How Orri Bogdan Raised a $2M Seed Round for VAE Labs (Orri Bogdan / VAE Labs)

[00:00:00]

Orri Bogdan: I think most founders don't deserve it. You have to earn it, right? Cause like I, I didn't deserve it at that point. I had to earn it and like self realize like actually truly believe that I deserved it.,​

I've had over 47 founders. Come on this podcast to share the stories behind how they raised millions for their company. And out of all 47, I'd say that less than 10 could be described as smooth sailing fundraises.

And that's because most aren't. Most are stories of struggle. Having countless things go wrong and against all odds closing a successful round of funding. Those are the stories I like to share, because those are the stories that I think actually represent what it takes to fundraise and be a founder. [00:01:00] Today's story is no different. For this interview, I'm speaking with Ori Bogden founder and CEO of bay labs. During the early stages of building and trying to fundraise. He ran into every problem you could imagine.

Co-founders leaving to go back to school. Production batch failures running out of money and lots of rejection from BCS. It would have been easy to call it quits, but he didn't. Instead he immersed himself in founder communities leading to connections and conversations that would end up leading him to close a $2 million seed round from Draper associates.

But before we have already telling the story, I wanted to know what he was up to before he became the founder that we see today.

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Orri Bogdan: like, I'm like high functioning autistic. Uh, high ADHD. Uh, I very much introverted, bullied most of my life, uh, got into communities very [00:02:00] heavily because I loved gaming and I loved building communities and being a leader.

It's sort of a natural thing for me. So I built several small and large communities, which are called like clans or guilds or whatever the game was in. It was a lot of different stuff. Um, I'm still, I'm 27. So I'm still young. I only became, uh, so for, for, uh, I guess. I kind of got into everything. I started off, I met my co founders when I was, um, 21 and I was trying to be a pro gamer from 17 to around then. Uh, so we went in 2022. So I was a challenger, League of Legends player, like top 30 North America for like several years. Um, I had a few different offers, didn't, my parents wanted me to finish school. So I was finishing school. I met my co founders in college, really into the gym at the time. Teaching them how to gym as well as doing human performance focused like startup stuff.

Um, they wanted to do a few different things, but the caffeinated breath spray came about when we [00:03:00] realized that if we could develop a way to make caffeine more soluble and liquid, we would have actually functional caffeine spray. Cause the problem with caffeine in the spray form is that it's hard to get a lot of like caffeine into a very small amount of liquid, and this is a very small amount of liquid.

So each spray. Without our tech would be two milligrams of caffeine, which would be about 30 to 40 sprays for a cup of coffee. Um, with our tech, it's 10 X more concentrated. So it's just three sprays for a small cup of

Jason Yeh (2): Before, before we get into deeply into VEI Labs, I actually don't want to glaze

Orri Bogdan: Yeah, no, that's fine. That's fine. I, I, I'm sorry. I'll just, I'll, I'll just, I'll just give you a background.

I can speak more to my personality

Jason Yeh (2): Yeah, no, no. Like

I think it's, this is a great conversation because, um, we, we, we know that there are a lot of founders with, uh, all sorts of, uh, neurodiverse backgrounds. And I actually haven't gotten a chance to, to speak to someone who is, you know, transparent about that yet. So would love to hear a little bit more about you as a kid.

And, and, you know, you talked a little bit about your parents wanting you to finish school. [00:04:00] You're an entrepreneur now. Can you talk a little bit about maybe what your parents wanted you to do, what they did, what your, what your role models were in terms of what you thought you were going to be when you

Orri Bogdan: I always,

yeah, I always did whatever I wanted to do.

Um, So like, I, I have a play published when I was 15, and then I Tisch, and then I've written a couple books that are unpublished and not out at all, like, they're just on my computer. Um, so I've always had a very creative background, specifically around writing. Um, I went to a Jewish school, so I had to take like 10 plus courses, so I found that even though I was naturally, I was good at math and science at the beginning, I just had so many courses and languages, like I had to learn four different languages in school that I like Hebrew, English, Yiddish, French, um, that I wasn't able to really, I started hating languages and I started hating math and science because once I moved away from, um, the Jewish school to a different school, it became a lot more like logic based versus just like, um, regurgitating information, which is what I had been doing previously.

[00:05:00] Um, so I ended up going completely into like the left side of my brain and just doing complete creative stuff. Which is how I became a playwright, um, and an author. Um, and stuff like that. Um, gaming is interesting for me because I kind of see it as another art form where I like to take, uh, like I'm good at games because I, I, I have good, when I train my, like a lot of work ethic, like I get obsessive. So the thing with ADHD and autism is that ADHD is, um, it's hard to stay focused on one thing, but you're super high energy, but autism, you get super obsessed with one thing. So they're kind of contradictory in ways. Um, I've always, but I've always been able to like really hone in on something I really love, and I love gaming and I love community.

So those two things I really focused on, and the community was out of a need for like being bullied, not having friends in real life, I wanted friends online. And then gaming was just sort of a show of like, the battlefield is even, and anything you do is sort of based on your own ability to improve yourself and learn and adapt. Um, so I always loved that as sort of like a dynamic art form. Um, I love League of [00:06:00] Legends in particular because The map is always the same, but the characters are different. So there's always a different combination of characters and like different outcomes in the game. Like maybe one, one, one time, like you're probably the same matchup top lane, but like one guy wins on the first time it can go the other way with this counter matchup.

So it's like, I, I love, um, adapting to dynamic situations and I like being a leader in those situations. So. When it came to gaming, I was always the leader. If it was like a game where it's like a, like a Call of Duty, like I'd be the leader of my clan, or like if it was League of Legends, I'd be the jungler, which is someone who'd like go in between the lanes and sort of determine the, uh, the flow of the game.

And

like, I kind of, you kind of think like soccer, like you, like you're passing the ball and it's my job to like set people up for stuff. Um, and I feel like that's what I'm really good at. And then I feel like that also transitioned me to, to real life now where, um, this community that I'm, I'm building and building my team at it's very much just like a puzzle and like figuring out like. Who's the best person for each situation. And, um, what I, what I'm good at, I think is identifying talent, um, and giving that talent agency to work. [00:07:00] And then once they do that, once they have that agency, if I trust them, I don't need to step on their toes. Um, and then usually that ends up being pretty, pretty good.

And I don't have to do as much work myself.

