How do you create custom acquisition narratives for buyers?

Jason Kirby (00:01.435) Welcome back, everyone to the Fundraising Demystified podcast. Today we have Colby McKenzie with us today. Welcome to the show, Colby. Colby McKenzie (00:10.904) Happy to be here, happy to be here, my friend. Jason Kirby (00:13.979) I'm excited to have you on. You and I have had a couple chats, you know, prior to having you on the podcast. You know, I find your background incredibly interesting starting in law, going into launching a VC back startup, and then coming back to law and investing in startups. I think you have an interesting story that has a lot to, you know, to our audience that can learn and kind of hear from your background. It'd be great for you just to share a little bit about your story, you know, starting as a lawyer and kind of what gave you that urge to start a company. And then we'll, we'll take it from there. Colby McKenzie (00:46.328) Yeah, happy to run you through it. I definitely have what I would say is a bit of a unique journey, but it's given me perspective that I think few have. And I've started as an &A attorney at Weill Gottschall, for those of you that don't know, big New York based firm, one of the top in the country. And being at Weill was really unique in that it gave me access to things in my 20s that... you typically wouldn't get access to. I'm sitting in boardrooms of multi -billion dollar companies. Now, granted, that's as the minute taker, but still having access to these types of things was incredible. And then you got the opportunity to work on deals like Verizon AOL and the... $280 plus billion divestiture of GE capital, like really awesome things to get to soak in in your 20s. And that said, like, I knew all along that I wanted to take a more entrepreneurial journey. So walked in like a crazy person one day and said, this has been great, but I quit. I will stick around as long as I need to, to keep everybody in good graces, but I'm going out on my own and everybody kind of looked at me like I was crazy. But I jumped out, started my own boutique. equity fund like many people that have a small boutique VC fund I got pulled into actually co -founding a company and ultimately got that to an exit so I became an exited founder got my letter jacket and everything and all of this took place in like a five and a half years but man so really hard sprint a lot of learnings along the way And it was something that I had always wanted to do and reaching that kind of pinnacle was awesome. And so it was well worth kind of jumping out of the and building the airplane along the way, so to speak. Jason Kirby (02:25.467) kind of jumping out of the... Well, kind of having that peth label as we call it, the post -exit founder background and opportunity opens up a lot of doors for you once you've achieved it. But let's take a step back. A lot of our listeners are still in that grind. Maybe they recently left their jobs somewhere to how you did it and they're taking that leap of faith and they're in the current grind. whether it's looking to raise capital, I think you kind of glossed over that whole experience. So let's talk about your experience at Enlightened, the VC back startup that you built and share a little bit about what you did at that company, why'd you start it, and we'll dive in a little bit more. Colby McKenzie (03:12.12) Yeah, so quick, quick background on it. And funny aside, so enlightened was in the cannabis space focused cannabis technology company. And I still go back and catch up with friends at wild and like, you're the weed guy, which for anybody that knows me is like quite hilarious. That's the title and tag that I have. But I guess when you found a company in cannabis technology, that's the, that's the label that you get from kind of the mainstream. But enlightened's focus was we were a retail market. Jason Kirby (03:12.667) Yes, sir. Colby McKenzie (03:42.026) tech stack. We had gone in and built kind of a middleware solution where we could aggregate POS data and normalize that and then display it in kind of a clean way. And it helped because cannabis, everything's so small batch. So things are constantly going on and off of menus that you need kind of that real time menu. And so we would display that on digital menus inside the dispenser using that technology. And we're smart enough to be early into kind of the retail. advertising space and so actually had a unit on on those displays where we were running content and advertising and then ultimately built a more robust more tech stack on on top of that that allowed us to aggregate data from inside the dispensaries, know who was in there, and then retarget them outside of the dispenser to kind of close the loop on the ecosystem. So really cool tech. And the interesting thing there is we actually were early. And I think this leads into like why we raised capital. We really wanted to move quickly. We were early in cannabis. We wanted to rapidly seize kind of the opportunity. And as you know, like a land grab is super expensive. So we needed to be venture -backed to give us that ammunition to actually capitalize on being early and having the superior tech stack. But as I'm sure you talk with a lot of your clients, when you take VC money, it comes with strength, right? So the second we took the money, it means, OK, you're going to have to blitz scale and really overweight growth. And it means that you're going to need to build with an exit in mind. And. kind of within that five to seven year harvest horizon of the venture capital groups. And the second you take the money, those are, those are kind of the strings that come with it. But lucky for us, like I had just come out of my stent as an and A attorney. So it was easy for me to build to exit everything we did. And the interesting thing is the narrative from day one with our investors was like really granular around what an exit might look like and how we would get to that harvest. And kind of the interesting thing is almost to the day I delivered on an exit, Colby McKenzie (05:50.794) that was too a strategic that fit the profile that we talked about five years prior and actually did it right at the five -year mark. So it was pretty awesome to actually have it come to fruition, which is rare with