How does my growth rate determine my funding options?

Jason Kirby (00:06.662) Hey, team. Just want to give you a quick rundown of this episode. So new office situation, gonna hopefully spice it up behind me eventually. But this one will be running through a pitch deck, or not a pitch deck, but a presentation, as you can see with the screen share here. And when you're doing the editing, obviously I'll give you guys this deck and you guys can use it however you want. I'm screen sharing so you can follow along, but. Obviously, want you guys to decide when to focus on my face and go full screen on me versus highlighting deck, I mean the slide and when to have me overlay the slide. You know, don't make it like a constant like me in the bottom corner. Kind of spice it up a little bit when it comes to the editing. And yeah, feel free to chop out any like, uh's or um's or pauses, which I might have. Ideally, this is like a 15 to 20 minute video. Maybe a little bit longer, we'll see how the flow goes and how detailed I want to be. If I start rambling or that kind of stuff, just cut it out. But I'll go ahead and get started with it. And if you have any feedback or comments. Jason Kirby (01:42.416) Today, we're talking about where you stand in the fundraising quadrants. Are you not familiar with the fundraising quadrants? Today, we're talking about fundraising quadrants. What are they? How do they impact you? And ultimately, where are you as a founder trying to raise capital, whether that's debt or equity, and exploring what your actual options are given where you are in these quadrants? So before we dive in, this is a highlight on where You might end up being, and we're to give you specific criteria as to which quadrant you qualify for. And then what are the capital options available to you based on the quadrant that you are in? So why am I qualified to talk about fundraising? Well, my background built and sold multiple companies. had four exits. I sold the technology company to Walmart called Liquids Guy. I've raised over 145 million as a founder, operator, advisor, investor. And. I now help founders navigate their capital options. It's what I do every day, work with countless amount of clients, helping them navigate where their capital can come from, how to get it, and then introducing them to the right capital partners. So let's go ahead and dive in and talk about how difficult it is to get fresh capital. Founders often think of venture as their first and primary option, but in reality, there's a lot of options. Let's talk about what you actually can do to source capital that's right for you and your business. So where do we start? Well, you start with figuring out what your North star is. So it sounds a little cliche, but bear with me here. You don't know what you want until you know where you're going. Cut that last part. You don't know how to get somewhere unless you know where you're actually wanting to go. And this is the question I spent a lot of time on with founders is like, do they actually want to achieve with the business? Let's kind of go over some what, what those North store potential options are. And you can kind of best identify maybe where you fall, in this category. Some founders are all about getting acquired and that could be in a wide range of options from aqua hire to. Jason Kirby (03:54.406) big nine figure exits to getting acquired from a strategic. Maybe it's to be a big, maybe it's to be a part of something bigger. lot of reasons to get acquired. Of course, money is also a good reason. Sometimes founders just want to generate free cashflow. Maybe they just want to, you have a good business, you love the business and you just want to be profitable and pay yourself more. Sometimes you have a massive ego and you want to go IPO. Nothing wrong with that. That's obviously why a lot of venture Capital firms back certain founders because they want to go big and IPO is the only way to create any kind of liquidity event when you get too big And then sometimes founders just are burnt out and they want to replace themselves, but retain the business So you want to still be a business owner just not a business operator and some Unfortunately just want to survive, you know, maybe you're still very early in your days. I haven't figured out product market fit and You wanted maybe one of all these attractive options, but right now you're just focused on surviving so And of course, last but not least, some people just want a lifestyle business. You want to make a good enough amount of income, could be six figures, could be seven figures, whatever it is meaningful to you. Sometimes you've got to ask yourself, maybe you don't want to have oversight from investors or board and you just want to be able to make the choices that are appropriate to your personal choice, personal life. So ask yourself, which one of these do you most align with? Because that really dictates what type of capital you should be sourcing from various different partners, whether that's venture, private equity, debt. There's a lot of options out there, but if you're trying to grow to IPO, private equity is probably not that practical. Venture capital is going to be more practical. If you want lifestyle business, steer clear of venture. So now you know where you want to go. Okay. So where are you starting from? Okay. So that's where we come in with the cashflow quadrants as I was alluding to before. So basically we have some basic criteria and it's not a hundred percent catch all criteria, but it should give you a good idea of kind of where you're at. So let's first start with where most people want to be. Uh, you know, early stage founders, hopefully for early growth where they're growing 10 % month over a month or more. Uh, they have, you know, around or a little bit below a million ARR and they're showing strong potential growth rate. Jason Kirby (06:20.198) Okay, so that's the early growth category. Then there's established growth. That means you're doing over a million ARR and you are growing at over 10 % month over month and you're