Jason Yeh (2): So, you know, when we think about getting to this point, because we're going to get to a conversation where we like to focus, which is fundraising,

Orri Bogdan: Yeah.

Jason Yeh (2): you know, when you were a kid, When it came to professional ideas or what a career would be, your first idea was like, I'm going to be a programmer, right? Did you have entrepreneurial role models?

Like, were your parents scientists? Were they

Orri Bogdan: My grandfather, uh, my grandfather is from Israel. He built a shoe business. Um, they have like 15 shoe stores. Uh, my dad has also worked for the company. Um, we ended up becoming a shoe distribution company because the retail sort of died. Um, but I had zero interest in that, like ever. Um, I, I, I didn't necessarily want to be a founder.

I just wanted to, um, do something that I was passionate about and that I felt would leave an impact. [00:08:00] Um, and I wasn't really sure if that was going to be like, I'd release like a book that became like a well known movie, which is a TV show. if that's an option or if I was going to be a pro gamer streamer or like what, um, the founder thing happened because my friends were founders and they needed me to be part of it. Um, and I saw opportunity in actually the, the CEO at the time who was, I didn't want to be the CEO or be in the limelight at all. Like I really didn't want that. Um, I was a COO. I was like, I like being a leader, but I don't need the, like the attention.

Um,

so, um, Well, I'm an introvert. Like I, I don't mind it, but it's not something I crave either.

So I just, I, like, I don't, I'm not scared of it. Um, but I, my, the CEO, the first CEO who's still working with us and is doing good in his new role, um, did want that and I felt that was a huge weakness of his, um, and that was, uh, part of the reason why I think the company fit. So like, I don't know if we get to the funded part, cause we got funded, um, [00:09:00] After I became CEO.

So right now I'm speaking towards before that still,

Jason Yeh (2): Right, right.

Orri Bogdan: Um, we, we, we've started on 21, 22. I was, maybe I could just speak towards that process of like before then. Um, so,

Jason Yeh (2): company raise money before you were CEO?

Orri Bogdan: no, we'll, a small amount. We raised about like 100k before I was CEO. Um, which was from me and my brother, so it wasn't

Jason Yeh (2): gotta guess. Not really.

Orri Bogdan: So like it wasn't, we hadn't really raised, we put in our own money and the other two co founders, they put in 10k each. We hadn't raised external money, uh, before I was CEO, just to be clear. Um, so the process of what happened with VEI is that in 2020, um, We hope it happened. We realized that, uh, we had to launch online. We did a different plan initially, but we're like, okay, let's do a Kickstarter. Um, Kickstarter doesn't allow caffeine products. We did Indiegogo. Um, so we went on Indiegogo. Um, we sold about 55, 000 in a month and a [00:10:00] half, which is like really good. Uh, on limited ad spend, like we didn't have a big budget. It was pre iOS 14. So there's some advantages then. Um, but we did, we did pretty decent, um, for being a bunch of like recent college grads without much experience in the middle of COVID. Um, What ended up happening is our manufacturer couldn't produce our product.

So we had to find a new manufacturer. It took us a year delay to get one. Um, finally, a year later, we get the product, bring it in. Um, and a big, a big problem happened, which someone had caused. Um, and after that problem had happened, we had to manually make all 5, 000 bottles ourselves because the, the liquid manufacturer was going to charge us like triple or quadruple the original price. Um, And we did that, and then we shipped them all out, and then they all broke. They all like, leaked or exploded or whatever. So at this point, we were out of money. so my co founder, who was the CEO, quit and did law school. then my other co founder got a full time job. And then I was the only one working on the project.

And I, I still like, had enough of my own savings where I wanted to keep going [00:11:00] with it.

Jason Yeh (2): And you believed in it?

Orri Bogdan: Yeh, so I, I kept trying. The hard part was that I didn't believe in myself as a CEO yet.

Um,

Jason Yeh (2): Well, so let's pause, let's pause right there, Ori. Cause like, this is where a very interesting shift in the, the lore and the story of Vay, especially around capitalization happens. Uh, cause you're, you're, you're going really quickly through it, but it's a crazy situation, right? So let's say that you'd been working on a company, put in You and your brother put in 000 each to get it to a point.

And at some point, a huge misfiring on the company is, is threatening the whole company, right? Two people quit more or less, right? They go get jobs at least. And you're the only one,

Orri Bogdan: one, one quit, quit. One was helping me still, but I was probably 70 percent of the effort at this point.

Jason Yeh (2): right? And so at that time, you're, you're the only full time at VEI, I assume.

Orri Bogdan: Yeh.

Jason Yeh (2): So at that point, I want to slow things down [00:12:00] and ask you, like, What's going through your mind because you

Orri Bogdan: Yeh,

Jason Yeh (2): running the company, right? You, you don't have any more money in the bank. You had all these mistakes and these things that are, that are threatening the life of the company.

So how are you thinking about what your options are in front of you?

Orri Bogdan: Uh, well, we didn't want to raise money before we wanted to try and prove ourselves first, but then I realized that we'd have to kind of get a really good story down and be able to raise money without product or like a proof of concept, really the product selling. Um, at this point, I think for me, a shift that happened was, um, so basically I talked to my brother and my grandfather built a shoe business cause I respect him as an entrepreneur. And I, they both kind of told me like, you have to know when to let go of something. Um, and it's time to let go. And I just thought that was stupid and I didn't agree with them. Um, so I, I told them that and I said, we actually needed about 20K to get our [00:13:00] patent because we had like a PCT, which is a global that we need to actually register in jurisdictions. Um, so I, I got my grandfather to give me 20K for the patent. Um, so that was something that we needed. Um, and that was a, Like he was, that was a argument cause he didn't want to do it. And I, I've said like, if I don't get this and like, there is no product, there's no future to it. But if I get this, then I can raise money.

So trust me to try and raise money. Um, and he was, you know, he did it. Cause I, I begged him, uh, basically, but he's, he's like a supportive and stuff. He just like wanted to make sure I was using, not wasting my time. Um, so yeah, at that point it was tough. Cause I had gained about like, cause I, I used to be like 300 pounds.

Then I lost down to like 150 when I was 21 also, or 20, I lost. Yeah, so I, I got really fit from the gym phase, I got fit, um, and then I gained back to like 200 pounds during the pandemic and I'm around there, I haven't, I've been there. So it's like overweight, but not like obese, like I was before. So I, um, it was tough because part of the, uh, insecurity in my recently built, I thought security or like confidence was in like my [00:14:00] body and then I didn't have that.

