0:08 good afternoon and welcome to the way to wow show people making money i'm your host kevin bemel and i'm broadcasting here from my little studio in los angeles california thank you for joining me if i didn't say that before and before we get started on today's show which is going to be a solo outing where i'm going to talk about the four questions that every entrepreneur needs to answer i just want to spend a minute talking about uh last week's show my guest was dr jenny spielman she's a professor at
0:44 the u.s merchant marine academy well associate professor anyway uh she teaches history there and so if you are interested in history if you are interested in the military if you are interested in the merchant marine if you are interested in leadership and if you are interested in academia or if you are interested in hearing the thoughts of an enormously intelligent woman i invite you to watch the recording of that show you can go to our youtube channel the way to wow show on youtube and there's a recording of the show there if you have any thoughts or
1:20 questions you can reach out to jenny or to me i'd love to hear what you think about the show and most and um even more so what you think about um opportunities uh in in academia these days there's a a lot going on in in that uh sector of of our world um a lot of changes uh occurring and so uh we would be interested to hear what you have to say about that uh but today our topic is uh the business world in particular entrepreneurship so we've i've talked to a number of people who um
1:57 have uh amazing jobs and and who have started their own businesses and i think it's a a fair question how you know how did how does one do that in a sort of a more global sense what is what is the uh uh the process behind the the sort of nuts and bolts almost if you will if you will so i was in a meeting a few weeks ago with a friend of mine by the name of don castle uh who um is a long time member of something called techcoast angels the orange county chapter and we were meeting with a friend of
2:34 mine who has started up a company and don was giving this friend of mine his philosophy on uh what an entrepreneur needs to be thinking about and and indeed the questions uh he needs to answer in starting a business and you know i i assiduously wrote them down there are four of them and i've been pondering them since that time and have come to conclude that that in indeed these are the central questions
3:09 that anyone who is starting a business needs these days uh needs to answer um the the business world is enormously competitive and if you talk to people who have who who invest in businesses or have started businesses they will oftentimes tell you um if you think you've come up with a brand new idea that no one else has come up with um there's there's two reasons for that one is you're wrong somebody else has thought of it you just don't know who it is and two somebody else has thought of it they've tried it and it doesn't work now of course there is option three
3:45 where literally no one has thought of it before and so it's really in that when you're in that third option that you these questions become even more crucial so you know i've been i've been teasing you with this this uh you know uh what are these four questions i i have to tell you you know as a rabbi whenever i hear the the four questions i think of the passover seder which i'm completely off topic but i haven't every time i say four questions i think about you know the part of the of this uh you know uh ritual where usually the youngest person
4:20 at the table has to ask or sing these these questions um my daughter always demers so but anyway these are the four these are four questions for enter so let me go ahead and share my screen because i've i've put together a uh a powerpoint here um and oh and and i've got to click share oops and there you go i'm on the wrong slide okay so these are the four questions every entrepreneur needs to answer in order to know that he has or she has a viable business idea in order for
4:57 investors most likely to be interested in what you're doing um and so uh we're going to go through those really kind of one by one now before we do that and for those of you who have seen uh my shows on um the uh the five steps you need to take to get a high paying job or how to market yourself to find a job you've seen this slide before um but i think it is absolutely crucial that we understand this whenever we're dealing with our finances so if if we're not already in this mindset
5:34 um this is one we need to adopt and that is that wealth comes from value delivered so when we think about how to make money in its most basic sense um let's say we do uh you know kind of an entry-level job maybe we work at a fast food restaurant maybe we work uh in in a retail store um or or in a restaurant so the value that we're delivering is our time
6:09 um that if it's our first job that may be all the value we bring to the table but indeed that our time has value right i'm sure you've heard the old cliche all we have in life is is is our time so the wealth that when we're trading off just our time um often the wealth we get is very small right we may only get minimum wage which i think depending on where you're at maybe somewhere between 10 to 15 maybe 20 an hour um and and in in a place like los
6:44 angeles you know there's there's no way you can you know raise a family on that kind of wage uh now look at the opposite end perhaps uh uh you know a brain surgeon or a lawyer who's been in the legal business for a long long time they may be earning uh their value also may be the time that they're that they're uh working but they are maybe getting anywhere from you know 300 two thousand three thousand dollars an hour
7:19 so why are they getting you know such a huge multiple over someone in an entry-level job right well the answer is obvious if they're a lawyer or brain surgeon they probably well they went to college they probably they went to law school or medical school they went through internships in the case of a doctor they probably did uh residencies as well and then over the years that they've practiced they have built up their knowledge skills and experience so that they are experts so the value that they're delivering in that case is not just their time but it's their
7:55 it's their expertise so they're deriving a lot more wealth from what appears to be just giving their time but of course there's a lot more to it right you you may have heard of the uh you know the sort of it's an old joke the uh guy uh you know has a uh uh a a problem with his his plumbing and so he calls up the plumber and uh you know and he tells the plumber you know um uh you know i've got this problem with my my plum my plumbing and the plumber goes into his house and he he looks it over
