just, it really struck a chord where it had the massive problem size, but the really simple solution that [00:07:00] I felt like, That was a good mix. Um, where like the product is so technically complicated, but yet so simple to explain and to sell. And I was like, I can, I can grow that.

Jason Yeh: Love that. Um, so you started getting this itch, this bug, like, like, I want to work for myself. And I guess you had Co founders who had a bit of an insight into a problem that you wanted to help scale. I love that path.

Um, now, now I'd like to shift over towards the topic that, you know, we're so fascinated over here with. Um, and when I look at people's fundraising histories, I can usually kind of, At least guess around some of the story that went through the fundraise. And the interesting thing about your, at least announced fundraisers, were that you raised a pre seed round from Reverend VC, which was announced in November, uh, sorry, in January of 2022. And then you went on and [00:08:00] raised a seed round, um, from Innovating Capital announced in November of 2023. The The staging, the cadence of that fundraise, Michael, for me, means that you probably raised your pre seed at a very, very heady time in the market where lots of money was being thrown around and from my experience, a lot of big valuations relative to traction, which was great at the time, but for a lot of companies, set them up for a very difficult seed raise, which was, which means like, could you actually grow into that? you had before. Could you grow past it? Could you show people real traction? So.

Let's start, if you don't mind, with the pre seed. Did I, did I get that right? Like, are you, are you going out to raise as a first time founder in an amazing market where you were able to raise fairly easily? How did that go down for you?

Michael Diesu: I mean, that was probably the [00:09:00] easiest fundraising environment ever, right? It's when they printed all this money and gave it out to everybody and everybody felt super rich and everybody wanted to throw angel checks everywhere. Um, and I, I do, I really think that is the cause of it deep down, but it was a great time to raise money.

We were pre revenue basically, pre product, um, you know, we had pedigree. My co founders are, um, equally strong resumes as myself. Like it was a great team. It was a great problem. So I definitely think we stood out, but yeah, I do. I think that we could have raised one and a half million dollars right now at this stage today.

Or at that stage today, um, no, no, it's a very different market. And I think it got a lot of people, um, I think you're right. It kind of over their skis when the valuations kind of normalized and they tried to raise again and they're doing a down round on a seed round and. That's a no no for a lot of seed funds.

Jason Yeh: Yeah, so let's, let's zoom in on that and feel free to share what you want to [00:10:00] share and you can glaze over what you don't need to share.

But where I like sort of starting to double click and zoom in is what's happening in the company Before you go out to raise your, your seed round, like you had raised a one and a half million dollar.

That's what it was announced. One and a half million dollar pre seed round. And then at some point over the next, call it 12 to 16 months, uh, the thought comes into your head that. We need to go raise again. Can you, do you remember what was going through your mind? What was happening at the company that sort of triggered this idea of like, this is, now has to be our time to go raise the next round.

Michael Diesu: Yeah. I mean, the, the pre seed round is really, I would almost call it a rolling round, right? It was, it probably, it was more of a bringing on angel and checks as we were building this product. Um, you know, Andrew at Irreverent, um, and some of his LPs were the biggest checks that really put the, um, the lion's share of capital in.[00:11:00]

But, you know, we were really building this as we were raising and, um, effectively, right where, you know, we got to. Around, you know, I would say a few months after, um, the pre seed was done was we finally had like this prototype. We were now bringing it to the market, beta testing it. And then by early 2023, I would say almost a year after that pre seed closed, the product that is revenue roll today was live and was starting to get significant traction.

And so like, I would say that's, that's the role of a pre seed, right? Is to get, I think product market fit. And. You know, luckily, you know, we had raised a lot of capital. We had plenty of time. We were patient. Um, we really spent two years building the product that is revenue role today. And it's been live in the market for about a year.

Um, and because we had that time and we weren't, um, pressured by our, by our VCs to spend and to spend it all on marketing and grow, grow, grow, [00:12:00] no, Andrew and, and other investors were very, um, very focused with us on taking our time, getting the product, right. And it paid off, right? We, we saw a lot of scale in 2023, to the point where we decided let's raise a seed round and let's build out a team underneath these founders to take it to the next level.

And that's, that's where we are today.

Jason Yeh: And when you said Andrew, you're talking about Andrew Gluck at Irreverent?

Michael Diesu: yeah, correct.