So I was going on zoom calls. And I felt like part of the reason I changed my NAR, my picture to LinkedIn to NARTO is I don't want to put a picture of myself until I feel good about it. So it's like, I didn't want to have an old picture. So I literally, um, I wanted to, uh, basically I had to get over the fact that I didn't like how I looked, but I didn't want to turn my zoom calls picture on, I would always do zoom calls and try to pitch people without a camera on, which is hard. Um, I would send product to people that wasn't working. Cause we thought we fixed it, but it wasn't. So I said it to them, they would ghost me. Um, I got flown out to meet a billionaire in Miami that I was like sick when I met him and I wasn't convincing and he didn't want to do it So I had a bunch of a lot of rejection in different ways mostly ghosting like really like rude Rejection not like not like respectful a few people maybe were but like a lot of lying a lot of shit That was just fucked up, I think um, because i'm a very upfront authentic like I try to be very upfront because I hate people who aren't and uh, [00:15:00] I got a lot of that. And then, um, what ended up happening is I joined so many different founder communities. And then through one of those better communities, I met one person who did two things for me. And I can call her out. Her name's Maddie Largey from Jinx Drinks. Um, she's another founder. That's really good. And I'm friends with her co founder, Colin, as well. Um, she sent me her two things. She made some intros for me. She then introduced me to the founder of Juul um, who ended up becoming an investor in the company. Um, she also, later on, um, Like months later, and indirectly. Um, and I'll get to that too. Um, she also sent me her monthly newsletter for me to copy, which I then, I like to, I, I looked at it and I saw she was on a podcast with someone who also ran an accelerator at the time, um, called the Draper Startup House Accelerator. and we applied on like a day or two before their applications closed. Um, and, uh, I think two of their people are from like India and Ukraine. and They couldn't come because of visa issues. So we were able to come. So we had a spot open up for us. Um, 50 K check, uh, 4 [00:16:00] million post money. First check in after like six months of unsuccessfully fundraising and not really knowing what to do.

Um, so I went there, um, The program changed. It's no longer like a program now, but it was a program where they had these two houses and you would live in the house for a month with a bunch of other people who are funded by the program. Um, it was a really good experience. I went there in May of 2022. Um, The program was super well run.

They brought in really good speakers. Um, and at the end of the program, because it's connected to Draper Associates run by Tim Draper, um, you got to pitch Tim. So I, we pitched him, um, he ended up liking our product, made us our first offer, which is a low offer. It was like 300, 000 at a 3 million post money.

Cause we had no other offers at this point. We'd only raised. 80k, 50k from his accelerator, then 30k from angels that came to the demo day. Um, so there was no leverage. Um, at that same time, I actually ended up meeting my mentor. And I think this is one of the key things that I talk about a lot on LinkedIn is like, a big lever is to find a mentor in your industry that [00:17:00] built something that's similar. Um, that you can leverage for like distribution connections, advice, and also general mentorship. Like I'm 27, like I need, I want somebody who's like 10 years older than me to like, give me a bit of feedback. We've done it before. Um, so I ended up meeting, uh, The first employee from Jewel. and

he ended up putting about a hundred K in himself.

We gave him 7 percent equity for it. So we very, we gave him a lot of, basically I copied YC's deal with an individual instead of a program. And I, I thought it was, I do a lot of things my own way. This is one of the things that I did my own way that a lot of people said it was stupid. Like I talked to one of my wife, the wife's friends about it.

They're like, are you sure you can trust this person? And I'm like, I think so. and it was absolutely worth it. It's been two years now, super worth it. Helped us, like got us a huge purchase order, got us more, more money at higher terms, got us. Like mentorship, connections, hires, like does a lot for us. Um,

Jason Yeh (2): pause you right there cause like, I don't wanna glaze over this point too, because it's a, it's a great piece of advice to call out. It's like, the stuff that a lot of founders go through are certainly unique, but so many of the things are like problems that have been solved. They're [00:18:00] solved problems.

They're, There are things that people understand out there who have been there before, done that, done it before. And so I love the idea that you weren't just like, I have to figure this out myself. There are, there are big shortcuts. One of which is adding someone to your advisory board or a mentor who can show you where the dead bodies are hidden and show you the things to avoid and then show you the shortcuts.

So that's really cool. Um, and then before you go on to, you know, you described this path before getting to your initial conversations with Tim Draper. And it is like zigging this way, zagging that way, like applying to a bunch of different things. Obviously, if you were to do it again, I don't think you would follow that same path.

So when you think about back on those initial things that you did poorly and the things that you, you know, turned out to be the things that helped you. What would you say were some of the things that kind of, if you looked at it again, actually brought you to where you [00:19:00] needed to be pitching Tim Draper?

What were the most important things?

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Everything that, or you just covered highlights a critical lesson. You don't have to figure out everything on your own.

On top of that, I know it sounds obvious, but warm intros from people who believe in you are crazy helpful. It's insane to see how much fell into place for Orien veil labs based off of one good connection. He formed. But I've been in the space long enough to know that's just how it goes. After the break. Or he shares the most important things that led him to be able to pitch Tim Draper and close a successful round.

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Orri Bogdan: [00:20:00] I mean, we got the offer up because we got the guy from Jewel to be part of the team.

And that was something I intentionally wanted to give him a lot of equity. So he would come to all the meetings and care and be a big part of it. Like I wanted him to [00:21:00] feel like we valued him and show him that, because the only way to do that is to give it. Um, and we gave him like a six month vesting on it, just to be clear. Like I, like I gave him a really good deal. Uh, it was really fast.

Um, Tim, Tim, uh, so I'd say the biggest thing that got us done from a pitching perspective was initially we're pitching the potential of the caffeine spray market, but Tim in particular, like knowing your investor is important and Tim is very much focused on huge outcomes.

It has to be obvious to him. So one thing that Tim hinged on with us is like, is there a potential medical Um, applications for this, or is like, is it just going to be caffeine? And like, are you thinking more about the device? Are you thinking more about the solution that you already have, like the tech you already have? Um, and he really wanted to see the big outcome. So learning to pitch the bigger vision. Um, when I first, I didn't want to do that. Cause it felt like it was almost like white lying. Cause it's like, well, I, this could be the case, but like, who really knows in seven years, we're going to be at like, This could be, but I thought that felt like it was not being [00:22:00] honest, but that's not how it's actually done.