8:30 and and he gets one of his wrenches and he goes and he you know he turns a valve and problem is solved and and he says okay and he says the guy okay that'll be you know a hundred dollars and the homeowner is incensed he says are you kidding me you spent five minutes i'm not gonna pay you a hundred dollars for five minutes that's that's twelve hundred dollars an hour so the plumber says oh okay let me itemize the bill for you so he he he takes the bill back and he writes down uh time to fix problem
9:07 five minutes ten dollars knowing how to fix it in five minutes and having the experience to do that ninety dollars total a hundred dollars right and and and that's that's the idea as we advance in our careers as we um build our businesses we get more experience we get we gain more knowledge and and so our our time becomes even more valuable and you know i'm talking about the value of time of course that's not the only kind of value we can deliver we're going to be talking about the different types of
9:43 value that we can deliver in a business the fundamental idea though is if we want to generate wealth and i don't necessarily mean you know a billion dollars i just wealth in in whatever amount you uh conceive it a hundred thousand dollars a million dollars or or more or less whatever that is it's going to come because you have delivered value okay now you say well what if i inherit money it's like well okay if you've got wealthy relatives and you know your your your plan is to wait for them to die and leave you the money um so you know i
10:20 don't know maybe you didn't you know deliver any value to them on the other hand if they're a relative then so presumably you have a relationship with them you've you've developed emotional closeness you've shared times with them and so even there while there may not be you know sort of a of a monetary value to what you did in that relationship there's still a value there um and and you know it's not too hard to imagine that you know if uh if someone has a relative that they have no relationship with so they may decline to leave them any of their money you know
10:55 when when that when they die so um and i think you know in its broadest sense this this idea holds true so again uh one last time wealth comes from value delivered all right so now let's move on to the four questions and the four questions are what is the problem you're seeking to solve what is your solution how is your solution unique and how will the investors make money off of it which includes how you will
11:30 make money off of it okay so let's take the questions one at a time okay so the very first question that you need to answer is what is the problem you're seeking to solve okay so every virtually every invention is successful because people perceive that it's solving some kind of difficulty they have in life okay so let's take something as simple as uh the hammer okay if you want to build
12:06 something you can pile up a bunch of rocks okay well that's that's one way that may not necessarily be very stable or you can nail together uh a house or you know a dwelling of some kind right and and now the problem with doing that is you need something a way to keep the boards together right so originally people would you know build log cabins and they'd they'd carefully uh shave the logs and stack them up and now you're using an awful lot of wood and an awful lot of work to build a dwelling so then they figured well what if we could just take just sheets of wood and use it to
12:42 frame a house and then cover that frame with maybe some kind of siding or whatever so eventually they came to the conclusion we need to have what what became what we know as you know nails right so the nails hold the boards together well um you know they might have tried pounding them in with a rock and if you've ever done that if it's the wrong kind of rock you'll hit the nail on the rock splits so it's not so the problem is how do you pound in the nails well hence the invention of you know the hammer right and the hammer solves the problem of being able to build a structure with wood and nails without hurting yourself
13:18 in fact it's very very effective because the hammer has a length to it so you have leverage to it it has a heavy head so it pounds in the nail more quickly right and and you'll notice on the back tip on a claw hammer anyway on the back there's that kind of forked piece right and that allows you to pull out a nail without having to go get another tool right so it's that that hand in its basic sense that tool of the hammer is solving a a a very basic but important problem how do i you know how do i build stuff efficiently um and and you know without having uh you know to
13:54 overuse resources like you know trees so um and actually i mentioned bozo let me step to the side here for just a minute i just got this um the other the other day i think i got it on monday so i'm gonna i'm gonna hold this up hopefully you can see it so this is just a really nifty little gadget um and what it allows me to do this is made by let's say bluehost or something i forget anyway what it allows you to do is you can charge your cell phone here you can charge your apple watch here
14:32 and you can charge your earbuds here all in one compact uh unit if you will so why is this important well for me i have it on my nightstand and i don't have a lot of space on my nightstand because i've got pictures i've got a little clock i've got a lamp i have a second lamp that i used on the sabbath which we can get into that some other time and i've got a cpap machine right and so originally i had this this sort of charging disk that was this about this
15:07 big and it was so big it i had to sort of bunch everything together so it was hard to kind of get at things number one and number two i could only charge uh my cell phone so then when i got an apple watch i had to um i had to plug in the charger for the phone the the disc thing um but then i also i had to have a second charger for the apple watch and it kept falling off and and and then i was running out of plugs and all that kind of stuff so um i i found you know this device and it only you know it plugs in here i
15:42 unplugged it to bring it to show it to you but um i only need one plug and i can charge three devices in fact i probably could charge a second cell phone here i think um i haven't tried it i i probably should uh and and so it's super convenient and even better it has a very small footprint it has a like less than half the footprint of the charging disc that i had before right so uh so i got one for me um and i got one for my daughter as well and uh you know and also you know look i i think they look you know it's kind of a nice design uh kind of kind of sleek