startups to actually have an exit in mind and then five years later have it play out like you thought. Jason Kirby (06:06.267) Yeah, that, that is definitely the anomaly, but it sounds like kind of giving your experience, seeing so many deals prior to doing your own deal, you kind of have that map in mind. But let's, let's talk about the fundraise and what that experience was like, and kind of get the founders that are listening a little bit of the timeline in terms of what year, you know, this company was founded, when you guys exited, just so people can kind of get an idea of what that experience was like. and ultimately how much you raised for the company and over what time period. Colby McKenzie (06:41.592) Yeah, sure. So fundraising was 100 % on me. I bore that weight. My co -founder was a tax Avant, an incredible operator. So he was the one that was really kind of leaving the charge on that piece of the puzzle. And it was incumbent on me to say, all right, here's the vision, go raise the money. So no pressure. I had to go out there and knock it down. So this would have been late 2016 when we founded the company. It was a time when cannabis cannabis was still largely taboo. And so I basically said, I got this, I'll go raise money. I have tons of PE friends and venture capital friends, and I'll just make a few phone calls and naive as I was as a first time founder. Walk out, every door slams in my face. Nobody's touching cannabis in 2016, 2017. So I had to reset. And I think, tell me if this story doesn't sound familiar. I had to start and just aggregate 25, $50 ,000 checks, anything we could get to keep the engine on and keep the momentum. So it was really just grabbing small checks as fast as possible, aggregating those. And then once we got a little momentum with those, I was able to get deeply into conversations with an emerging fund manager that was launching a fund in the cannabis space. So they got it. There obviously wasn't an issue with it being in the cannabis space. And I courted them over a period of time. And I think this is something that a lot of first time founders don't think about. It's like, you don't just make a phone call and then they said, why are the money? Right. Like I courted them for months. They got to know me personally. I got two trillion diligence questions including like all kinds of random stuff We went into the wild to see our product and we're having dinner and talking about how it fits and things like that you really go through this like Colby McKenzie (08:29.496) And before you get married, you have to actually feel confident in that. And then once we were able to get that group to join, first significant check, all of a sudden we're feeling good. And it would never have happened, right? If we didn't get those first couple of checks, we wouldn't have the product in the wild and none of this would have taken place. So it's all kind of the part of the process. But from there, it became race on. We raised another even larger fund that was focused on cannabis, jumped in and joined that allowed us to us to close a little over a five million dollar round and then when it came to our next round It was all of like eight seconds. We raised our hands said, Hey, we need six and a half to get from point A to point B. it was largely internally funded with kind of the, the funds that were already in. And then we grabbed one extra cannabis specific VC fund that was a way to a get another strategic in the loop, but also, as is super important with a lot of these ones, validate the fund round by having an outsider join. and the, the beauty of it and what I always like to joke, is like had we not taken that group it may have presented a problem because that last group that we let in actually gave us a nice bridge round while we were in the throes of working through the exit that kind of bolstered the balance sheet and allowed us to not lose any of our leverage so they came in as advertised strategic at the finish line to really help us and so first round a little over five million second was a little over six and a half so across the two rounds approximately twelve million dollars and what was about a two and a half year stretch and a five year total exit horizon. Jason Kirby (10:05.499) was about a two and a half year stream, five year total exit horizon. I'm just so glad I asked that question because you hit it on the net, and you're coming from the perspective, you have connections, this will be easy. And this is why founder, you know, like the. Totally. Colby McKenzie (10:19.416) Totally. it was so brutal. Just doors in the face. Jason Kirby (10:23.195) Yeah. and like, yeah, especially in cannabis tech, you know, it's, and every, everyone's got their, you know, industry they go into and they're talking to the wrong people essentially, but you found, you found your crowd, you found your people, you built those relationships. Also, it's like, all right, perfect. You have alignment. They invest in, you know, cannabis, check size, all that kind of stuff. But like, they didn't just come in and write a track, like took months and months of diligence. And I imagine. Yeah. Colby McKenzie (10:47.832) Yeah, we're talking probably six. That first one was probably six months of courting them. So it took a significant amount of time to get them in. Jason Kirby (10:55.195) while you're grinding to go out and build a business while probably chasing and accumulating those smaller checks with that person knowing that they could probably solve your problem, but they're still on the sideline. It's absolutely infuriating. Colby McKenzie (11:07.512) Yeah, the whole time. Colby McKenzie (11:11.768) And I think part of it is like, they want to see you trial by fire, right? Like, prove to me that you can aggregate a couple of checks. Prove to me that you can go from the pilot to something that has some momentum. Like, they're just sitting there watching like, yep, you're doing it. All right, check the next box. Check the next box. Okay, here's the money. Jason Kirby (11:29.019) Yeah. And especially in these early days, like there's, there's nothing else for them to go off. You don't have historical financials of up into the right, you know, for the last four years, like it's, it's hard to underwrite a deal. So they're