Like they expect you to paint the, if everything goes right and this is what it could be. And that's what they expect when it comes to like a TAM.

Um, and I, I didn't know that. So that was one thing. It's just like to both have a very realistic and clear TAM, but also a pathway to get there that made sense. Those two things combined was really important that I developed. And then also, um, Having the team to justify that it could happen because my two co founders are like neuroscience grads, uh, one's a lawyer also, um, really talented guys. But like, that wasn't interesting, like that wasn't impressive for VCs.

Like they wanted to see the jewel guy. And like, if, if he was a co founder, like if he would start it with us, like earlier on, co founder, we probably could have raised it like a 30, 40 million valuation. In 2021, whatever, like would probably not too difficult. Um, so I think a lot of, um, what VCs are doing are pattern matching on various specific things [00:23:00] like market size, realist, like realistic pathway to get there, um, strong proven team. Uh, that, that, and I think part of what they're thinking is also like, how would other VCs do this? And I think that they're seeing this as like, well, wow, we got in an eight and a half million post money into a team that has the Juul founding team on it. And like all this, it's just, it's, You kind of, by getting behind the curtain a little bit, you start to understand what they're, what they, what they actually, how they're thinking about things and you start to understand how to pitch things towards them and all of these, everyone's a little different. Um, but I think most importantly for what I, this is necessarily your question initially, but most importantly, what I learned about the, how to think about VCs is like, I, especially with this community that I'm doing, which I'll probably raise some money, probably only on uncapped safes. Cause I don't really want to give much equity away to VCs anymore.

Um, not that I have issues with my VCs, but like. I don't think that VCs are important. Like, unless they're actually, like, highly operational and, like, relevant. So, like, the Jewel people, who, like, is also a VC, is [00:24:00] super important to me. Um, and, like, The other VCs I have are good. Like, I, I'm not at all throwing, I wouldn't throw shade at them at all.

Like, I think they're, they're really good and I got lucky with them, but I've also heard of a lot of VCs that are not good. And I've heard of a lot of VCs that are useless, which is probably the most common failure mode of a startup because you give away valuable equity to useless players. And then the founding team gets more than they can handle and they don't have enough equity to give away to employees.

And then either the founding founders get diluted to nothing or they just don't have equity to give to key players and they have a shit, shit team. So, Sorry, a lot of, a lot of thoughts there. Um, but basically I just, I value who, who, uh, has equity a lot.

Jason Yeh (2): Yeah. There's one other part to this that, that you've kind of glazed over and it's a bit of a nod to your, your comments about, you know, not needing the limelight. Um, but one thing that you didn't talk about, which is very important, is actually, The VC's perception of the founder CEO, right? Like, and I wonder if you have perspective on how you were kind of thrust into this [00:25:00] position, you, you weren't the CEO, you were COO, but the CEO kind of moved on to law school and all of a sudden it's, it's your job.

Right. And so. There is a bit of a learning curve, I think, for you to get to a point where, you know, you can stand in front of Tim Draper and really drive that conversation towards something that he's excited about. So can you think back on your, your own evolution and whether or not you had to sort of work on parts of yourself in the live pitch scenario?

Or if it's, you're like, no, okay, go for

Orri Bogdan: for sure. I mean, I pitched on TV to, so how I met Mark Randolph is I went on elevator pitch and I pitched him on TV and that was something I never wanted to do. My team pitched on Dragon's Den, which is like the Canadian shark tank before I was CEO and I was like, thank God I don't have to do that.

And like, then I had to do it. Um, so. I, uh, yeah. I mean, I, when I pitched him initially, like, I don't think I did a very good job. Like I was really nervous. Um, I didn't have, I felt like I still didn't believe [00:26:00] that we could be VC funded. I thought that because everyone had told me that we're a CPG company.

No one cared about our tech. They're like, you're a CPG company, you know, revenue, like get a million revenue and then we'll, then we'll talk, which everyone told me. So I was like, okay, I have to raise some angels and like Tim won't. And so even though Tim gave me, I think a low ball offer off the start, I still was like, I didn't sleep for the next two days.

I'd say there was a shift in my brain at that point, um, where I was like, okay, actually this is something and I am someone to do it. Um, which wasn't clear before. Um, And then I guess that combined with meeting so many other founders, these founder communities and stuff, allowed me to have perspective Um, and people say, Oh, I hate when you don't compare since the Thief of Joy, I compare myself to everybody.

Like I was comparing myself to everybody, understand, like, what makes this person successful? What makes this person unsuccessful? Like, do I think this person is going to succeed? Let's see in 12 months. Like I, I, I compare myself to everybody because I think it's the only way to be accurate to like to understand, to get a true read of like how things are in reality.

So I, I did that and I, [00:27:00] um, From doing that, I was able to kind of kill my imposter syndrome because I know how capable I am from evidence, and I know how capable I am from research. And I've done all these things and I've sort of verified to myself, and I didn't have that before, um, but now, like, I, anything I spend my time on, I know is going to be extremely valuable, and if I give equity to anyone, they better be providing a lot of value back, otherwise I'm not going to do it, which is where my opinion of VCs is now, is like, you know, I would never raise it like a low pre C to C value, I'd fund it myself as much as possible until as long as possible, and then only take on VCs that I think actually have relevant experience.

Jason Yeh (2): I think that, that part that you said you worked on is Extremely important for everyone to hear, um, from all types of backgrounds, but imposter syndrome is, is one of the calling cards of a lot of like initially successful people in the world that get to a certain level. And the thing I think that makes them break free of that or break out of that and even further in terms of [00:28:00] success is like actually gathering up that, that Self confidence and the, the vision for where you want to bring a company.

And that's what VCs are looking for, right? Like VCs want to see somebody who, who knows what they think they can do and believes in that. If you don't believe in yourself, how is a VC going to believe in you, right? So.

Orri Bogdan: I think it's even, they want, they want someone smarter than that, like better than them, right? Cause they, if VCs, I think, I think most VCs would be founders if they felt they could be founders. Like, I feel like they want someone that they're like, wow, that's crazy. We just give them our money. Like, that's what they're looking for.

And like, I wasn't that in the early days of A, which is why I think my valuation was, I mean, it was bad market, but like, wasn't where it could have been. Um, but that's what I'm saying. Like me at 27 versus me at 25, my, assessment of myself is a lot different. Um, and it's backed by evidence. And now I'm like, I, I know, um, I don't look to someone like, Oh, they're an investor.