Jason Yeh: Um, sounds like a great partner. So you, you actually launched a product that started, um, gaining momentum before you even ever, ever had to think about going out to fundraise. Did you still have quite a bit of runway? I think you mentioned, or you, you acknowledged that you actually had a lot of time.

Michael Diesu: Yeah. I mean, we did, I mean, we had probably, what was that? Like over two years from the inception of the company to when we had to do a seed. It was over a year from the pre seed to the seed. So we were in a strong spot. It was more of now we know the product is in a good fit. We [00:13:00] know that people want this, they want to pay this price for it.

here's how we start to have that exponential growth. And in order to do that, your burn rate is going to multiply, right?

And that's, and that's when you need to bring on capital or you don't have to, you don't have to go the VC route. You can just steadily plug along. Um, but the game that we're in. Is, you know, SaaS.

It's very competitive, right? You need to move fast. You need to get market share quickly. You need to get innovations out the door and sent and shipped to the customers and that takes money.

Jason Yeh: Right.

So

Michael Diesu: and that's,

Jason Yeh: this was, this was an offensive move. It wasn't like a defensive or running out of capital. You saw the right things lining up, which is amazing, right? That's the, the, the common wisdom is, you know, raise when you don't need a raise. That's, that's when fundraisers are the easiest. Now, at the same time, you said that you launched your fundraise in January of 2023. Not too far after, long after that, crazy stuff started happening in the venture capital markets.

So, [00:14:00] walk us through that. Were, were you like, we launched, it's going well, so then you're like, let's start fundraising? Or how does it line up with, obviously, the crash of SVB and, and sort of the waves that it sent through the market?

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I always love to see founders strategically thinking about why they want to raise and what they have to show so far to prove they can put that capital to good use. While raising his $1.5 million pre-seed round, Michael and his team were able to validate the problem. And the market demand. By growing from that starting point. They moved into an amazing position to raise their seed. When we come back, get your notebook out because Michael gives us the details behind his fundraising process that allowed him to close $2.5 million in a subsequent seed round.

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Michael Diesu: [00:15:00] it definitely, you know, paused it, I would [00:16:00] say. So as you, as you mentioned, we were, um, we were raising when we didn't need it. So once the product was getting initial traction, we were having, you know, as they say in the industry, the coffee chats. Right. Meeting people. We're not raising yet, but we want to meet people and see like, who's interested when we do.

and I would say like the first half of the year was, was a ghost town, right? so it deals were not getting done and thankfully we weren't too rushed. And I don't, it would have been a different, if we had to raise a pre seed round today, like if you took the whole life cycle of revenue role and pushed it two years ahead.

Right. Um, We probably wouldn't have been able to raise one and a half. So it would have been a different situation for the company. And for that, I think we're very blessed.

Jason Yeh: Awesome. So, it sounds like because you were able to build up momentum, do the coffee chats, and the company was executing, right? Revenues growing, People are excited about what's happening. The fundraise ends up probably going Better than [00:17:00] a lot of people's fundraisers in 2023. Um, how long, but like, even, even then it couldn't have been super easy from your very first conversations to close.

How long did that actually end up taking you guys?

Michael Diesu: I met Anthony Georgiotis from Innovating Capital in early January, 2023 for like a coffee chat, like, Hey, like, you know, let's get to know each other. Um, you know, we had mutual friends through my time at Accenture. Um, and. Then I didn't hear from him with, uh, with, um, Silicon Valley bank, right? Everybody was so worried.

So didn't really talk to him for a few months. And then when everybody started coming up for air, we resumed the conversation. So kind of just pause the whole cycle, I would say for three to six months.

Jason Yeh: Um, so along the way, like you had a very, You raised that one of the best times of your pre seed round. Seed round, a lot [00:18:00] was going great in your company. Market, maybe not so much. I wonder if any, um, really difficult stories come to mind in this, this second fundraise. Like, were there any challenging experiences that were particularly hard for you or like, um, I don't know, like sort of cut you deep, anything that you remember?

Michael Diesu: Nothing, you know, I think it's just the usual thing with VC funds and. I have a lot of friends at VC funds, but they, they never actually tell you why they say no. They're, they're just trying to keep the door open always because if Sequoia jumps in tomorrow, they want in, right? But, but they have a list of reasons why it's probably not for them.