ultimately making a bet on you and, and trusting you. And the easiest way for them to do that is to build a relationship over a period of time. And, and also if you don't have five other term sheets being thrown at you, you know, this is the game you got to play. And it's, it's a kind of a. Colby McKenzie (11:56.184) So. Jason Kirby (11:57.211) write a passage as a founder that every founder hates going through, but it ultimately makes you stronger, faster, better, and drive to successful outcomes. So appreciate you sharing that story. Colby McKenzie (12:06.68) And I think as a first time founder, you just, you have to know that's coming, right? Like second, third time founders, you probably have traction, maybe a little easier. First time you're taking the hard road. It's, it's steeper, it's bumpier. Like you just got to grind it out and get through it because it's always a little more difficult the first time unless you have, have some outside help. Jason Kirby (12:26.523) set and again like a lot of people think like I didn't grow up with a network and everyone has so easy when they have a network even if you have a network it's not easy you know that depends on what you're building the context or stage where you're at. Colby McKenzie (12:36.184) Yeah, no. Colby McKenzie (12:40.472) somebody in Texas backwards falling into building a can tech company. You can do it from scratch. Trust me. I had no ties into that space, no insight and still was able to pull it off. So if you kind of work hard enough at it, I think anybody can make it up. Jason Kirby (12:56.539) So let's talk about the acquisition. So you built up enlightened, you get it to a point, you raise some money, you're grinding away, you get to the table with weed maps and you get that kind of saving grace, bridge around. Let's talk about kind of what that experience was like and how you manage it. As an &A lawyer who had know how those deals get done, how did you approach it? Colby McKenzie (13:22.392) Yeah, so the experience was, it was really incredible, honestly. It was my Mona Lisa. I had this ability to say, this is a true test of my career and the skills that I've accumulated to date. The ones that I've been touting to get the investors to back us, like time to actually put it out there and prove it. So I was the banker and that I fully ran an informal auction for us. I was our founder and executive having to go to all the key strategic meetings with the targets, kind of leadership and I was our in -house council actually running the transaction behind the scenes. And so at the time here though, it was my company. So it made it all the more special and made me work all the harder at it. For the listeners though, to get into a bit more granular and strategic level on it. Like we only were looking at strategic acquirers. Our company purposely was built. It was like the perfect tuck in. It would allow the acquirer to get kind of broader access to a bigger marketing play. We had non cannabis advertisers like DoorDash and FX. Yes, of course that's who we had in the cannabis space, I guess. And then let these guys get kind of further embedded into the physical retailers. And so with strategic exits, it really becomes more about fit integration and the specifics of your company. And so you're painting this narrative of life as part of the acquirer and using kind of products and financials to really back up that narrative. But it's a little different, as you know, than like a financial buyer that's just digging into KPI after KPI. Here it's like, how do you fit with the acquirer? And that's really what matters the most. And that was our focus. Jason Kirby (15:04.411) Yeah, the strategic acquisition is ultimately the ideal outcome because there's, you know, in most cases, not always, but like a higher markup on the opportunity because there's strategic value ads, you know, coming together. So it's not just a markup on your revenue or EBITDA. But when it came to like. Actually architecting that narrative, because really that's what it comes down to is convincing senior leadership at the potential acquire of that post acquisition life and how that will drive their outcomes. and what that will ultimately look like and how your team will come in or your tech will come in and solve whatever problems or objectives they're looking for. How did you gain insight to the perspective buyers that you were bringing to the table? So obviously, Weedmaps were the one that won the deal, but obviously there's some others. How did you go about identifying what narrative to build and to pitch? Colby McKenzie (16:02.168) Yeah. So from, from our perspective, we got to a point and I said, Hey, I promised a five year exit. I back in it's seven months prior to that. And it's like, okay, if we're going to deliver seven months from now, I need to start that process now, which I think a lot of people mess up when I don't think about it far enough out. Right. So we're about seven months out and I go first and I build a list of like who in cannabis or outside of cannabis would be even interested in buying us and buying us. Jason Kirby (16:02.843) Yes. Colby McKenzie (16:32.074) us like you said at that premium due to the kind of synergies. And where I landed was most of the targets were already partners of ours, whether that was somebody that we were integrated with, whether that was somebody that was white labeling a piece of our puzzle. Like I went and said, Hey, like a lot of people that are already working with us that know us that know the team well are probably best suited to be the buyers. And so what would happen is organically the next time we would have like a catch up with that partner, like, by the way, like now that everybody else has dropped on the call, would you be interested in buying us? And all of a sudden you start forming formulating this list of like, all right, they said maybe they said yes. And once I had kind of that short list of maybe seven or eight that raised their hand and said, yeah, this is interesting. I went and found two that were outside of cannabis just to make sure from the board's perspective, we had opportunities both in and out and could compare them. And then basically pitted them against each other and said, we have a lot of interest. We plan on