I have to, I used to be like that. They're an investor. I have to

Jason Yeh (2): Yeah, put them on [00:29:00] a pedestal and be like, Oh

Orri Bogdan: no,

now I think most, now I think I'm smarter than almost all of them, except for the ones that have been operators that have actually done stuff. And those are the ones I respect. So like, that's how I feel about it now.

And I really am not impressed by someone being an investor anymore.

Jason Yeh (2): Super. That's a helpful perspective for everyone to have. Actually. It's something I tell all VCs is like all founders. It's like VCs. Like they don't, they certainly that much different than you are. Um, and they certainly don't know your business better than you. So you have to go to the table, come to the table with an amount of confidence.

That you deserve, right? And, and that kind of thing will be picked up by VCs when you're starting to pitch.

Orri Bogdan: I'll say, I'll say one thing there is you said that you deserve and like, that's like, I think most founders don't deserve it. You have to earn it, right? Cause like I, I didn't deserve it at that point. I had to earn it and like self realize like actually truly believe that I deserved it. And if you don't truly believe that you deserve it, you probably don't deserve it.

So like, I don't, I don't. Like, it's not like, I [00:30:00] don't, I don't want to give this idea and I'm running a founder community now, so I want to be clear about this. Like, I think that as many people who can be founders should be founders, but I also think that most people can't be founders and I think that or a successful founder, it's not that like you deserve it and the VCs don't see it in you.

It's like, they probably don't see it in you cause you probably don't have it. And it's not necessarily a, it's not necessarily a bad litmus test to go see if you can raise from VCs or not. And then understand like where, what you're missing

Jason Yeh (2): Yeah, I like sharing this quote, and we're kind of on the same page here, because I like sharing this quote from Charlie Munger. He has this quote where it says, he says, In order to get what you want, You have to deserve what you want, which is like a very simple way of thinking about it. But so much is, can be packed into that of like, well, what does it take to deserve this?

And then do I deserve this? And should I, you know, do I believe I deserve this? Like there are a lot of sort of things that lead into that, but once you know that you deserve it and to your point, not everyone deserves it, but once you know that you deserve it, then you come to the table and then you can get what you want.

Um, or [00:31:00] you. You kind of talked about a very, like I said, a windy journey that had a lot of rejection in the beginning. And, um, you do have a bit of a chip on your shoulder with VCs, which leads me to believe that in parts of the conversations, you know, you talked a little bit about some rude interactions.

Are there any, are there any like situations or things that you went through, uh, during your fundraising journey that were particularly painful? Anything that like sticks out in your memory that, that is hard to forget that you could share?

Orri Bogdan: Uh, I mean like with Angels it was probably the worst, which is unexpected, cause like I guess they don't have like a reputation to uphold. Um, there's a lot of small things, like, VCs just like, not, like reading my emails. Like I've had, I've had like, I've had an update, like, like, and I don't mean that literally, I mean like, Responding, but not reading.

Like, like I literally had sent updates to VCs where they're like, well, kindly [00:32:00] pass. And I'm like, it's an investor newsletter. Like I wasn't even like, like that's happened to me multiple times. Um, I sent emails directly to VCs where then I had talked to them on the phone later and they'd be like, Whoa, I had no idea you had this technology and stuff.

I would have totally invested. And I was like, well, I told you like three times in different emails and I chased you and you didn't, I think they, I think most of them work hard and they have a lot of stuff they're thinking about all the time, which is why they can't focus in on like a few things. Um, but I think most VCs are frankly really bad, um, evaluators of talent. And, and, uh, dive into the rough. And part of why I'm building this founder community is that we're not gating it. I know it's a different thing. We're not gating it by how far you are in business. It's who are you are, who are you as a person?

Do you have a qualities that could make a good future founder? And then can we add the resources to your life that propels that? Um, so that's that's something, I mean, I look at myself as like an outlier, like rebel, like, you know, [00:33:00] non technical gamer, um, you know, philosophy major founder. Like it's, it's not like, uh, I don't fit any of the stereotypes of a typical successful CEO or founder.

Um, and I think that a lot of the best talent in the world is just like looked over because I think VCs like, especially like YC, like pattern matching, right? Like I hate it. Like that's why my issue with YC is like, I think there's a lot of good founders in there and there's also a lot of trash founders in there and I've met both and it's like, they're just pattern matching things that are obvious and they have a really. their system works and the YC machine is like extremely effective. But YC circa 2008, when they were like in their first few years and like actually Paul Graham was going in and actually helping people individually. Um, and there's a team of like Travis, like the four of them total that were doing everything, like compared to YC now, which is like 150 person batches and like one partner to 40 companies.

Like I, I don't have an issue with YC per se, but I think their terms are bad and they pre-select for a certain type of founder. And I think that's, um. I think it's, it's a [00:34:00] shame that there's a lot of founders that, um, are left with no other option, but to take like Techstars 20K for 6%, like, and like, there's like, there's like, I have so much beef with so many different accelerators and terms and my investors always tell me to not talk about this stuff, but the thing is like, I don't care.

Like, I'm going to talk about what I believe in with this stuff. And I think that, um, I don't know, I think the ideal model at which like, For like, that like a YC should be taking is more like a Neo or HF0 model where it's like a few percentage points baseline plus, I don't even necessarily know if I like Neo or HF0 either, but I like their models.

Um, and I think there's that model for like a top tier founder that works. I think that's a logical way to actually support a founder and actually create strong companies on a higher hit rate. Um, like the YC model works, but I don't think it's actually effective. And I think the brand's been diluted. Um, And I think the real model that needs to be done is more of a paid, it's like actually a paid community model.

Cause I've been in so many paid communities and that's where people actually like have skin in the game. Um, and when I say paid, I'm talking like [00:35:00] five bucks a month for like the base tier. Like super approach, like anyone can do it.

It's just about like, let's, let's get some skin in the game. Let's be real about shit.

Let's call each other at our problems. Let's give real resources. Let's do real pitch, like pitch reviews with each other. Let's do a lot of peer mentorship. Cause I think that's where most of the mentorship needs to come from is from each other. People in, people who are slightly ahead or slightly below. Um, and yeah, no, I just, I, uh, I think the whole, uh, accelerator slash founder startup sphere is like really lacking in, uh, and that, that's why I shotgun approached it and have, I tried to find a community that would fit that I needed and I couldn't, which is why I have to build one now myself.