And oftentimes it's not the company. It's like the dynamics of the fund and things they can invest in and what, you know, their mandates are. Um, from my experience, um, But I think that generally VC is like a who's in a deal type of situation, right? So for [00:19:00] me, as I think about my Series A, um, I probably won't have conversations with anyone unless I've like, I know they've been leading rounds for the past 12 to 18 months.

I think I, I think in hindsight, we wasted a lot of time with folks that. We're not serious lead checks, right? There are more of kind of follow ons, which is totally fine. there's a complete business in that. Um, but this, this go around, like, again, not doing it anytime soon, but you always have to be fundraising when you don't need it.

So as we go through the, you know, the coffee chats again, um, I'm only talking to people that I know have made like investments in my industry recently, because our time is too valuable, right? Especially with this growing business and the traction we have. so I would say just general to answer your question, it, it was, there was a lot of wasted, wasted meetings on non serious investors.

Jason Yeh: Yeah. Um, when. And then the [00:20:00] flip side of like, uh, annoying, wasting time, like negative memories. Do you remember when you, when you got the message from, I don't know if it was Anthony or whoever at Innovating Capital that they would actually, they wanted to give you a term sheet that they would be leading the round.

You remember when that happened?

Michael Diesu: Yeh, I was, uh, sitting at this desk working pretty late and Anthony works late too and I think it was pretty late in the evening, probably after 11pm

Jason Yeh: Yeah.

Michael Diesu: called me and we hashed out.

Jason Yeh: What were the feelings? Like, um, was that something that felt like it would never happen where you're just like, finally, like, let's move on. What were the feelings knowing that, you know, over 2 million is going to come into the account and. You'd be able to pour fuel on the fire.

Michael Diesu: Yeah, it definitely, you felt very relieved, right? Especially after like, it was a six month, you know, process talking to a lot of people. Um, I felt like, you know, I, I enabled our team to keep building a great product, [00:21:00] um, by getting this done. Um, at the same time, right? It never really ends. And VC land, so like.

You know, it's, I think it's actually, that's just a third to 50 percent of a CEO's job, right, is fundraising and the other half is hiring and the, you know, the remainder is strategic initiative settings. So I think that was a lesson to be learned. It's like, great, you just raised your seed. Now calibrate your business to do a Series A, right?

Like, so, um, I don't know. I don't, I don't really think I felt too long of a moment of relief or euphoria. It was a great couple of days and then it was back to work.

Jason Yeh: That makes a lot of sense.

Um, I like asking this question of, of founders who have gone through it, but in particular you, because, um, there were so many founders whose only exposure to venture capital and startups and fundraising happened right around 2021, right? And because of that, their baseline of what to expect was sat in a very, very sort of mismatched time [00:22:00] in terms of the market to what we are today. But you were able to. They sort of launch your business right around that time, then go through a correction in the market, challenging times in VC land, as you called it, uh, have to pause and then restart a fundraise, actually get it done and get back to work. You're now already thinking about your Series 8, even though you have multiple years of runway. If a new founder were coming to you, a friend or an introduction, and they're getting ready to think about fundraising, their first fundraising, uh, their first fundraise, are there any like big pieces of advice that you would share with them based on your experiences of vastly different markets in a very short period of time in, you know, the two to three years that you've been running Revenue Roll?

Michael Diesu: I would say raise less than whatever you think. And I would say half of your burn rate [00:23:00] is actually probably a waste. And I would say that, like, you know, just using the old Pareto principle, right? There's probably like that top 20 percent of what you're thinking or what your CTO's cooking up. That's what really matters.

Um, and I think because at a young age of the company, There was seven figures in a bank account. We felt like we could try a lot of things, especially because our investors encouraged us to focus on product. Um, but I think raising less forces you to think like on one to two tops, three things, um, and so if you can be disciplined, if you can do it with a small team, um, raise less, but from the right investors so that if you need, you can always go back for more, but you don't.

You know, take on too much and feel like you have to do more when I think focusing is the key to any startup [00:24:00] success.

Jason Yeh: I mean, I think you got very lucky that you only took on one and a half million dollars for that pre seed, because People that have been overcapitalized at the pre seed level, I think they do the exact opposite of what you're advising, which is like, we have all this capital, like, I guess we got to deploy it.

And then, you know, you, it kind of throws things in crazy directions. Great advice.