continuing to show strong prospects of continued growth. Then there's strong but slow. And what I mean by that is you got a real business, you're making real money, but maybe not growing rapidly month over month. Maybe year over year you're growing 10 to 50%, which is awesome, great business. But that attracts a different type of capital partner than say, established growth, early growth. And then last but not least, the struggling companies. Now, struggling companies may not be, you if under a millionaire, are definitely struggling. Maybe you're over a millionaire, are declining, but we're not really covering that category today. But if you're in the struggling category, your options are obviously going be a little bit limited. So I want you to reflect on these quadrants here and think about which quadrant you might fall in. Okay. retain that information for as we go through all the different options based on which fundraising quadrant you are in. So what paths are available to you? So you know where your North Star is, you know where you're starting from, but you know, which path is actually appropriate for you. So let's explore the options based on the different quadrants that we reviewed. So early growth usually falls in the category of early stage venture. So call it your pre-seed or seed round. or angel round or kind of friends and family where it's still appropriate to raise maybe under a million or a couple million dollars. And this is established growth. So you have a lot of options. This is where everyone wants to throw money at you. You built a growing, sustainable business. A lot of people want action. So then it's really about, you know, going back to the North star, which is the appropriate capital option for you being that you'll have plenty of options. And we'll go down and break into these options in a lot more detail. So you're strong but slow, usually debt, private equity or strategic &A are often the most applicable choices for a founder at this stage. And then last but not least, struggling. There's ways to optimize your business for an acqui hire or to turn it around and start generating cash flow, stop focusing on growth and start focusing on just milking the profits or bringing in a turnaround organization or CEO or whatever it might be to turn things around. Jason Kirby (08:46.918) All right, so let's just say, you know, you've identified which quadrant you're in. Now, you know, what kind of, you know, the high level, capital options that are available to you. Now let's actually break down all of these different options. So you have a little bit more granularity in terms of these capital options. So attracting venture. So what does it take to attract venture capital, either in the early growth quadrant or the established growth content? So first and foremost growth. If you don't have any kind of level of growth, it's going to be hard to have a VC jump in and get excited about you. Now we'll talk about growth in two different categories. One is traction. So you built a business, it's growing, things are looking good. Great. There's also growth in a market. And sometimes VCs will bet on companies that have no traction. You haven't built anything yet. I know that early stage. idea that you all hear about, they bet on an idea. Well, they're usually betting on a high potential growth market and usually backing you as the potential horse to win that market or to win that race. So that's how you should think about growth. If you have an awesome market you're going into, that's got a lot of future potential and, or you have a great business that's already growing, you know, at least 10 % of them. Are you in a shiny market? So going back to the market point, like don't be in a legacy market. And something that a lot of founders don't realize is that the pay attention to is. Maybe you are in a former shiny market that got previously a lot of venture capital and a lot of money went into it maybe three, four years ago, but maybe not anymore. And so it's something to kind of think about where's the money going today? So obviously 2025 AI this AI that, you know, you get the, you get the picture. Uh, so how can you develop something into a shiny market to make sure you're going to attract venture capital if venture capital is the right path for you. Traction and validation, so we talked about that, just picking up traction, identifying growth channels, things that you could put more money into that had you already proven and can continue to grow the business. Having a rock star team, ultimately a lot of founder or VCs will back the team, less so much the business or the ideas. So it's important to stack your team with the best possible people. And then last but not least, how can you generate FOMO at the end of the day? So one wise strategy for fundraising is to build a relationship with a relevant Jason Kirby (11:09.254) group of VCs over a period of time. And then ultimately, when you're actually ready to run your fundraise process, making sure there's plenty of parties involved that already know who you are before you start the process so that you're likely to generate a bunch of term sheets, create a little bit of FOMO so that people accelerate the process and don't just sit around and kick the tire. All right, that's Venture. Let's talk about debt. So if you're in that more established growth or you're in that quadrant for strong but slow, these are the things that matter. So when you want to acquire debt, you're going to assets. So sometimes you could be the business and the value of the enterprise value of the business that's been validated by external investors. Or you have manufacturing equipment or IP, things of that sort, things that they could collateralize and protect their downside. venture, all about upside growth and they don't really care too much about the downside, but they do, but it's more portfolio construction. Whereas debt, they don't like to lose money. And so that you need something that potentially can collateralize. having deep pocket investors, having venture investors already