Jason Yeh (2): that's funny. Well, so you, you end up, you know, pulling together over 2 million, which is an amazing transition from exploding, exploding canisters and people.

Orri Bogdan: four now, by the way,

almost, it's like three, that three and a half, three, a little bit over three and a half now. Yeah. Yeah.

Jason Yeh (2): Amazing. As it's quite a transition. And so. [00:36:00] A couple things that I want to wrap up with is, and I don't want us to like dwell on the, you know, ask you the question about the negative parts.

What about the feeling, and do you remember when you had the sort of the main term sheet sign, the thing that sort of opened the floodgates for everything else? Uh, do you remember where you were when you had that?

Orri Bogdan: The only thing that was, I mentioned it earlier, like the only, uh, I didn't really care. The term sheet being signed was dragged, like it just took too long. I, I think when the term sheet got signed, the rest of my team was all happy and my parents and my grandparents were like, so I didn't, I didn't feel anything.

I felt when I, only time I felt anything was when we got the first offer from Draper at the 300k for 3 million posts. I didn't sleep. Um, Then we got multiple follow up offers, so I kept saying no. I said no to that, then I said no to a million at five, then I said no to a million at six, then I took a million at eight and a half.

Um, and, I don't know, like, I didn't feel anything. I think, like I said, I think something changed in me where I [00:37:00] felt I deserved it after that point, and then I didn't, there's no longer, like, a feeling of, like, gratification because I need it. It was more like I'm already validated, so I just, like, I'm just gonna try and do, get what I deserve.

Jason Yeh (2): Love that. Just the, the, the switch being flipped is, is kind of a powerful thing that you talked a bit about how important the, the mentorship and the community has been. It's kind of why you're, you're building this new community. Can you just say what the name of the community is so that people can find it?

Orri Bogdan: gonna change by the time it comes out.

Right now it's called Founders Game. The one I've been building for like 7 8 months. And it's been built with like a team of 10 plus other part time founders.

Like that's, it's, yeah.

Jason Yeh (2): you have, now you have experienced like having gone through communities, have, haven't gotten a bunch of different pieces of advice. You've been a, you've been unsuccessful at fundraising and now very successful at fundraising. Are there any like key pieces of advice that you like giving founders as they're starting their journey either in the company itself [00:38:00] or if they're about to go start their first fundraising journey?

Orri Bogdan: Uh, I mean there's a lot of advice. Um,

Jason Yeh (2): Any favorites?

Orri Bogdan: Yeah, I mean I think mostly, like, I think Uh, one, be very sure about who you're working with, because that's like by far the most important thing, because it's really hard to deal with otherwise. Um, be sure that you're happy in your role, because I've seen a lot of co founding teams break up because the CTO thinks he's a better CEO than the CEO. Um, and then once you have a very clear idea of the market and differentiation and why you're the team to do it, Find a mentor who within the last 5 to years, sooner is better, built a company in the space that is no longer involved in that space. And it's willing to help another company kind of like learn from their lessons.

So that's, that's the approach we did with, the Juul team. And it was really effective.

Jason Yeh (2): Super helpful. Um, well, those are the main things that I want to ask you. I usually end [00:39:00] the interviews trying to look for something fun or off, off the beaten path to talk about. And usually about the, the person's company. So Veilabs, the, the product that you have in front of the camera now, it's a, uh, it's a caffeine spray.

Um, And I would imagine that you have a bunch of different types of customers, like why they use Veilabs, why they like it. What are the most interesting, either funny or interesting use cases or types of users that you have in customers for, for Veilabs?

Orri Bogdan: I mean, if you're having funny, it's like, I know a lot of people replace 80, like add it all with it. Like they'll take it instead of ADHD. If they have ADHD and they need to rely on Adderall, they don't want to take Adderall anymore. They, they'll use Vey instead cause they can control the caffeine dose and use L theanine and L tyrosine.

So it helps with working memory. Um, I think one also, like we assumed, like there's like this little, like sporty sort of like stripe on it. Um, like we sort of assumed gym goers are going to be our market and we were wrong. So now we're [00:40:00] rebranding some stuff. Um, but it's more shift workers, um, that really are our market.

And we're also older than we thought. We thought it was going to be like college age, some college age people like it, but. The majority of our power users are like 30 to 45. Um, so learning some stuff about that kind of every day, um, and we're undergoing a rebrand and, uh, product like optimization process right now.

That's going to be ready around August. Um, so like it's even like after raising and going to, we're in 500 stores, but even after doing that, there's still so much learning and, um, our product right now is not good enough to, uh, for me to go and try and scale it. Like, I just know there needs to be certain improvements and, The good thing about my team is that we're very realistic with ourselves.

And I'm not going to go try and blow a bunch of money to scale something that's not going to be scalable. Like I'm not trying to be like the retail version of like those DTC brands that all died. so we're just focused on product. Um, uh,

we're focused on try to make it a big, like as good a product as possible to make it as big a market as possible, it seems like shift workers get the most uses use case out of it. Um, but whatever it is, you know, the [00:41:00] product's gonna be as good as possible. And that's really the focus that we have for, uh,

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Jason Yeh: That was my episode with Orri Bogden founder and CEO of VAE Labs. Lapse instant energy anywhere.

like I said, in the beginning. These are the stories that accurately represent the journey of fundraising. Let this interview be another example of the determination and persistence. It takes. To get funded

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Paige Randall: [00:42:00] hello, Jason. How are you doing?

Jason_Yeh: Hey, Paige. How's it going?

Paige Randall: Not bad. Um, I, I, this episode felt different because we don't have that many founders on that are in the CPG space, just because I think you've touched on this before, but like, we just don't see as many CPG, uh, companies getting funded these days, and I

actually wanted to start off right there and just ask you a quick question of, like. Was it ever a super popular space to, to invest? I think that it was, if I'm not

Jason_Yeh: Yeah. There was a run up, I think, if we call it, uh, 2017 to 2020, where there was a lot of interest and hype around it. I mean, if you think about things like Warby Parker, uh, Allbirds, Casper was a [00:43:00] big one. The Mattress Company. Um, there was this belief that sort of direct consumer, no, no brick and mortar stores would change the way companies acquired customers and, uh, and brand would, would save the day.