16:18 the nice sort of matte black color is beautiful um and and so this is this was solved this solved the problem that i had of not enough places to plug stuff in and not enough space on my nightstand for the various devices that i you know need to have by my bedside or at least it's convenient to have by my bedside so you know this whoever i don't know who designed this like i can't remember the name of the company it's if you recognize the the logo and i'll hold it up let's see where there we go yeah maybe you recognize the logo anyway i i
16:54 you know saw an ad for it on instagram um so it's it's a it's it's it solves it it solves a problem right and uh and and that's the basic place to start a lot of inventions were created by people who had a problem and they figured out a solution to it and many many times you know if you have a problem other people have that same problem so it's it's the best place to start is you know what is annoying me what is annoying you know
17:30 my friends my family uh my my coworkers you know and and and and and think about that first and foremost what what is the problem that i'm trying to solve okay so that's that's question number one to answer question number two what is your solution okay so once you identify the problem now you need to come up with a solution and today more so than i i mean probably any time since i want to say maybe the 1930s
18:05 solutions i think have to be uh first of all elegant and when i say elegant i'm going to show this again this has it has a very nice simple shape like i said the it's it's a the color the the matte black is is beautiful it's very simple um if i drop it it's not going to break it's it's just it's a really simple and and therefore elegant solution with a nice design element to it right that's uh that's something that came if you remember you know pcs before apple um design didn't seem to be too too big
18:43 an issue and then you know along came apple and as as they they advanced design became an ever more important element uh in in defining themselves uh from the competition but you know first and foremost you need to come up with a solution so um like we talked about for the hammer or for this so let's uh you know look uh you see it everywhere uh pharmaceutical companies right we have the the kovig kovid pandemic uh what is their solution well their solution was to come up with
19:19 either uh a vaccine or some kind of treatment now you know you could argue a vaccine would be better because that would prevent people from from getting covid all right um but but a lot of people got it anyway even i guess even some vaccinated people from what i've read so you know you need treatments too so so the solution was you know come up with a vaccine come up with a treatment protocol or some kind of medicine to um i don't think it you know it gets rid of the symptoms but you know it it makes this the symptoms much much less uh
19:55 uh impactful on us right so anything you can think of like that so um let's see if we can if i can come up with another example here of a a solution a problem and a solution so uh oh oh okay so um for those of you who are you know kind of more of my vintage or maybe you know 10 years younger than me remember when you drop when you drove in a car and you had you know your your your coffee or your soft drink or whatever and uh yeah you held it while you drove that's what you did right the problem
20:31 was there was no place to put it in the car because if you set it on the seat it would fall over and spill if you put it on the floor same thing especially if you stop too fast so you had to hold it right and that's that's it's inconvenient it's dangerous right to be driving with one hand right so eventually so the problem was how do you um enjoy a beverage you know in your car i sound like sheldon from uh the big bang theory enjoy a beverage right um how do you enjoy a beverage in your car right without you know
21:06 being unsafe or or having the hassle of driving one-handed or whatever right so someone came up with the an invention called the cup holder and the cup holder was this little plastic thing it had it had a you know a round kind of disc that the cup fit into was with the thing on the bottom so it wouldn't slip all the way through and it had a hook that would hook into your window right and so you know you you went through your drive-through or you went to you know 7-11 or whatever and you got your you know your beverage and then you put it in your cup holder and off you drove right and and people bought these they bought a ton of
21:42 them again it was a very simple elegant solution to an annoying problem um and they were inexpensive i i don't remember what they probably a dollar or something like who knows because we're going back already probably you know 30 40 years i guess so um you know again and think think of it who peop someone someone was so annoyed by not having any place to put you know his or her uh you know drink in in the car that they came up with the cup holder right now of course there were problems with it uh if you went and got a big gulp they didn't fit into the cup holders so
22:18 you know you you had to uh still hold it right so eventually and i don't know you know which one did it first i i don't know um a car manufacturer figured out hey what if we in essence build a cup holder into next year's model of car right and and if again if you remember the kind of this time in history one of the things they would advertise on new car advertising was a built-in cup holder right at first there was one and then there was two because you know if you're in the car with somebody else you're both going to have your coffee or if you're carpooling or whatever right and so they
22:54 had the they had the you know dual thing and now you know and now it's it's i think it's pretty much standard equipment right i mean when i got my new car in december um you know it did not say cupholder you know as one of the items i think they just assumed that i you know i wanted a cup holder in it and indeed it's got you know two slots for cups one behind the other um between the two front seats and you know and i frankly don't use them for beverages i use them to stick my cell phone and my keys in so you know they don't rattle around on the seat or whatever um so again you know it's again
23:29 just a very simple example of an annoying problem an elegant solution right and and and then you know then people kind of took it from there on and on right the i you know i don't know how the cup holders in cars got developed it could have been that you know somebody came up with the idea of having a built-in cup holder in a car and went to one of the automobile manufacturers and said look instead of people having these these uh cup holders that hook on the window where you know if they bump them they can knock them off and then it spills and it's a mess or if you put down your window or put it