Um, I, I always like kind of ending conversations, trying to tease out something fun from the business that our founders run. Uh, you run revenue role, you, you help e commerce brands convert Bounced users into more revenue. Uh, how many, how many different businesses are you working with at this point?

Michael Diesu: Uh, we have over a hundred.

Jason Yeh: Wow. Um, are there any like funny businesses or like interesting types of businesses that you hope that you can talk about? We might not use this, but like, if there are funny types of revenue that you help recover, um, we we've heard crazy stories [00:25:00] of businesses that our, our, um, founders have come on and talk to, talk to us about.

And so just curious if you guys have done anything that we would laugh at.

Michael Diesu: Yeah. I mean, most of my clients are Shopify, um, e commerce stores, right? Um, I work with a lot of like the big brands in the space, like, um, Caraway and like Lalo. so, you know, they all, they all have, um, super strong, loyal customer bases. I would say like, like, that's, what's been, I think most impressive.

Like what we've seen, it's not really funny. I don't know if I have a funny story for you. I can think a little bit more, but. The, the amount of like loyal subscribers that these folks have. Like I think that I read something the other day that I thought was really powerful. What is the value of a brand?

And I think the value of a brand is if they turned off all outbound marketing today, what would they have left? And I thought that was, I think it was the founder of Chubby's who said that. And, and I think that's so true and I think that the best brands, SaaS companies [00:26:00] included. I think that's a good measure.

Like if you stopped putting your name out there, would people come knocking on your door? and I think these brands that I work with are, are incredible at that. they're just household names within a year or two. And that's something that we aspire to. And we try to learn from.

Jason Yeh: Love that.

Well, Michael, I really appreciate your time sharing how you've sort of navigated the fundraising waters at Revenue Roll. We'll be excited to see what you guys do for your Series A. And last thing, you're in Miami. Uh, are you from Miami?

Michael Diesu: I'm from New York, but I'm a part of that great migration down to Miami.

Jason Yeh: I have many friends who have done that.

Um, the community in Miami is pretty interesting. A lot of good new founders. Are there any that have come across your radar that you want to That you want to put out there that we should be following for our next, uh, our next set of interviews and instead of 2024, 2025, uh, we've actually had this happen twice now where an early guest says like one of [00:27:00] my favorite founders is blah. And then two years later we've interviewed them. Anyone come to mind? Could

Michael Diesu: Has to be SAS or can it be?

Jason Yeh: just like a founder that you know is getting started that you're like, I have an eye on this person. I think he's going to be, he or she is going to be great,

Michael Diesu: Yeah. So a recent friend down here, um, his name's Gabe Loftus. He used to work at Meta. Um, he is building a, a really cool direct mail platform, which sounds like boring, like sending marketing, um, via postcards, but he has a really cool automated, like clear incremental way that they're building it. Um, and he's down here in Miami with me.

We play tennis, um, well, a version of tennis called Padel,

Jason Yeh: but, uh,

Michael Diesu: on the weekends and, uh, you know, it's always exciting to hear what he's up to and how quickly they're growing. So, hopefully you'll have him on here soon.

Jason Yeh: we'll keep tabs on him and obviously keep tabs on you and revenue role. But thanks so much for joining us. This is a great conversation, Michael.

Michael Diesu: Thanks for having me.

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[00:28:00] That was my episode with Michael DSU co-founder and CEO of revenue role, helping companies scale revenue with the most accurate retargeting technology in the market.

I hope Michael's ability to raise during both an easy and terrible fundraising market gives you the inspiration. You need to start prepping for your fundraise today and get funded.

When we come back, we'll see what my producer page had to say about the conversation we just had.

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Paige Randall: [00:29:00] Hi Jason.

Jason_Yeh: Hey Paige, how are ya?

Paige Randall: Good. I finally am able to go outside during all points of the day and I'm enjoying it.

And who, who, like, ever says they get excited when it's cloudy out? But I've been so, I've, this whole week's been cloudy and I've been loving it so much. It feels like summer in Buffalo.

Jason_Yeh: I was gonna say, we should make sure that we give a little backstory of born and raised in Buffalo, New York, went to college in Buffalo, and now you live in Austin, Texas. Very different climate,

Paige Randall: Very different climate.