And I think what ended up happening, the reason why you're seeing this now as you're entering the venture capital and startup space, where you're like, Oh, it's not that exciting. Um, Those unit economics and those customer acquisition strategies ended up not playing out. In fact, you saw that, um, trying to go only online meant that your paid acquisition costs would end up going through the roof.

Like your first, you know, a thousand customers wouldn't be so bad, but then once you needed to be a billion dollar company and you're spending tons of money on Google and Facebook, like

it just costs a lot of money. And then you saw all those companies Um, Open brick and mortar stores and then it just ended up not being that great and Casper wasn't a [00:44:00] big success even though it did, um, you know, go public.

Paige Randall: so interesting. So VCs ended up, and this happens, I'm sure this happens with a bunch of industries over time, like people take a big bet on an industry and then it just like, doesn't end up, uh, always hitting, but obviously there are still pretty cool CPG companies getting, um, fundraising. And I think it goes to show. You know, when a CPG company does get fundraising, that like something's there, something's there that made people willing to invest in it.

Um, and I actually really liked how this episode started off where there was so many problems going on with, uh, Veilabs. Like they had manufacturing problems. The founding team like was going through all these different changes.

People were going back to school. Like they were running out of funds and, um, Ori wasn't even the CEO at the start and he ended up just. Stepping up and becoming the CEO. And I just. Out of everything that he listed happened, I was actually very impressed that he was like, all right, no, we're doing this.

And that probably ended up being a [00:45:00] pretty green flag for investors who learned more about his story. Cause they were probably like, what the hell, why are you still doing this? And he's like, I want to do something I'm passionate about, you

know? So that was really cool to see. And it was also impressive because they ended up, because of those problems, having to try to raise money without a proof of concept and how Like, you have to focus, obviously, a lot on the story.

And I don't know if you have anything you want to add to that of like raising. Is that kind of similar to what we see with a lot of pre seed rounds is like raising without proof of concept. I know this was for a seed, but.

Jason_Yeh: yeah. I mean, look, when we talk about seed, pre seed, I think those are terms that are very fluid and liquid, uh, liquid, fluid, you know, you, you don't know where you are on the spectrum. Uh, you know, I'll say something quickly around your initial reaction, which is. Yeah, that, that display of grit and, you know, I'm just going to do this is probably the thing that did get a lot [00:46:00] of early investors to jump in pre product or pre proof of concept.

Because I can see an investor being like, wow, there are so many reasons to give up here. There are so many things that he could have done to like sort of exit stage left. And he didn't, he stuck it, stuck with it. And. In my mind, in some cases, I might be like, directionally speaking, working on something in this space is kind of interesting.

Maybe it isn't this at the end of the day, but kind of bet on the horse, you know, bet on the chalky, not the horse. Um, so that's really big. And then the second part of it is, you know, you're asking about, do you see a lot of people where it's capital pre. Launching of products, et cetera. Um, there is this thing, especially within software companies of, of like raising on the dream or raising on the numbers.

And when, before you have a totally public launch of something, you get to tell a story of [00:47:00] what could happen and what it could be and how much interest there would be. And get people excited enough to say like, Ah, I should bet now. Um, and not miss the train when it, when it launches and goes crazy. Um, and then betting on the numbers means or investing in the numbers means that, well, if you're going to raise capital and you've already launched, then people are going to be like, I tell, I hear that you're telling me this big story.

But you launched, so tell me the numbers, right? Um, it's important to note that that selling the dream version of fundraising was much easier to do in the height of the market, you 2021, 2022, harder to do today, but certainly we can bring that back to Ori's situation. And it's, and it's possible. You just have to be able to tell people what's going to happen once you launch and

Paige Randall: Yeah.

And he was in a weird spot too, because he kind of had. Launched a little bit, but things didn't end up working out. Like things went to crap basically. Um, so that's why I was like, [00:48:00] damn, he must have really crafted an impressive story of like, this is what's happened. It's kind of shaky, but this is what we're going to do, you know?

And like, just think that that takes serious grit to pull off. Um, another cool thing that I love, which we always see in a different way with a lot of successful rounds is. Someone, they meet someone, like Ori was joining a bunch of founder communities, which I think is awesome. That's also why we love the community that we run because it's so helpful for founders to interact with one another and give feedback and advice. And he ended up meeting someone, uh, Maddy Largy, I made sure to write it down, CEO of Jinx Drinks. And he, she ended up being like his super connector. She introduced him to the founder of Juul. She introduced him, um, which ended up introducing him to one of the first Juul employees who ended up investing in the company. Then she also, he discovered about the Draper accelerator program through that, which he ended up. In the smallest odds getting into because someone had to pull out of. [00:49:00] And the next thing you know, he makes it to the end of the accelerator and Draper is putting in a check. And that's just wild to me. Um, but I did have a question because he said that, um, Draper ended up offering like 300, 000 at a 3 million post money.

It ended up being a 2 million round with a 8. 5 million post money. I don't even know the word that I'm looking And I'd

need a refresher on, on what that means because I have forgotten.

Jason_Yeh: Yeah, so the mechanics, let's walk through it and I'm glad that you are open to ask the questions that a lot of people want asked and want explained. So, let's go through specific terms that you talked about. Post money valuation I think is an important one. Either post money cap or post money valuation.

Thank you. Not exactly the same things, but for these purposes interchangeable. It means, essentially, what would the company be fully worth once all the money was [00:50:00] invested in? So, in the example of Draper putting in 300, 000 at a three money post money cap, or post money valuation, What it's saying is that essentially the value of everything that goes into the company, the technology, the team, everything that has been set up plus 300, 000 equals 3 million.

More

Paige Randall: Oh, okay.

Jason_Yeh: less it's saying, we think the company is worth 2. 7 million today. With 300, 000, that's 2. 7 plus 300, 000 equals 3 million post money.

Paige Randall: So It's

like a type of valuation? Is that like

Jason_Yeh: a type of valuation. And, um, the reason it's, it's a type of valuation is they said that they were going to raise 300, 000 at a 3 million post money cap. If they ended up raising 500,000 or a million dollars at a three [00:51:00] money post money cap, then the valu, the, the total valuation after the money goes in doesn't change.

It's still $3 million. So you put $300,000 in, that's kind of saying the company is worth 2.7 million today. If you ended up putting 500,000 in the $3 million post, money doesn't move. So what it's saying is, well, actually, your money, your company is worth. Two and half million. If he raised a full million on that same terms, if he just kept adding more and more money on that same, on those same terms.