behind you or equity investors behind you. because that means that they'll be less likely to let you fail and they'll have more money to back you in case you run into a tough spot. So again, protecting the downside for debt investors. Securing revenues, recurring revenues. They love recurring revenue because it's predictable in terms of cashflow coming in to be able to pay down the debt. Again, protecting the downside and understanding that there's enough business coming in to where whatever they underwrite you for in terms of the debt, you'll be able to pay it back. Financial history. So unfortunately, it's very hard to get debt if you're brand new, you're just getting started. Ultimately, having a couple years of financial history opens up a lot more options. So being a little bit more on that stable, established growth or strong, but slow category is going to be more likely a fit for debt partners because you'll have a little bit more history, been around a little bit longer. And then having some big name clients. Sometimes one of the debt products is accounts. It's called AR factory, account receivable factory. We'll talk about in a second more, but getting paid by big clients, that means the Jason Kirby (13:31.224) lender can underwrite the lender. I mean, sorry, that means the lender can underwrite the client instead of you to make sure that you're going to get paid by that client. So that's another way for them to kind of collateralize and reduce their downside risk. And of course, inventory. if you're a e-commerce business or you're selling physical goods, they can collateralize that inventory in a variety of different ways to make it possible to give you access to working capital for your business. And then equipment, similarly going back to machinery or assets, things of that sort, what can they collateralize with the business? right. So these are all the different types of debt. I'm not going to go into granular detail about all of them because there's plenty of information you can get from chat GPT on all these different paths, but you need to kind of know the terms. so I encourage you to take a screenshot of this. It's also on our website. If you want to click, go to thundr.vc, click raise debt. We have this exact graphic on there so you can dive in a little bit deeper in terms of what the options might be. But just remember, you kind of have to be in the established growth or strong but slow quadrants to attract the right amount of debt options. Debt's just not readily available at any notable scale or accessibility if you're in the other two quadrants. So again, it's really important knowing what quadrant you're in to know which you should be pursuing. All right, so let's talk about private equity. Okay, so private equity, if you're not familiar, you should know, you should be watching these videos with me if you don't already know what private equity is, but it's effectively a firm or sponsor that's going to buy most likely a majority interest in your company. In some cases, it can also be a minority interest, but it's more for stable businesses. Whereas venture, they're buying minority investments in a company for high enterprise value increase. high probability of enterprise value increasing over time. Whereas private equity, have lower expectations in terms of return, but they have higher expectations in terms of reducing the downside risk. So they look for EBITDA positive. You need to be profitable. You need to be printing cashflow for private equity to take you seriously and to have plenty of private equity options. So again, either on established growth or strong but slow category. Jason Kirby (15:49.99) Ultimately, most private equity partners want to see a path to three to five X their position from three to five years after making their initial investment. That could either be by selling the company into another private equity firm. It could be refinancing them out with that. could be having another, we'll just capture that last part there. Just edit that out. Having a predictable business and predictable revenue. This is very, very important for private equity underwriters to come in and see like, okay, you have predictable revenue. We know that over the next several years, you're to grow by X and therefore hit our benchmarks of what kind of return potential you have as a business. so that's something important to have. They want to have less work. They want to back a team that already is working or have assets or revenues that are already predictable and working. so that they're taking less risk on the business. And then how can they potentially add instant value as another way to attract private equity? Could they connect you to one of their existing portfolio companies to do a partnership and increase revenue or cross-sell? Could they bring you on to, as what's known as an add-on purchase, where they're going to acquire you to add on and bolt on to an existing entity to cross-sell or improve their cost efficiency or increase profitability? So how could they potentially add instant value to your business? So I mentioned both on creative deal structuring. What's fun about private equity, they can get very creative. You can, it's not just like they come and buy you for $10 million cash and that's it. They could potentially pay you a lump sum upfront. They can do earnouts. They can have, give you upside into the new entity. There's leverage or debt that can bring into the picture. So there's just all kinds of ways to get a deal done. So maybe you don't see the vision, but by talking to a couple of private equity investors, they could potentially propose ideas for growth or profitability that maybe you're not aware of because that's what they do all day. So it's always worth having a couple of conversations with private equity and you're thinking about either M &A or a capital deal because they tend to be a lot more creative than say venture capitalist or debt proposal. Jason Kirby (18:05.67) All right. Let's talk about planning the exit or you're pursuing any kind of &A. So if you're in