exiting in the calendar year, like start making offers. And people started pulling together term sheets and we started comparing them and kind of playing them off each other and had a number of actual like term sheets when it came came down to it and narrowed it to two and from that point said hey this is this is the one and it's funny because a lot of people just look at like one factor our board was pretty sophisticated and you kind of have to look at the the opportunity and the deal holistically including what you may gain on the other side of the transaction and so That was where Weedmaps ended up being a great fit for us. Jason Kirby (18:06.523) You're a deal architect. That's all I'm hearing is like how you strategically think about the end in mind and had executed, of course, maybe glossing over maybe some of the ups and downs in the experience, but you drove it to an outcome and that was ultimately led by you and your vision and what you were taking the company to. So it's impressive. Just. leveraging that lawyer background in the &A space and being able to truly drive that outcome is a very rare skill to which most founders, they hire people like you as their lawyer to do this for them or their banker or this type of stuff to get that insight and experience because it shows that that experience pays off substantially. So. Colby McKenzie (18:49.976) Totally. And the funny thing, because you touched on it, is we actually, at the time I would never have admitted this, right? But we had different narratives for all the potential acquirers because our fit had different value, different ones. So it wasn't like we created a cookie cutter, SIM, and sent it out. It was like every single call, I was explaining stuff in a completely different way to the one I was going to have two hours later with a different potential acquirer. Because you really have to highlight what your value is on the other side of a deal to that group. And I thought, That was something that we did a really good job of was like really custom bespoke narratives to each of the target acquirers to help prop up our value in their mind. Jason Kirby (19:28.891) Did you sleep at all during that time? Colby McKenzie (19:31.48) no. And my wife will hold it against me for possibly forever. She said, you disappeared for about five months there. And I said, yep, that's about what it took. Jason Kirby (19:44.251) Yep. No, similar experience when we sold Liquid Sky to Walmart. It was just an absolute never ending, relentless grind of one, maintaining the house of cards, making sure nothing falls apart in the organization so that you don't lose leverage and that you have options. But then creating a narrative for the potential buyers at the table that were completely bespoke, like almost no overlap in terms of what we're going to end up doing. Like... Underlying technology, yeah, it's still there, but as far as what comes of it under each choir, it was a very different narrative. My advice to the founders listening here is if it sounds like it's going to suck to do it, it's probably the right thing to do. If it sounds like it's going to be an absolute nightmare to manage and to do it the right way, you might be on the right track. Like it sounds like you're. Colby McKenzie (20:38.136) And the funny thing is I somewhat glossed over it, but you touched on it is like, today you have a business that you're running at the same time that you're running this process, right? And if the business gets shaky, if it doesn't stay on that rocket ship, J curve trajectory, all of a sudden you may lose the deal. So like not only do you have to be perfect in the auction or the exit process, but you have to really be on your A game and running the business because it has to stay on that same trajectory. It's like, man, talk about pressure. Jason Kirby (21:04.379) Yeah. And you can't lie about anything. You can't fake your numbers. You can't, you can't tell something that isn't true. Cause like you're going to sign all these liability waivers, not waive, not so much waivers, but, you'll probably know the, yeah. Yeah. And you could, you could have everything called that if something you said wasn't real or something you provided was, you know, not. Colby McKenzie (21:22.712) Yeah, your reps and warranties, right? They're going to come back and you know. Jason Kirby (21:34.555) what they thought it was going to be. And so there's still a period of like, yeah, you got the check, deal closed. But there's still ways for like clawbacks and escrows and things of that sort that you have to manage it all. It's not something that just some magical fairy comes and says, hey, I want to give you $50 million for your business. And you say, yes, okay, here's your money. Bye. It's a grind for sure. So. Colby McKenzie (21:49.848) Totally. Colby McKenzie (21:59.032) Yeah. And the thing that I always tell people is like, in most cases, you're gonna have to, you're not gonna just have a clean break. You're gonna be a part of whoever requires you, right? And what I always tell people is like, do you really wanna fudge or make something up or embellish something when three weeks from now, you're gonna be sitting in the room with these people and have to say, yeah, my bad. Like, it's just not a great way to start off your relationship on the other side of a transaction. It's not worth it ever. Jason Kirby (22:27.163) I think that's incredibly well said. So, all right. You sell the company. You're now at Weedmaps, but you check that box. You're officially a post -exit founder. What's going through your head? And where does that take you to where you are now? Colby McKenzie (22:45.88) Yeah, so it's interesting because when you're a founder, at least most of the founders, I know it gets tricky to go back, right? You're in control, you're the founder. And then all of a sudden you're not, but that's the case with everybody. And funny enough in a group that you and I are both in, this is like half of the threads are about how to deal with what happens after you sell and you lose some of that control to the buyer and things like that. We all go through it. But from my perspective, Weedmaps was by far the biggest company operationally that I had been at. And so I was just trying to soak it in. I had a one year run