Jason_Yeh: my memories of my last visit to Austin in the summer was so hot that the doorknobs. Or too hot to hold. Like you [00:30:00] literally had to like get your t shirt up and grab the doorknob. So

it's quite a

Paige Randall: Even cars get sunburned here. It's a thing. It's crazy. Um, but that is not today's topic of discussion. That will be for another time. Today's topic of discussion is Michael and he's the CEO and founder, co founder of Revenue Roll. And I really liked. the two things that we tackled or that you tackled in this episode, which were his pre seed and his seed.

And if everyone was listening properly, they heard how big his pre seed was, which was 1. 5 million in 2022. And I just wanted to pause on that for a second and ask you, first off, I know pre seed is a relatively new round. Um, And I'm curious to know if, like, you have an estimate of when we first saw, like, what is defined [00:31:00] now as a pre seed round, and then I have a following question.

Jason_Yeh: Yeah, I'm, I'm more specific about this in some of my writing, but, um, I do remember it coming on the scene. I would guess it was something like 2018

Paige Randall: Okay.

Jason_Yeh: to 19 when it started becoming more popular. Uh, I remember, yeah, I just remember. People then making up terms and they would call it a mango seed. A mango seed is like a, a really big seed. And then people came up with terms like, Oh, let's go before that. And let's go to something that's before the seed and precede. So it's, it's really not that old. I, you know, like I said, it's, it's probably six ish years old and. Some people might say, no, no, no. We were doing things like that before then, but I don't think it became popular as a term, nor did it become popular as like a category for specific firms to focus on until the like 2019, 2020 run up.

Paige Randall: That's really [00:32:00] interesting. I have another question, but one just came up. Is it, so is it then relatively new that there are firms, or like venture capital firms that are dedicated to being pre seed funds?

Jason_Yeh: Yeah, it's, it's just a weird thing where, um, seed rounds started getting bigger and bigger as in like, Oh, we used to want to invest X million dollars. in the round before a series A. And then people were like, Oh, we want to, we were going to put more money into that, more money into that, more money into that. And then there became this like little middle ground between angels and that, the, the growing size of the seed round. And people were like, well, we should focus on that. Um, and then it became like, well, we'll go a little bit earlier. We'll go with less traction. And we want to be those firms to like, catch it early. Um, And, and like, so in a sense it, there, it has been, it has been pretty recent that there are firms focused on that, [00:33:00] but there's always kind of this cycle of, of firms starting at one place and then wanting, raising more money for their own funds and then realizing that they need to deploy more capital as in put in more money to work per deal. And so you see them saying like. Initially, we would write million dollar checks and then they're like, well, one and a half, then two and then three. And then they start like essentially going to companies that have a little bit more traction or further along to put more money in, which creates this like void of funds that will actually back companies in that

space. And so it's actually a cycle that you see

Paige Randall: that's interesting. I was mainly asking these things because I was curious to know, I guess, during the crazy time of like 2021 to 2022, these pre seed rounds seem to like have gotten really big and kind of mimicked [00:34:00] what you would usually see in seed rounds and I guess now that we've moved through that and things have changed I was wondering if you think it's kind of back down to what it was before.

Um, like I guess when I think of pre seed I think of like, I don't know, less than a million, like five hundred thousand dollars. I don't know if that's way too low or, but that's what I think of and I think of seed around like the lower million range and

Yeah, you go for it.

Jason_Yeh: I think you're right and like your instincts are correct. Um, in the bull market over COVID people were, you know, it was called the ZERP area era, the zero interest era where people were just getting access to capital funds included. So when they got all this capital, they needed to deploy it. And they were like, Oh, we need to invest.

And they were just being willy nilly with it. Companies that in the past, maybe. Deserved getting a half a million dollars or a million dollars. [00:35:00] People were putting two to three to 5 million just because they wanted to put the money into companies. Um, we are no longer in that exuberant era where anyone with an idea, uh, can like wink at an investor and get a few million dollars, so that is pulled back.

I think there's a little bit of a, I don't know. I think there's a little bit of an imbalance. There's still a little bit of additional exuberance around AI. Everyone else seems to be crammed down to having much more, um, reserved expectations around, uh, how much they should

Paige Randall: So like an AI pre seed could still be pretty hefty, but like,

Jason_Yeh: with the right elements, yeh, can still

Paige Randall: so then this leads me to my next question, which is this finger in the air, which you like to say. Pre product, pre revenue, SaaS product. What do you think revenue would have been, revenue role would have been able to raise for a pre seed in today's market?