24:04 up it may slide out and again you got a mess why don't you build it in the car and i'll manufacture that part and you can buy it from me and build it in your cars you tell me what the specifications are and you know off you go so that could have been a business idea that some entrepreneur you know brought to the automobile industry i i don't know if that's the case i'm just saying it could have been that way so the problem that you come up with it doesn't the solution doesn't necessarily need to be sort of a stand-alone solution it could be a solution that when added on top of an
24:40 existing product or an existing situation makes that product or situation better okay so you think about something like you know legal zoom well actually let's forget legalzoom take uh docusign there you go docusign is a better example right so for most of my time in business when you prepared documents they were paper documents um originally you would messenger them to the other party or send them by mail um if if it wasn't you know time uh you know time critical or you know use fedex if it was um if it was you know time critical but not in your
25:16 local area and then you had we had we got fax machines right and there was a whole big thing over whether a document that with a fax signature is that a legal document is that binding right and then then we had the ability to scan and email documents and and then that created the next thing you know uh is an email document with a signature on it is that is that a binding document well so along came docusign so for those of you who have never used it docusign is a uh internet based platform and and you basically create your documents in docusign and
25:53 then when let's just say a listing agreement to to for a real estate agent to represent the seller of a property so they can send their client a link to the document and the client can electronically well can read the document of course and then can electronically initial and sign it and it's a legally binding contract and especially during coved it solved the problem of well we're not supposed to be you know interacting so how do i get people to sign documents when i you know shouldn't
26:28 be going to their house i'm not supposed to be out unnecessarily and yet people still had to sell their houses and so these these this sort of online you know document signing became a a very again elegant solution to uh an annoying at least an annoying problem maybe it was more than annoying it was a you know a kind of problem that would make it very difficult to do business otherwise right so again you think of your problem and then what is your solution to the problem and by the way um you may come up with more than one
27:03 solution and that's great because then you can you can you know discuss the very solutions maybe even test them out see which one works the best so you don't need to confine yourself to just one solution maybe there's more than one and so then you you've got some choices into you know how to pursue the next step of your business and the need the next step of your business is answering question number three what makes your solution unique in other words why should i be interested in your
27:38 solution as opposed to anybody else's solution right why should i be interested in if in docusign if um for example i i don't know if this is the case but the you know the uh realtors association has their own program you know that i can use you know included in the cost of my membership in in the association of realtors right so what what makes what makes your solution unique now this is where design may be one of the factors so you know going back again to our little phone charger here um one of the things that makes
28:14 this unique and i looked at a number of different phone chargers this one as far as what i was able to find had the smallest profile in terms of space it takes up on my nightstand so that's one of the things that makes it unique the second is a lot of the other ones the charger for the cell phone is this disc and the new iphones they they um attach to the disc i think magnetically well i don't have a new cell phone um i have an older uh iphone and so it wouldn't stick to the magnet so
28:50 one of the things that i that i like about this is it doesn't matter whether i have an older or a newer cell phone there's a little ledge here just i just drop it right on the ledge and i don't have to worry does it does it stick does it not stick doesn't matter it's right on the ledge um and so this is in to my mind more versatile than other um cell phone chargers uh that i that i've seen um and uh um also then um what i found is when i go to turn off my alarm in the morning i'm pushing against
29:25 something solid as opposed to you know trying to push on the bottom of the phone and it pops off the magnet or whatever it would fall off right so this this again is a more elegant more universal solution i think to the cell phone charging than some of the other chargers and including one of the chargers that i that i tried out another thing that makes it not necessarily unique per se but again you can charge three devices on it now that's becoming more and more common i i don't i don't i don't think this was the first one that did that it it may have been i don't know but one of the
30:01 things that sets this apart from you know the disk that i had where i could only charge one device is i can charge three devices in the space where you know in half half or less of the space where i could charge only uh one device before um another thing that makes it unique again is you know i only have to i only i only need one plug and i can charge three devices so all of these things make the solution uh you know unique or or at least somewhat unique as compared to um competitive
30:36 products in the market and by i should say i have no interest in in the company that sells these at all i'm just using it as as an example because i i i keep using this word elegant i just think this is a a really beautifully uh elegant device even to the point where i don't know if you can see this because it's kind of dark but on the back there are holes in the plastic so as the phone is charging it allows the heat that builds up on the charger to dissipate which i assume is you know better for the phone right so
31:11 you know all of these features um make this uh you know at least somewhat unique now do you have to find something that literally no other product has or no other solution has you know that that is not my experience it doesn't have to literally be one of a kind um especially if you're you're introdu introducing something that's a fairly new technology or a fairly new idea anyway