Should I put you on the spot? Math wise?

Paige Randall: Uh uh. Uh uh. That strong suit.

Jason_Yeh: So full million dollars on a three money cap means 3 million. Minus one is basically we're saying you're worth a million, $2 million plus a million dollars of of funding, so you're worth $3 million today. That's how Post-Money Dynamics work.

Paige Randall: So the 2 million round at 8. 5 million is saying that his company's [00:52:00] worth around 8. 5 million?

Jason_Yeh: So after the money going in, right? And I don't think, you know, we don't, we didn't get the full details of how it broke down, but my guess I'm 99. 9 percent certain that, um, he probably did multiple notes or multiple safes. Probably took the Draper on 300, on a 3 million cap, and then opened up something different, which was at an eight sum cap, and then raised another 1.

5 million off of that,

which means like he managed his dilution a little bit more than if everything were on a 3 million post money cap,

does that

Paige Randall: Yeah.

Jason_Yeh: I mean, he was basically doing what we talk a lot about, which is building credibility, building momentum. And as more momentum develops, then initially you don't have a lot of negotiation.

So if [00:53:00] someone says 3 million valuation, you're like, but once someone credible enough, like a Draper comes in and says, Oh, we want to invest. Then you can go to other investors. And they're like, Oh yeah, we'd be excited to invest. And you're like, well, can't do it at 3 million anymore. Now it's at eight.

Paige Randall: Hmm. Another thing that's helpful, I feel like I'm gonna have to ask that question again in the future at some point.

Jason_Yeh: listeners are excited for you to continue asking it and having me describe it multiple ways.

Paige Randall: That's what I like to think. Um, I, uh, one last thing I did want to touch on that I liked, um, because I, I do think it brings up a real, uh, I don't know, a real thought that a lot of founders have when they're pitching investors, which Ori was talking about basically how he struggled painting this gigantic picture.

Like one of the main things that Tim Draper gave him advice around was you need to paint a bigger picture. Like you need to paint, you need, this needs to be massive. [00:54:00] And. One thing that Ori struggled on, which I think a lot of founders struggle with, is like, when does painting a huge picture feel like you're telling a white lie, almost?

Like, you feel like it almost feels so big that it doesn't feel real. And I was just wondering if, like, I don't know exactly what I was running, but I just wanted to talk about this because I feel like it is a weird, it's hard to strike a balance between painting a gigantic picture and not knowing, like, is my company going to go in that direction? And like, finding the comfortability to like, paint a picture you might see happening.

I don't know.

Jason_Yeh: Yeah. I mean, I think it's, it's, um, it's a question I get asked a lot. It's

Paige Randall: Okay.

Jason_Yeh: you know, where, where do I start? How I tell, how do I tell the story? I think the reality is the reason Tim Draper gives that advice, the reason founders hear that advice, let's, let's make sure we anchor it and why.

It's because the venture capitalists.

Can't invest in a good business. That doesn't, that [00:55:00] doesn't fit their business model. If I invest in like a pretty good business that is profitable, that makes the founder money, that's great for the founder. It doesn't actually move the needle or fit the business model of a venture capitalist because they are, they are betting on one out of 50 investments that they make being massive outcomes.

Massive, massive outcomes and the rest of them essentially going to zero. Now I'm, I'm like oversimplifying, but that's how the math works. So if I bet on a winner, if it does win, it's got to make so much money that it covers all the other losses. Okay. So if I bet on a company and I think the, the, the, the, the maximum amount that it could generate, if it were as successful as it could be, is like, 50 million, which is, sounds like a [00:56:00] lot of money to you and I, that doesn't actually fit.

And actually it breaks their model. So they should have never invested in that company in the first place. It wasted their time. It wasted one of their, one of their bets. And so the reminder to everyone here is the reason even people think about that advice is like, it's gotta at least have a shot of doing what a venture capitalist business model expects.

Now, I think there are actually two ways you can convince. a, an investor that you eventually will get to like a really, really big outcome. One of them is to say like massive story, things that I think we could get to, this is what we're going after. And by the way, like, you know, here's, here's where we're starting and here's our path.

I also have talked to investors and I also think investors look at the option of saying like, okay, I'm talking to a founder and he's describing the business that he's running [00:57:00] today. And he describes like the industry in vector. And when I talk to that founder, that founder just seems obsessed, like obsessed with the space, in love with his company, in love with his team.

And he just seems like the type of person that is like, just wants to be building in this space, just wants to continue building as big of a company as they possibly can. And I'll bet on that. Like I'll bet on the fact that they're not going to want to stop. Like they're, they're just going to want to keep adding onto it, adding onto it, adding onto it.

So, you know, when it comes to how you pitch something, I think it's really important to understand What venture capitalists need to believe. And then like, if you're going to think about that big vision and someone encourages you to do it, like the encouragement isn't [00:58:00] to make up a story necessarily, and just be like, well, that's the made up story that I don't feel comfortable about.

It's actually sitting down and, and really thinking deeply about that possibility. And if it scares you or if it excites you, and then like really spending a ton of time on being like, if I'm raising venture capital, I am kind of signing up to go after this actually, like, that is what you're signing up for.

You're not signing up to, to, to like build a mediocre small business that is profitable for you. You're saying I'm going to raise money from people and I want to go after something really big. And I just think, you know, as Ori is thinking about that, as other founders are thinking about it. And it's scary and it feels weird.

Well, you kind of have to face that fear. You got to face that discomfort and then embrace it. And then you can go tell that story. That makes sense.

Paige Randall: That should be a whole TBC episode. I'm not even [00:59:00] kidding.

No, I think it is really cool to hear, or like to, for founders to become aware of. Like the investor psychology involved or even people outside of the industry. Cause it's like very hard to wrap your head around. Like, even if I have a good business, it couldn't, it might not be venture capital backable, you know?

Like, and that's something like, I think I'm still wrapping my head around what it means to like run a venture backable company and just how big that needs to be. Like, it's wild.

Jason_Yeh: By the way, I think most founders that I run into shockingly are in that same space. They don't realize what they're signing up for. And that's, that's actually why a lot of venture capitalists, like we'll say they kind of only like backing repeat founders because. Repeat founders have a much more sober understanding of what they're signing up for.

And like, that makes a big difference. So,

Paige Randall: I say we end [01:00:00] there.

Jason_Yeh: is that the debrief?

Paige Randall: That's the debrief.

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