Jason_Yeh: That is [00:36:00] the right question, right? That is a great illustration of where things move and how definitions of rounds and round sizes and where the cutoff or traction points need to be in order to raise. Those are always moving. So founders need to, um, need to know what the market is. I can't remember if Michael said what his background was. Um, I don't think he had sold a company before. I don't think he had the credibility to be able to be like, Hey, Hey, You should raise, you know, you should, uh, you should invest in me. So today, someone without a crazy credible background where someone could take a flyer bet on them, pre product, pre revenue, pre revenue, those companies aren't SaaS, just pure SaaS.

Those companies are not raising money.

They just aren't. They would not have

Paige Randall: It's crazy.

Jason_Yeh: The good thing is I can, I can be, I can be 100 percent confident in that because we can never test it. But I'm telling you, like those, those companies with those statistics and those backgrounds and [00:37:00] those, um, profiles, they are not raising

Paige Randall: It's crazy.

Jason_Yeh: The bar has gone higher and higher and

Paige Randall: That's crazy. Um, he mentioned something that I, I don't think, I thought I understood, but now I, I don't think I understand, which he was talking about the precede round and he was calling it, uh, he views it as a rolling round. I always thought of rolling rounds more so as bridge rounds, or I don't know if the, I guess what I'm asking you is can you give like a quick little beginner's definition of the difference between a rolling round and a bridge round.

Actually, I know what a bridge round is. I know what a bridge round

Jason_Yeh: we'll, we'll, we'll talk about a few of those things and like, and where you might have gotten confused. Again, everyone out there is so glad you asked the question because most people like, even if they understand it a little bit, probably don't know it super, super detailed. So let's get into it. Um, so first I'll just describe a bridge round. Bridge round [00:38:00] isn't really, um, applicable here. The only thing that might've gotten you to think about it is bridge rounds are usually smaller and bridge round are exactly like the, the, the terms used are used to describe what it is, which is you are raising money. to build a bridge to an actual bigger round, like bigger, bigger fundraise. So a lot of times it'll be like, Oh my God, my company is running out of capital. But in two months we will have launched this product, which will actually generate the revenue, which will give us the numbers and create the story that we'll need to actually be successful in fundraising. Instead of raising now, Like the full round, we want to raise a bridge round, a smaller stub to get us the, what we need in order to run a full fundraise. That's usually what we think about bridge rounds for. Sometimes it's a bridge to an M& A, um, an M& A event. So a sale of your company, you don't need a full fundraise.

You just need a bridge to that. But [00:39:00] everyone should think about bridge as an, an actual connector between the point, like the current point in time and something that you're

Paige Randall: is. It's almost like it's gonna help you finish that one milestone or thing you said you were gonna do, so that you can

Jason_Yeh: Exactly. Um, now rolling rounds, rolling rounds could be done at any time. I think when you describe a rolling round, it's just like, let's say I wanted to raise 2 million or in Michael's case, one and a half million dollars. A rolling round is like, you're talking to a bunch of people. And page says that page is interested in investing 200, 000. And you're like, great, collect the money, put the money in 200, 000. And you're just continuing to like talk to people as you're running your

company, not really running like a full process. And opportunistically, when someone says that they want to invest, you're like, yeah, jump into this round. It's still open.

We're still, we're like, it's a rolling [00:40:00] close is what they say. It's like, we're just rolling the money in. And the reason I think Michael attributed or like sort of equated pre seed rounds with rolling rounds is that honestly, um, inexperienced founders who don't run processes, who like don't need to raise that as much money. It all kind of lends itself to doing this thing where you're just kind of like, Oh yeah, talking to people and collecting money when you can. Um, so it probably happens more often than not in the earlier stages.

Paige Randall: that makes sense.

Jason_Yeh: It's not an approach I would, as you know, advise people to run, but,

Paige Randall: it seems like it's more

common, like you said, with precedes, because there is At least what I have noticed. I don't know if it's always like this, but there's way more like friends and family, angel involved. It's usually, I would say, correct me if I'm wrong, is it not that common to have a pre seed round that's [00:41:00] just venture firms, maybe, maybe it is.

Okay.