there. That was kind of the deal. And so I was just trying to spend that one year focusing on on soaking as much as I could in from like operational expertise and things that I wanted to take away from it. And it was great. Like I really learned a lot and I had value in that year. ultimately jumped and did another year as a public company, a C -suite executive, just to kind of round out that piece of what I viewed as my journey and puzzle and kind of gain that skill in full. But at the end of that two -year sprint, which was here at the start of this year, I sat down and said, that was great. I had this journey, but like, I really wanted to get back to my superpower. And what I viewed as my superpower is the ability to negotiate high stakes, negotiations and handle complex, what I'll call complex issues that companies are dealing with. And a lot of times that's in the guise of either fundraising or &A. Colby McKenzie (24:19.608) And I wanted to get back to that and the way that I could really unlock my supervisor was going back and opening up a law firm, which I grabbed a couple of really talented attorneys that had worked with me along the way. And at the start of the year launched transition point law. It did so kind of with the entrepreneur spirit and really entrepreneurial focused in mind. And you will appreciate this having been an exited founder as well. And I'm sure you probably use this, but I sit down with a prospective client and I look him in the eye and say, I have been you, I have been in your shoes. And because I've been in your shoes, I promise you I will understand what you're going through and probably help you through it in a much better way than most. And all of a sudden you start getting these nods and it's like, okay, like this guy gets me and it creates like this really harmonious relationship that probably wouldn't exist if I hadn't jumped out and been an operator and actually experienced what that feels like because it's a lot like. you're selling your baby, there's a ton of stress and you're going through a lot. And it's a, it's a unique situation that I now can provide kind of my own, my own lens into. Jason Kirby (25:23.163) Yeah, I completely agree. Because obviously I'm in a similar boat of exiting a company. And then I jumped around in terms of executive roles and leadership roles, advisor, investor, all these kind of different flavors of different experiences. And then ultimately driving back down to what I felt my superpower was, which was raising the capital, putting together the narrative, the strategy. And ultimately now it's we're how founders and it's the, where the investment bank for founders, by founders, with that, you know, kind of similar mindset. Part of the reason why I think you and I hit it off so well and wanted to bring it on the podcast in terms of sharing your experience. Colby McKenzie (25:57.24) I was just going to say that, like I think our ethos are totally aligned. Jason Kirby (26:00.891) Exactly. And I just think there was such a unique perspective that as again, being in their founder's shoes and being able to relate and still, technically we're still founders, still building stuff. We're not resting our laurels. We're not an employee somewhere. And being able to dive into the weeds and get it right off the get go. I think that's probably one of my favorite things when founders should be like, I don't have to explain from like, point A to point Z in every great detail. Like you can just say A and Z and I can fill the gaps. Like it's just, it's a rewarding experience to be able to have that with, with other founders that are, and honestly, they're probably the most difficult part of their business of just navigating a very difficult challenge, whether it be fundraising, legal transactions, whatever it is, there's always an incredible, you know, what appears to be an unsurmountable challenge as a founder that you go through probably too often. Once you get over one, you're like, all right, yeah, we did it. And then you can't even celebrate that because you're at it again, dealing with a whole new complex problem. Colby McKenzie (27:07.608) Yeah, we're definitely broken in that you don't celebrate, you just get to the next one. But I think you said something that's interesting and I... Yeah. Jason Kirby (27:12.635) I know it's a problem. Colby McKenzie (27:15.544) I agree. It's in the DNA. But also I think that there's this language that founders have that you can't really fully appreciate and understand unless you've been a founder. And when people talk, all of a sudden it resonates with different points in your career and you just get it, right? And so we all have kind of this unique language that we're able to speak. And it's in part why you and I have hit it off so well is because we're serving founders in new capacities, but we kind of speak that language having been them ourselves. Jason Kirby (27:44.251) So let's talk about how you're servicing founders now and what you're doing at your law firm and some of the examples of work that you're working on. Colby McKenzie (27:55.832) Yeah, happy to jump in and I think it marries really nicely with a lot of stuff that you guys are doing at Thunder and so. One capacity is serving as legal counsel on outside funding grounds. Another one is really helping people to prepare to execute &A, whether that's, hey, I just raised a series A or series B and we're about to get aggressive in our corporate development, or, hey, we're ready to have an exit ourselves and really helping people through that process. A third one would be we have a fractional GC model for venture -backed companies, pretty limited number that we work with, but it's a way to keep me in the full on day -to -day matters and really let me apply my experience as a tech founder as that in -house capacity. And the last one, and I think this one's probably my favorite honestly, is just being available and supporting the broader founder community. It's something I'm super passionate about. I had people help me along the way and kind of the pay it forward, which I know is something that you and I kind of really hit it off on. Jason Kirby (28:58.011) Yeah, that's great to hear. And I guess what are some of the common pitfalls that you're seeing founders make, whether it