the established growth or you know, of the other, you know, strong, but slow category quadrant, think about strategic value you can add in an acquisition. thinking about &A, whether you're, maybe it's an aqua hire, maybe you're struggling. Like how could you add strategic value with your team to an acquirer to add immediate value? You know, fun fact. engineers, most cases engineers, can add a one to two million dollars to your purchase price based on their seniority. So stacking your team with in-house engineers could dramatically increase your acquisition price. Something I always think about when it comes to Acquire. That goes to my talent acquisition point. And then there's product expansion. How do you bolt on to someone else? How do you add more value to their existing customer base? by expanding their product offering post exit. Other cross-sell or up-sell opportunities to their customers. Do you guys have similar customers, or could you introduce new customers to them that they could potentially buy from? So what are the strategic values that you have to bring outside of just your traditional cash flow and EBITDA, which are pretty self-explanatory? Do you have IP that's complementary to them? Can they add to their top line or bottom line with the purchase? So when you think about doing any kind of exit, think about what is in it for them. You know, lot of founders, just, you know, continue to run their business. But if you're ultimately want to drive a process and you're in one of those quadrants, or you're pursuing &A as a potential path for what you want as your North star, then really think about, okay, who wants to buy us and why. Now, if you're profitable printing cash, that's always a good reason, but you often not get the best price. if you were selling based on just cashflow and EBITDA multiples alone, you want to think about how you can add strategic value. And sometimes it's consolidation, adding the ability for firms to consolidate a market. Maybe you're the platform for the first acquisition into a market that they're going to try to consolidate. That's a lot of strategic value, both pre-acquisition and post-acquisition. So really think about how you can plan the exit. right. So now you know, that was a lot of different options. Jason Kirby (20:29.21) to reflect on. So reviewing back on the quadrants. Jason Kirby (20:39.814) So reviewing back on the quadrants that we talked about, you know, we have early growth, established growth, struggling and strong, but slow. Really think about which one are you in? Which is the appropriate quadrant to place yourself in and think about your North star, where you want to go. And then as we kind of reviewed some of those options at a very high level, which of course, if you want to dive deeper, you want to talk to my team or anything like that, reach out to us at thundr.bc. or create a free profile on our account, we could be in touch. But ultimately, it's important to have these conversations either with board advisors, your board, your investors, of discussing kind of which quadrant you're in, where you want to go on your North Star, and discussing what are the possible paths that you really want to pursue with your business. So now you know. So hopefully this was helpful to you. As a quick recap, a question you wanna ask yourself in all these quadrants, two very binary, or sorry, a very binary question to ask yourself is, should you be using other people's money or should you stay bootstrapping? And hopefully the content that I provided to you today and the quadrants and the definition of the quadrants will help you answer this question of, stay down, heads down. focused on building and bootstrapping or do you start seeking other people's money? just to recap if you're not familiar with Thunder and what we do these are some of our stats. Jason Kirby (22:25.658) So if you're not familiar with Thunder, just a quick recap on who we are and what we do. We are a tech enabled investment bank for founders, by founders, helping founder led organizations navigate their capital strategy. Companies that have used our free tools that we make available on our website for free have gone on to raise over 1.2 billion in transactions. We've personally been involved in over 200 million in transactions over the last few years. And We have a massive network of companies and funds and investors that have used our tools or are part of our network that help enrich the data to help better identify relevant parties that you should be talking to based on which capital strategy is right for you. You're welcome to use our free VC Finder tool. You're able to find our debt financing tool where it helps you identify which debt is appropriate for you. So these quadrants who kind of map this stuff out already using technology. to help route you into the right direction. We also have our podcast and newsletter that we publish every two weeks, which you're listening to here. And of course our services in terms of what we do for clients, which this is just the tip of the iceberg, but really helping founders navigate capital strategy. So debt, equity, or the pursuit of &A, that's where we come in and help provide a lot of clarity for founders, even for them that, you maybe you think you want to go down a certain path, you got it in your head. But maybe you got to convince your board, you got to convince your investors. You can call us in and we can put together the report that helps defend whatever strategy is most appropriate for your business. that's a little bit about us. Of course, we have our community. So make sure to subscribe. Just go to this QR code or subscribe at Thunder.BC. Tell us a little bit about yourself and we'll see if we can help you navigate your capital options. All the links and details of everything I mentioned are down below. If you want access to this presentation, just leave a comment and we'll be sure to reach out to you with a link to this presentation in case you want to review it on your own time. Thank you for joining us and don't forget to like and subscribe.