31:46 there's a limit oftentimes to how far people will go in in in approaching something new so there's a balance between it being familiar well i should be talking about you know consumer products in this case there's a balance between something that's familiar enough that people won't be afraid to try it but different enough that you separate yourselves out from your competitors right so going back to docusign for a minute because i i had a i had a different uh or used i should say a different um
32:23 electronic uh document platform before docusign i don't remember what it was called and what i found was docusign is is easier to use now again i don't have any interest in docusign i can imagine some people find other ones easier to use than that i'm just talking my own experience so please don't you know bombard me with no docusign is terrible and this is better i'll stipulate to that i'm just speaking you know one reporter's opinion as they say uh having said that um you know really super cutting edge solutions that
32:59 are so unique that that people have a hard time wrapping their heads around it that can be problematic so i'm working with one client um who who they have you know they have a startup um they're actually at the they're wrapping up their seed round now so they're not literally a startup they're a little more mature than that and i you know we've been presenting to different potential investors and um one of the last investors we we uh they presented to he just wasn't well enough versed in the
33:34 what was unique about their solution to really understand it in his guts okay now by the way i don't think that's a fault the fault of either one um it was a mismatch in terms of uh you know potential investor versus uh you know company and that happens right what it did help us do though is clarify all right it just doesn't make sense for us to be pursuing you know this particular area of potential capital because
34:09 what's unique about this particular business it's too big a leap for them to really understand the value of that uniqueness as opposed to this other potential pool of investors who they get that part right away so then we can get into a more in-depth discussion of are they pursuing that particular unique solution most effectively um what are the potential you know problems with it how are they going to be dealing with those problems right so this is a it's a fintech company so when i um when they did a presentation for myself and a
34:45 friend of mine who's a data scientist you know he he was immediately able to target in he understood exactly why they why it was unique and why that uniqueness uh brought a lot of value to their solution and and he quickly identified you know several aspects of it have you have you considered you know cyber security have you considered this have you considered that right and and i as i recall they were the answers were yes getting to it yes you know that kind of thing which is which is good right and that's the other thing
35:20 just because someone questions the uniqueness of your solution doesn't mean that it's no longer a good solution it may be a perfectly good solution it just needs to be fleshed out more or it may need to be tweaked or redirected in in order to make it more effective right so part of the one of the one of the fun things about um helping companies raise capital is hearing these you know what are meant to be helpful critiques um so that so the next presentation can be more effective
35:56 and the next one can be more effective and and in so doing the the the solution and the uniqueness of the solution to the problem they're addressing gets better and better and better right and and the best entrepreneurs are the ones who can take in those critiques and figure out which which part of it really is worth you know building into my solution to to make it better and and honestly that's a judgment call so typically you know more experienced
36:32 entrepreneurs are able to do that better um and i don't mean to bring this up uh to to prevent you from considering getting into entrepreneurship quite to the contrary if you approach answering these questions with somewhat of an open mind you know not a mind so open that your mind falls out as my dad used to say or it wasn't my dad any friend of mine used to say but an open enough mind to really take in the input that you're getting and and you know examine your solution and its uniqueness critically
37:07 even if the the entire idea is not applicable maybe there's a kernel there that you want to apply to tweak your your solution to make it better okay so question number three what makes your solution uh unique all right and now you know drumroll here comes question number four how will the investors make money right so um you know we can come up with um a a a solution or we can come up with a problem we can come up with a solution
37:42 the solution can be unique and now we got to answer but how is anybody going to make money off it so i had a conference earlier today with a fellow who's actually going to be a guest on the show um maybe next week or in a couple of weeks and we were talking about how to solve the problem of homelessness so so that is the problem right we have um people who are living on our streets um many are mentally ill they have addictions um especially women they're being you know assaulted sexually assaulted it it's it's a huge
38:18 problem in in many many many cities and la where i live it's it's a it's a huge problem right so one of the solutions is what are called tax credit uh developments where um in essence the government um partially funds the construction of low-income housing through giving the developer tax credit okay okay well that's that's a solution oh and it seems reasonable right okay what makes it unique well what makes it unique is the government has the authority to tax citizens and then take
38:55 that money and use it to finance projects that they believe are for the good of society or for the good of the local community or whatever whichever you know government is city state federal right so that's what makes it unique the fourth question is how will investors make money and this is where the solution is somewhat problematic it is true that investors can make money but the typical term of one of these projects is drum roll five to seven years from when you start
39:32 the process to when you can open your doors and start having people live there right it's a it's a very long window a conventional you know housing project might take you know 18 months maybe two years i'm talking of a comparable size five to seven years in that kind of time there's been so much time invested that in reality the kind of return that that you know property developers can get is dramatically reduced and so the