be clients or some of the investments that you've made? And that's something we haven't talked about is also the investments side of what you do. So let's actually maybe go, let's start there and then we'll go to the advice side. Let's talk about kind of what you're doing as an investor and is it a fund structure? Is it just angel investments? How are you going out and identifying companies to invest in personally? Colby McKenzie (29:27.736) Yeah, I have two vehicles. One is a holding company, McKinsey Group, that invests into the legal space, which makes sense because that's the ecosystem that I live in now. So whether it's the picks and shovel pieces or firms themselves, we have a holding company that does direct investments into those. And McKinsey Ventures, which I mentioned at the outset was kind of the boutique VC fund, is still kicking here in year nine. And so I make a number of investments through that although at this point more have gone indirect through other funds or More strategic like micro PE plays on that side than the traditional VC I woke up one day and said good lord my Portfolio my personal portfolio is so overweight Venture I get and seed stuff. I got a cool it But that's kind of the two pieces there now I'll tell you a story on one because you mentioned there what's one of the things to kind of watch out for. And I think one thing that happens a lot in venture, and I'm curious if you've seen this as well, is somebody will come in and say, I'm strategic. Because I'm strategic, I want a discount, or I want some warrants, or I want something for that. And I feel like a lot of times, particularly with first time founders, they'll just say, sure, you say you're strategic. Great. I trust you. you and you are, which I would caution founders to be so open to just accepting that as as true. And I say that because I just am in the process of making an investment and said, hey, I did it. I said, hey, I'm strategic. And because of that, I want X, Y, and Z. And this founder did it exactly right. He said, cool, give me multiple references where you actually did this. I'll call them. And if they are, if you are who you say you are, then great, I will honor and give you that value as a strategic. And I just started applauding him on the spot. I was like, good for you. Like, nobody actually backs that up and validates it. And this is why I love you as a founder, because you actually say, prove it if you say you're strategic. So that's one thing I think founders should really think about and be cautious about, because it happens a lot. And you probably see it as well, dealing with so many VCs. Jason Kirby (31:43.739) You know, I'm so glad you actually bring this up because one, the validation aspect, you know, like who is this person on the other side? Because, you know, the bad story of my experience on this front is with Liquid's guy, we had pulled in way too many advisors way too early, all promising the world to which naive founders, we just expect them to show up and do stuff. They don't do anything because we're not managing them. And they all got fat stacks of equity. that we couldn't claw back, we couldn't do anything against, they were just equity grants effectively. And, you know, it's one thing to kind of do reference checks, which of course people in our network were saying like, they're good, you should trust them. But, you know, we didn't, we were so young and naive, we didn't know how to manage them. So that's the other aspect to it is, if you are going to give up a little bit of something extra to an advisor, like how are you going to manage them? What's the actual plan? And what's the, how do you claw it back if they don't perform? Colby McKenzie (32:40.472) Yeah, keep that stick, right? Make sure you hold something to make sure they stay inactive. Jason Kirby (32:41.019) and Jason Kirby (32:46.523) Yeah. And it could be, you know, it's hard to kind of like, you know, sometimes people just want to name, you know, like, this guy invested in us or this guy is an advisor. And like, cool. But when I see that as an, you know, as an investor, you know, we'll put my VC hat on. I'm like, if I don't, if that person's not notable in the industry, like a tier one name, it doesn't really have much value name dropping them. So you just kind of gave up a little bit of something for not much value if you were only doing the name drop. But if they come in and actually. get their hands dirty, you want to make sure they're rewarded and compensated appropriately, but also in the event that maybe you outgrow them, maybe they did their part and time has gone on. Having some kind of vesting schedule around it, what is it called? Founder Institute has the FAST agreement as an option for founders to kind of have like an off, you know, a template. And then also, I'll have to see if I have to cut this or not, but I invested in a company that is focusing on solving this problem verbatim in terms of having those check boxes of like, did you do this? Yes or no? Okay. Yes. You get your equity grant. No, you don't get your equity grant. And to create transparency and kind of a management experience across that overall, I think is something that, you know, obviously I invest in this company because I see it's such a huge problem because it's either leaves such a bad taste in founder's mouth down the road. You know, it's usually, you know, pretty negative outcome because they just didn't manage that relationship as best they could. So it's good that you brought that up. I think that's a super valuable point that a lot of founders just don't really think far enough ahead. And there's certain tools out there that you can use to mitigate those problems. Colby McKenzie (34:31.064) And I think you said something that is so true and that's like, you need different advisors at different points in the journey. Like some you need early stage product and flushing out some, you need that one big introduction into your early client base. Like some you need as you scale from operational perspective, some helping with exits. Like you need different people at different stages. So if you pay somebody and then they just get to hang around as an advisor for the life of the company, it doesn't always, it sometimes they're just in the way, right? And