Jason_Yeh: it's somewhere in between, but yeah, like there are pre seed funds who will, you know, majority of a check of a, of a round size, they'll write a check that fills it up. And then yeah, small, small checks will come in. Some will be angels. Some won't be. Um, but yeah, I think the, the idea that multiple would people, multiple entities, people that, uh, things that write checks would come into a fundraise. over a course of months and months and months, little by little by little. That's very unlikely to happen with funds. It's more likely that you're talking to a bunch of angels or whatever, and you're saying, Paige, join us. Jason, join us. Jonathan, join us. And so that is another reason to Michael's. You see rolling rounds happen in the pre seed, but like, I don't want people confused that [00:42:00] pre seeds should be rolling rounds.

I just don't think that's like a very good approach. I'd much rather people go, even whether they're angels, individuals, or pre seed funds, you try to like figure out all the people you're going to talk to. As much as possible and then go talk to them all at once and try to close them all at once and then get back to

Paige Randall: I like that. Like, you can still apply the calendar density aspect to things, even if they're not a venture, a regular venture firm. Like, you could still grab a list of all the different pre seed, angels, whoever else, and still, yeah, I feel like that's looked over a little bit. That's, that's great. Um,

Jason_Yeh: I mean the dynamics of influencing people to invest, whether they are a partner at a fund or an individual writing their own check, they're very similar. It's like, they want to feel like other people are doing it. They want to feel like other investors are joining. They don't want to just be on their own having to decide to commit to you and trust you.

They want like those signals pushing you and that's why you

run a process. [00:43:00] yeah.

Paige Randall: on to the round for a second. Obviously, he ended up having, they must be doing something right because, and this is creds to him and his whole team because they ended up closing a really good seed round less than a year later. Um, and I wanted to highlight because obviously this round was raised when the market was going through a lot of stuff.

SVB had happened a few months after he started trying to raise, it was just messy and there was a lot going on. And I really liked how we mentioned that he met Anthony from Innovating Capital who ended up leading the seed round. Early January, 2023 for coffee. And then stuff went down, SVB, all that stuff, things were changing and he hadn't talked to him for like three to six months, months, and it paused.

And then they picked up the conversation. And I just wanted to highlight that. Cause I feel like. People can obviously, he was in a good spot because he had raised a pre seed round. He didn't have to worry that much, but it [00:44:00] is cool to see how sometimes good things take time. If, you know, and I just wanted to call that out.

Jason_Yeh: I mean, I think his story highlights a few things that I try to get founders to more deeply understand. One of them is how much investors like feeling like they caught a deal. And in this case, this is like catching a deal is, is, um, Anthony met Michael early and he like has a good meeting with Michael. Michael's doing something interesting. Um, The company is building revenue and he's like, well, I met this great founder early on. So most other investors are not like clamoring to get to him yet. He also has a data point early on, which is another thing that. Founders should realize is that investors like seeing the progress, like knowing that the progress is real.

And Anthony could tell the progress is real because he met him in January [00:45:00] and then three to six months later reconnected and could connect the dots from what he saw previously to what it had grown to. And all those things are what relationship building is, is all about. And, you know, it's, it's important to call out that some people do that over the things. and meeting investors along the way until when they finally go out and raise capital. There's kind of like a big body of work to reflect back on, um, and influence the reason you want to invest in the founder. And then others like do it in a more compressed period of time because they, they have to like get their network. Running and, and building. Um, and I probably like Michael and Anthony as a example of the latter of like, okay, well I raised my pre seed round, but I know I'm going to have to raise more money. So you're meeting investors along the way and building relationships so that when he actually decides to go out, there [00:46:00] is connective tissue within the investor community so that he can actually stimulate a really, really good race, which he was able to do.

Alongside great numbers,

Paige Randall: I love that. Yeah. Last thing I wanted to tiptoe around is. He mentioned that moving forward, he would like to only talk to funds that have led rounds in the last 12 to 18 months or who are like basically currently investing in the space. And I guess, I don't even know if I have a specific question around this, but I guess I'm a little bit confused around what it means to be a lead.

And if like, are there certain firms that are just always lead? Like, can't you go back and forth? How do you know? You know, like who, who is a lead and who isn't, or is that just something constantly changing?