40:09 program is not widely pursued there are developers who specialize in it but there aren't enough of them to really make a significant dent in building enough housing to deal with the problem of homelessness right so uh you know in in so in in dealing with this problem um i have a client who he's looking for private sources of capital where don't have to deal with all of the paperwork and the approvals and all of
40:45 that um and and so you know we could cons we he could conceivably get these projects done in a more conventional construction uh i mean development timeline maybe uh 18 months pro probably not 12 but maybe 18 months that would be a realistic timeline right so in the time it would take to do you know one um uh you know tax credit project um they could do what three four and a half uh
41:20 six they could do somewhere between three and six or seven conventional projects which which you know multiply the numbers if they were going to do 200 units in the tax credit deal versus three to you know six in the conventional way you're talking about 100 units versus 300 to 600 units right it's it's a huge huge difference so um the question is then in a conventional way how will the investors make money right and and will that will the amount of money they make
41:56 be enough for them to take the risk of investing in such a project right and so those are really the the the two key aspects to any business that you start how how much money will it make and will the return be adequate for the risk that either you or an investor is taking so if you're going to start a business on your own and i started my first business i basically used credit cards
42:31 right i have to worry about investors now you know cost of credit card capital was was pretty high you know 18 interest and when i started my business as you might imagine i wasn't making any money right so i was carrying balance and paying you know minimum payments with the interest building up right um but that was fine because eventually um the business got up and operating and started making enough money that i could pay off the loans and over the long term um i did very very well um and and and and i got a satisfactory return
43:06 for for you know for my investment especially since i you know i wasn't really risking any uh equity i i was risking you know money i had borrowed from the credit card companies i mean not that i would do this but you know worst case scenario i'd declare bankruptcy and you know walk away and start over again um that's one of the benefits of of the legal system here in the united states is bankruptcy um so now when you're dealing with outside investors you know they may have different investment criteria so um and especially when you're talking about angel capital so let me define these terms in case you're not familiar with them so angel capital
43:43 is money given to or invested in a business when it's first starting up so it could even be a situation where the business is going to make a product but they don't even have a um oh should i lost the word all of a sudden a prototype for the product so they need they need a capital investment just to build the prototype so that's that's angel capital or angel investing and the reason they call it angel investing is as you can probably into it right is it people who who you know invest this kind
44:18 of money they're they're really angels right and and this is what they know they may invest in 10 companies probably eight of them they're going to lose their investment one of them they're going to do okay and one of them is going to do well enough to kind of compensate for the other eight that did nothing now that may not literally be their ratios but but you understand what i'm saying so it's it's high high risk and a lot of the money that they invest it it ends up not paying off now they'll do you know a
44:53 lot of investigation what's called due diligence and all of that and despite all that a lot of companies just don't make it it's it's the nature of the risk and so they're gonna want a pretty significant uh payoff in order to you know in order to take that risk because as i mentioned they may they may um be they may need to recapture the investment in 10 companies through just one very successful fairly successful one right so if you think about it you're like wait wait you mean if they invest in my company and my
45:28 company's successful i'm in essence paying for eight or nine other companies that weren't the answer is yes i mean that's how the risk gets spread out and how these kinds of investors can afford to invest in these kinds of ventures that are very very risky right so you know that's that is that's the cost of playing the game as they say and it may sound unfair but if if you take a moment and kind of step onto the other side of the table if you were putting your money in are you going to put your
46:04 money into one venture and and if that one and and only that one and then if that one fails all your money's gone makes no sense right it's it's it's too big a risk no matter how sure you are because things happen you know uh natural disasters uh pandemics right and the government uh you know uh shuts down the economy right so you know and and the you know the the the you know brilliant restaurant venture that you invested in ends up closing because people can't come to the restaurant or or whatever it is right um or you know the supply chain is messed up and and
46:39 you know you're you're going great guns and all of a sudden you can't get uh the supplies that you need in order to continue uh building your product or whatever it is these are all risks and you know every business every person who starts a business tries to mitigate those risks but they're all still there right so if you were if it was your own money that you were investing you too would probably want to spread out spread it out across several ventures to mitigate the risk right and in which case you would quickly see if if you know seven or eight of them crash and burn i get nothing back the other one
47:15 two three they've got to not only repay the total amount of money that i invested but also give me enough of a profit that it was worthwhile for me to do all this work in order to make these investments right so the return has to be commensurate as well right different angel investors they have different criteria they you know in terms of this the the you know sectors that they'll invest in in terms of the returns they want how long they'll invest in what and what way they'll invest whether they'll they'll lend money whether they'll it has to be an equity investment where they actually you know own a share of the company