it's like, I have eight people on this advisor call and it's like, eight of you are here, but I need three. Jason Kirby (35:08.603) Yeah, so that's the thing. It's just you set up a structure that allows the relationship to do its part, but also have a cut off or have, you know, just think about what that relationship could ultimately lead to and put check -ins. You know, don't just put it as like a forever grant, like, here's your equity grant or here's your option grant. And, you know, you're going to get whatever 1 % or half a percent or whatever and have no actual written agreement or criteria. That was a mistake that I made. We gave away way too much with no strings to pull back or hold them accountable. So it was, you know, everyone's fine. Everyone made money and you know, no one's upset, but it's just like, kind of wish we handled that a little bit differently. So, you know, going on that topic, what are some other kind of areas in your experience, especially on the legal side that you see that, you know, is a common problem with founders or things that founders should be aware of? Colby McKenzie (35:51.16) Totally. Colby McKenzie (36:07.032) Yeah, I'll give you two. One is, and this is something every time I talk to somebody I preach, swallow your pride and you have to get away from measuring success in a funding round solely by your pre -money valuation. Like there's so many more important nuances that matter. I think as you scale, then giving up a little more dilution early and one of those being like liquidation preference. Great. The round was at some big valuation, but if you gave up a massive liquidation preference, like you may end up not making anything. Right. And so like thinking about it more holistically than just the value And I'll tell you, and this is one that I don't often speak to, but we, as founders at Enlighten, actually gave up pretty significant equity in the early round of fundraising, but we kept the control that we felt we needed, and ultimately it got us to the exit, so it was totally worth it. But I think sometimes you just have to take a little more dilution if it means you have the ability to get some of the other terms that you want. And I think in that same vein, like you really have to really need to double down and focus on any place where you see control, whether that's drag along rights, veto powers, we give up or like even something more simple, like you're losing control of your time because you have like really onerous or strenuous reporting requirements each month that take a ton of your time. Like you just need to think about like anywhere where you're seeding control. Cause I think that's something that founders often gloss over in a term sheet, but ends up like two years later, they're hitting themselves for. Jason Kirby (37:34.075) Yeah. And, you know, if you don't have that proper legal counsel that rep, and also I'm curious how you get your opinion, especially at the later stage, like pre -seed, you know, not so much seed maybe, but, you know, series A, series B, I often recommend founders, you have your, your lawyer for the company, but then, you know, to kind of represent the company, but as a founder, you have now maybe a potential substantial amount of paper wealth. You have certain controls, certain, you know, shareholder rights. It might be good to have a lawyer look over your agreement for you and be solely responsible to you, as opposed to, to the company. Cause there, there might be some points that, you know, don't necessarily align equally when it comes to the company and, you know, you as a founder and having personal representation, to kind of look after you and your potential outcomes is something that I often will advise founders, especially at a later stage when there is, you know, this company is not going under there's deep risks substantially. And there is wealth generation that will come out of it in most cases. It's something that often I try to kind of poke founders to like, don't forget about yourself. It's not wrong. It's not wrong to do this. You know, you definitely, you don't want to be bitter and angry. And, you know, when you could have solved that problem in the early days of that round. So, you know, curious to hear your thoughts. Colby McKenzie (38:42.648) Yeah. Colby McKenzie (38:52.664) And in that vein, I think it's okay to put that money on the company too. Just like a lot of times an incoming investor will say, hey, X amount of my legal bill is being covered by the company, right? Like... If a founder is looking at it in their own capacity, like it's only fair that that's covered by the company as well. So I think a lot of founders, kind of will be hesitant there. It's like, I don't want to pay this, but it's like, it may not be a personal expense. You could argue that it's an expense of the company, but, especially as more secondaries and more kind of, opportunities to take chips off the table in these later rounds, which is become extremely popular over the last handful of years, maybe a little less so in the last 18 months than it was before. But I think that's also a place it's like, if you're taking any chips off the table, the table. You need somebody looking out for you because those are your chips, not the company's chips. Jason Kirby (39:41.627) So I just think it's something that, you know, it's worthwhile investment, whether you pay for it personally, or have the company cover the expenses, which again, you are the leader, you are a sizable part of the company, you are the company in a lot of ways, it's important to have that look and that protection. Colby McKenzie (39:56.632) And I'll tell you this, I'm a lawyer of practice for many years. Sometimes you're too close to it. I actually got my own attorney for my own deal. Like, I was focused on the company stuff. I said, I need somebody that's not so in the weeds that can look out for me behind me, because I'm just running and gunning. And I had a. a friend who funny enough now is part of transition point law, actually kind of look over my shoulder for me personally in my capacity. So even in my case where I am an attorney, I still did that and used somebody to kind of just look out for my interest personally. Jason Kirby (40:30.043) You know, you mentioned that in the weeds