Jason_Yeh: I wanted to make a snarky comment

first, which is, I'd like to be [00:47:00] 6'4 and dunk a basketball. Now that's, that's a little bit of an aggressive of a comment. My point is that if I think when you're a founder who raises capital in one way and feels like they wasted time talking to investors that never would have Invested or never would have led your deal. Your next comment is, or, or like maybe, and one of his comments is like that have led around in the last 12 to 18 months. He probably, he specifically must have talked to a fund, led deals, but was actually like going out of market or like stopping investing and, So essentially he has scar tissue. He's like scarred from that experience.

So in the future, he would like to only talk to investors who lead deals and specifically have led deals in the last 12 to 18 months. Yeah. We, we all want some of these perfect scenarios, but the first thing I'll say is like, it's pretty hard to be that dialed in, especially at the earliest stages. Um, [00:48:00] so when you're talking to investors, when you're running a process, I think you have to, build, like bake in some expectations that look, you're running a process, you're trying to talk to as many good funds as possible, but sometimes you miss. Um, and then to your question of like, what does it mean to lead? What does it mean to not lead? So there are some funds whose strategy, um, relies on them being lead. And by being a lead investor, that means like, We always have the biggest check size in the round, usually. And their strategy probably has something to do with, um, having some sort of influence or control in the company. They feel like, and a lot of funds are like that, they feel like they want a seat at the table. They, they, they want to care about every investment that they do. They never want to be like a small check in a round and not really

care. And [00:49:00] so their strategy is that they always lead. There are some funds that are like, we would like to lead, mostly like to lead. But if we can't lead and we can still get a decent enough chunk of the company or a decent enough sized check into the company, then we don't have to lead. So to your point, yes, some funds will, will do both. And then there certainly are funds who never lead. Their whole strategy is just to wait until they see a fundraise coming together in a credible firm. Deciding that page is a really great investment. I'm going to go lead the round. And then those funds will like hustle up and try to be

like, Oh, me in. Let me

Paige Randall: they never say that directly. Or,

Jason_Yeh: Well, no, actually, no, a lot of

Paige Randall: okay, then I guess that's one way you could avoid, you could find those, but,

Jason_Yeh: yeah, so you know what, to your, to your credit, to your credit or that, that question is accurate. None of the websites say

that. None of [00:50:00] the websites say, by the way, we

Paige Randall: yeh.

Jason_Yeh: you know, because you're right, um, they'll, they kind of want to make contact. With founders, they want to at least make contact and like make the connection and hear a little bit about them. And then when they're like, when they find out, when they ask the question, like, how do you invest? We're like, we don't lead, you know, we wait for a great lead to get in place. Then the founder is like, Oh God, like that's so annoying.

Paige Randall: Okay, this might be a really silly question, because I don't, I don't know, just wait till you hear it. But I always get confused when people say, That they're looking for funds, um, that have invested recently. Cause in my mind, maybe I'm just thinking about smaller funds. But I'm like, if they invested recently, doesn't that mean they have less of their fund left to potentially Or am I so off with that?

I don't know why my mind goes to that.

Jason_Yeh: You're right. And it could be the case that if they invested recently, they've. Used up all their capital. Um, but I think when people say that [00:51:00] they are more defending against funds that like the fund exists, but they haven't really raised, they already deployed all their capital. Um, so there's this idea of reserves versus. Primary, like primary checks. So like, let's say I have a hundred, a hundred million dollar fund. Sometimes firms will invest 50 million, half of their funds or a portion of their fund into first checks. And then they'll reserve the second half for follow ons or for extenuating circumstances where they need to put more money into the company. And so a lot of times a fund can be alive and be exist, like exist, but they might've deployed That first 50 percent that they said they were going to, and that's annoying because then those funds will still take meetings so that they're like still in the flow of information. But at the end of the meeting, they might say like, we're actually in the middle of raising our next fund. The [00:52:00] timing might work out. Uh, we'll let you know. And that, that can feel like this huge

Paige Randall: Oh, yeah. I totally feel that, Michael. That's tough.

Jason_Yeh: Yeah, I think, I think reading between the lines, Michael has a little

Paige Randall: Well, Jason might feel differently if he ends up being able to dunk. So, we'll, we'll, we'll check back on this opinion.

Jason_Yeh: Debrief. End.

Paige Randall: That's, that's one way to call it. And, yes, that's the debrief.​

[00:53:00]

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