47:51 all of that is is you know negotiable so so that's not those you don't really have to worry about per se what you need to be concerned about is how is this going to make money and and what is what return are the uh investors going to get um i'm just checking the time here so i don't run out of time uh how are the and what kind of return the investor is going to get now um you know there's probably going to be a period of time when the venture isn't generating any kind of uh income right and that's that's understandable
48:26 you need time to get it going you may need time to build your prototype and then get it into you know marketing channels and start building your customer base and all that and all that time you're burning money but you're not making very much money or any money right that all needs to be worked in right and so let's say you know it's going to take you uh you figure 24 months to you know build your prototype um figure out all the various manufacturing issues get your marketing going get your your you know your product sales flow going and then at the end of two years
49:02 you'll be at a point where maybe on a monthly basis you know you'll be in a profit okay excellent so keep in mind that that money that was invested in your business has been sitting for two years with no return on the investment at all so the so the return that they get the investors get going forward has to be high enough not only to pay for the current use of the money but also the past use of the money okay so that's again how are they going to make money and and you know
49:38 another way that a business can make money so what we're going to we're going to build it up we're going to build a huge client base and then we're going to offer ourselves to sale for sale to another company that's in a similar line as us they're going to acquire us write us a big check and you know we're going to get a you know five times what what uh you know it cost us to build the company or that that's another way um you know uh selling the company another another way investors might make money is you might go public so you you'll issue stock um and and that's another way for investors
50:13 either to be able to pull out some or all of their investment along with a return on their investment that's another way that investors can make money so there's lots of different ways that investors can make money by the way they might be able to get let's say you have a service they might get to use the service for free right so well that's that's a perk you may say you know that may not be enough you know to um entice them to invest in you without anything else but it could be a nice enough perk that they say okay so you know at least i'm getting a little something and also i get to try out this uh you know this business and see if it's how it's working etc etc etc okay
50:51 so how will the investors make money that's question number four okay so again just just reviewing real quickly question one uh find a problem or what is what is the problem you're seeking to solve two what is your solution three what makes your solution unique for how will investors make money so those are the four questions that every entrepreneur needs to answer okay so um presumably you've heard about an elevator pitch before there are three parts to an elevator pitch one is uh the first part is you want to break the ice typically you do that by
51:27 giving them some sort of benefit i'm not going to read through these you can we can read the slides yourselves and if you've seen again my other presentations this is kind of a rehash with a few uh minor changes to it on how you do an elevator pitch but you want to give an um some kind of um benefit so i will look at the last one introduce the problem you found and in your field compellingly and then give your solution right so um you know the problem is is is people have all these gadgets they they need to uh recharge it takes up a lot of space and
52:02 a lot of plugs near their bedside so this solves that problem and it's beautifully and simply designed right um so that that would be the first part um what's you know unique so what's one aspect that stands head and shoulders above the competition well um this is it's basically a one or two i know whatever three piece you know uh um unit here um and so it's it's it's very easy to construct so it can be built very cheaply and it can be sold cheaply you don't have to worry about what kind of phone you have because it'll work on any kind of phone
52:38 so those are a couple unique aspects and then you need you need to make your ask right what is it you need maybe make it clear what you need i'm looking for investors i'm looking for equity investors i'm looking for uh debt investors or i'm i'm looking to meet people who would be interested in seeing my presentation on my business or i i need an accountant who understands this business and can help me develop my financial projections or i need someone on my board of directors or on my advisory committee who
53:13 understands this problem and can lend their insight um to the best way to solve it those are just i'm just giving you examples of some of the asks right but that's so you know create your elevator pitch so that no matter where you are you can be promoting your business okay so as with all my presentations um i want you to hopefully you will take some kind of action right so if you're interested in starting a business you you don't need to have any money to get started in this process
53:49 not a penny all you need to do is start with one of these four actions find a problem what do you find annoying what do your family and friends find annoying what do your colleagues at work find annoying um or what does you know i don't know society at large find annoying find a problem a compelling problem that that's for which you know there's no solution or no good solution or or there are there are some solutions but there could be better ones that's one thing you can do second find
54:25 a partner find someone who's interested in the same kind of business that you're interested in it's very very valuable to be working with someone especially if you have complementary skills knowledge and experience so if you have the same skills knowledge and experience you're just duplicating each other that's not such a great partnership the best partnerships i always fall back on um the disney brothers so walt disney was enormously creative very very energetic a real you know hard