part, like, I think one of the reasons why I'm able to have such a high perceived value for a lot of founders and similar to you as well, it's just like coming from the outside and being able to not have a horse in any race and just be able to kind of see the facts as they are and being able to provide that clarity to founders. I think it's something that, it's so immensely valuable. And often I'll meet with founders for 20, 30 minutes. I'll kind of read, you know, read between the lines. cut them off at some point and just be like, Hey, this is what I see. You know, these are the issues that you're running up against and just quickly get to that conclusion. And a lot of founders, they'll just take that and I'm like, it just pops, you know, a new light bulb pops up and then they just start running in that direction as fast as possible. it's, it's rewarding to see it, but it's also just a reminder for founders to kind of make sure you're talking to people around you that don't have. a horse in the race. And what I mean by that is like, they don't have skin in the game. They don't have, you know, a certain expectation of you or the board. Like your board is supposed to be there for you, but they all have maybe ulterior motives. Maybe they want you to sell early. Maybe they want you to take a deal with their buddy and not necessarily the best deal for the company. And like these types of things can happen. So it's always good to have a peer network of, you know, fellow entrepreneurs in a similar stage or with the YPO's and EO's and Colby McKenzie (41:28.728) Totally. Jason Kirby (41:55.579) different groups out there that exist from forums or maybe some friends that get it, get the founder experience or have been a founder, just to have these kind of conversations. Because it can help open up your eyes as a founder to certain variables that you just can't do it when you're in the business every single day and you know way too much of how things were and how things are and not so much how they could be. when you kind of get that outside perspective. So I think that's a good tip for founders to take into consideration. Colby McKenzie (42:29.496) It's super funny that you say that because one of the things that's becoming increasingly popular for our firm is And this is in particular with technology first or like development first founders is we will come in as what I call like a second. So you're the first you want to be the face of the company. It's your company. You're going to be negotiating this key thing, but we will be there behind you watching paying attention as like an independent third party so that when you come to regroup, it's like, Hey, you missed this. Have you thought about this? What about that? And it's like, my gosh, I didn't think of any of those things. And it's like, yeah, cause you're in the throes of negotiating, but to your point, you're all. also so close to all of this that sometimes it's hard and it's been a really interesting, I wasn't sure if it would be something that would catch on as a service, but it's been one of those things that's like immensely valuable and like not, it's like, yeah, we only needed you for 10 hours as part of this like key negotiation to be kind of our second, but it ends up being something that changes the trajectory of the company, right? And so it's super interesting and admittedly, like even when I was a founder, sometimes you're just too close to stuff. Jason Kirby (43:32.923) Yeah, I completely agree. And something that, for shameless plug purposes, so apologize to the audience, but we got to knock it out here. Colby and I are working on a collab for optimizing data room, just legal stuff about your capital raise and going to market, whether it's for &A or raising capital. There's going to be some other goodies that we're going to come out with, but the link should be down below in the description. But you're probably, and I have collaborated on a document that helps founders kind of navigate some of the common pitfalls for developing out your data room, what to include, how to manage it, what's the difference between a teaser data room versus a comprehensive data room and things of that sort. So I just want to do a shameless plug there for us and for founders that are potentially exploring setting up their data room, how to do it, and what they should take into consideration so they don't make common mistakes or get buried with. you know, one off questions or look unprofessional or unpolished to investors. So, you know, be sure to check out the show notes down below. Yeah. There'll be a link for you guys to download that for free. So, sorry. Just kind of got to throw that out there before we, before we wrap up here, Colby. So that all. Colby McKenzie (44:49.112) Most definitely. And the cool thing is like we both come at it from such a different angle, right? Like it's pretty comprehensive. I have my path that I've gone that's more legal driven. You have your path that's more on the capital raising and making sure this from an investment bank looks like it should. And so I think it's pretty holistic. So I will pile on that shameless plug, my friend. Jason Kirby (45:08.027) down the road now. So, you know, Colby, it's been an absolute blast having this chat with you. It just feels like a regular conversation, which has been a lot of fun. Where can people learn more about you and Transition Point Law? Where should our followers and listeners go to connect with you? Colby McKenzie (45:13.08) Hahaha Colby McKenzie (45:31.608) Yeah, you bet. I try to stay relatively active on LinkedIn. So feel free to reach out and connect with me there. And then we do a good job of putting up content and things on transitionpointlaw .com, which is the firm's website. So two easy spots to keep up with kind of the content we're putting out and me personally. Jason Kirby (45:52.059) Well, make sure to include those in the show notes for everyone to be able to reach out and connect with you. And, you know, just it's been great having you on the show. It's been great having this chat and, you know, look forward to getting this episode out to our audience. Colby McKenzie (46:06.072) Most definitely, appreciate the time. Jason Kirby (46:08.443) Awesome. Thanks for being here with us. Perfect.