55:00 driving guy knew what he wanted to accomplish and a complete bust when it came to you know organizing a business financing a business his brother um roy was very good at organization at dealing with finances he was very calm i mean they got into fights i'm told but but relatively speaking he was he was you know he he was kind of the the brother behind the scenes who helped his younger brother bring their vision to fruition right and that that company now is the largest entertainment company in the world right so so it was
55:36 their complementary uh uh skills uh knowledge and experience that made their partnership so fruitful and in fact despite all of the um you know disagreements they had over the years um it was an enduring partnership and it only ended because you know walt disney died um so um and i think you know and i've read quite a bit about them i think the reason it endured was because they had complementary like i said skills knowledge and experience so so go out and find a partner and and then then you've got someone now to bounce ideas back and forth with okay
56:13 find a capital source okay you say wait i'm going to find someone to invest in something when i don't even have something to invest in that doesn't make any sense it does part of the reason people are going to invest in a business you start is because they like and trust you okay and you say what if if if someone gives a presentation and i can see in the potential investor's eyes that for some reason the presenter is irritating them it's not going to invest it's not going
56:49 to on the flip side um i i um two of my friends met this is now quite a number of months ago um one is a uh a scientist and the other is a business guy and they weren't talking about anything they were just chit-chatting while we had cocktails and the next day the business guy called me up he says i want to meet with your friend again because i want to put some money into whatever it is he wants to do he's a sharp guy he very well spoken he he really
57:24 he just so impressed me and that's that's not the only time that that's happened so even if you don't necessarily have a hard and fast idea start spending some time around people who are potential investors because you may find someone there who who likes you and believes that you know that you can be successful and now you've got a different kind of partner but you've got someone you say well you know from time to time can i run some idea or may i run some ideas by you see what you think and and and if they say yes bang you you've taken the first step now
57:59 are they going to definitely give you money no of course not of course not but you've you've broken that ice and you've you've advanced that relationship from the introductory to this the stage where you can build it okay finally another step that you can take is you can learn about angel and seed capital investing okay that you take if you're you know watching the show this is your first step okay because we that's what we really we've been talking about here for the last uh almost an hour right there's lots and lots and lots to learn there's you know tons of websites you know other um
58:35 uh other shows podcasts that you can follow um you know there's tons that you can learn about it there's books you can read um uh oh shoot um kawasaki i can't a guy kawasaki his books are are very good for example um and and he talks a lot about the kind of things you need to do to be able to successfully start a business lots and lots of people out there um when i when i post this on our youtube channel i'll i'll mention a few uh sources you know places where you can learn uh you know additional uh information about starting a business about angel and seed capital
59:11 investing okay and by the way i think i forgot to mention this so so angel investing is when you're first getting started seed capital is when you're already you're already kind of up and going you you have your prototype you're probably already beginning to um sell some of your product you've raised your angel capital and now you need some additional capital to you know get the business up to the level where venture capitalists will be interested in it so so sort of seed capital isn't literally what's called bridge financing but it is kind of in that middle place between startup angel
59:46 capital and venture capitals which is for businesses that are you know you know very much more likely to succeed and and really grow and and potentially take off okay so these are the actions you can take last slide um because we're almost out of time here so just if you if you need help these are where you can uh contact me at the show if you want to connect with me on linkedin i'd love it if you want to you know follow the show and me on facebook there's the the link to follow it's all you know basically the way to wow show um on on the various
60:22 platforms um there is a way to wow show page on linkedin you can follow that as well um you know on the other hand if you're if you're looking for help or advice or whatever so feel free to um you know uh connect with me on linkedin i i find that the best place to connect for these kind of business things okay and and that that is that is really it for the presentation so um if you know if you want to review the presentation or whatever again feel free to contact me i'm happy to send you a copy of the the powerpoint uh presentation uh so that you can look over it uh review it whatever you want
60:58 to do um look at it take some notes et cetera et cetera and i forgot to do one thing let me quickly look hopefully it's gonna come right up here um my guest for next week is oh okay yeah so my guest for next week is bob mcelroy uh bob is the founder and ceo of the alpha project the alpha project provides permanent housing for uh homeless veterans um they're they're based in san diego california but they also have projects in other places um he was telling me uh
61:33 oakland um the inland empire i think riverside if i recall i think there was one other place um bob has a fascinating story i i invite you to come and hear how he started out very very humbly and and is now um the most successful organization um probably in southern california maybe in a in a wider area um working on on you know solving the problem of veteran homelessness and homelessness in in general um and you will find for all of
62:09 his success he is still a tremendously uh humble fellow and uh it's it's it's i'm i'm very very excited to be able to introduce you to bob really looking forward to that so thank you so much for joining me this afternoon i appreciate it i i hope you got um good information out of this if you have questions uh you'll be able to drop them into the comments on youtube or you can ask them through social media through the different channels um that i that i gave you at the end of the presentation and wishing you a wonderful rest of the day and looking forward to seeing you
62:45 next week bye now