Episode 2
· 14:36
Alright. We're opening c suite. I'm Mike Corey, and I'll set the stage for today. We're talking about the first board meeting after the financing. Now at different stages of companies, Corey has been, you know, PE backed CEO, been start up, you know, ground floor and up.
Mike Shannon:And so it's different at different stages. Right? We could be talking about, you know, the early series a, series b fundraising. We could be talking about a private equity buyout,
Corey Ferengul:an acquisition.
Mike Shannon:But what's interesting here is that as the operators, we can get into this mode where the the hill to be climbed is to get to that moment of the financing, especially early stage start up, I'd say, from my perspective.
Corey Ferengul:Yep.
Mike Shannon:And, and there's there's a, you know, a lot of emphasis on the valuation of that deal. Yeah. You know, from coming from my world. Yeah. You wanna, you know, get to a high valuation.
Mike Shannon:Even if you're
Corey Ferengul:going public. Yeah. It's a big focus. Yeah. Right.
Corey Ferengul:Everybody wants to get
Mike Shannon:it right. And and, you know, if you're going public, obviously, it's a lot of shareholder payout and everything. So there's logic to it. There's logic to the start. But as the operator in c you know, the CEO or anywhere in the c suite, now you have the first meeting after that financing.
Mike Shannon:And depending on the dynamics of it 1st board meeting. 1st board meeting. Yeah. Depending on, you know, the dynamics of that deal, really high valuation comes with really high expectations. Yeah.
Mike Shannon:We're gonna talk about the first meeting after, which can be sometimes not thought about as much when you're pursuing the financing. Right?
Corey Ferengul:Yeah.
Mike Shannon:So let me ask you this. The first meeting, you've been on the board. You've been the operator. How often is it going well according to plan? Often, is it a little behind because the numbers were inflated?
Mike Shannon:Like, what tends to happen here?
Corey Ferengul:It's usually a little behind. Little bit behind? A little behind. Okay. I mean, look.
Corey Ferengul:There are absolutely situations where everything is great and there's not a single problem in the world. But let's remember, every time you're raising money in any way, shape, or form, including going public, include you are telling the best possible story that you can about your company. And as a result, you are probably pushing to the limits. So the littlest wiggle in anything is gonna bring challenges. Yeah.
Corey Ferengul:It's not to say some companies don't walk into that first meeting and things look great. Like Yeah. That absolutely happens. But it doesn't there's probably something a little askew from what was sold, so to speak.
Mike Shannon:Alright. So let's do a little, you know, myth busting or clarification. From the investor standpoint, is that expected? Is that okay? Or what you pitch on, is that what you're held to?
Mike Shannon:Right?
Corey Ferengul:You're held to when you pitch on. Okay. You are held to if you pitched it, you're held to it. Okay.
Mike Shannon:Now as Panhard also heard this, though, hey. They're going to discount the numbers you show them anyways. What does that mean?
Corey Ferengul:That's how they price the deal. That's how they expect what is to invest in. You're right. If I'm looking at a deal and they show me a plan, I say, okay. So if they hit XYZ numbers, they came down 10%, they came down 15%, and we invested these dollars, and then you roll that forward.
Corey Ferengul:Here's how it plays out. Okay. I can still hold this valuation.
Mike Shannon:Alright. So that does it. An underwriting process. Yes.
Corey Ferengul:Then there's a management process. And I'm looking and I'm discounting for the underwriting process. Yeah. I'm walking in for the expectations. I'm holding you to your client.
Corey Ferengul:Sure.
Mike Shannon:Yeah. Yeah. So so that's a that's a tricky thing. Right? Because, also, you know, in in there's there's 2 sides of it.
Mike Shannon:Right? Like, obviously, the operators, so it's founders and CEOs of a later stage company, you you know, you have a lot of stakeholders Yep. That that you're fighting for. Right? So that you wanna get the best second locks.
Mike Shannon:You know, the the investor side. I think, you know, there's also a little bit of if you're asking every pitch for, you know, what is the story of how it gets to this $1, 000, 000, 000 thing? That's what you're going to receive. Yeah. Yeah.
Mike Shannon:And, you know, I go a lot of honors. Everybody's kinda trying to figure out how to draw a unicorn somewhere in the deck. Yeah. And so I think in some ways that's that's self manifesting Yep. That you're gonna get, you know, kind of aggressive pictures in the deck.
Mike Shannon:So how do we how do we get to, like, a balance point where that first meeting can
Corey Ferengul:go well? A relationship with those investors. And look, it's a little different on the public side. Right? You know, while I didn't take the company public, I was at a company that we did a massive acquisition, bought a company more than double our size.
Corey Ferengul:And it was pretty much the equivalent of your first board meeting after financing. Right? And so what are you gonna tell them to look for? What should they be watching? Your the relationship you have with the investor is going to dictate how much flexibility you have to work with.
Corey Ferengul:Correct. And and I'm gonna go even further and say, how much time did you invest in being honest and building credibility with that investor? In the due diligence in the due diligence process. And and, look, on the public side, it's not like you're not talking to the possible, you know, big institutional needs that are gonna be on your back later. How do you build credibility with those organizations?
Corey Ferengul:And, I'm a believer in transparency, but transparency also can go too far when doing the financing. So as much as you can tell them, keeping it as clear as you can, making sure that the things you're sharing now are the right things they should be watching for later. We're gonna make progress in Europe next year with operations. Is that real, or is that just because you think that's a bigger Yeah. Total available market and you wanna be excited?
Corey Ferengul:Yeah. If you're gonna communicate it, we expect to be held to it later.
Mike Shannon:Yeah. Now how do you communicate the because there is some degree of having to show, here's what could happen. How do you define what I'm talking
Corey Ferengul:about as could happen versus I'm saying this is going to happen? And and it is once again, it's that. You just nailed it. Right? It's like, this is our plan.
Corey Ferengul:If we do this, we could do that. If we do this, we could do that. Yeah. The the the optimistic plan doesn't happen without some action. Yeah.
Corey Ferengul:Right? Have you ever seen an optimistic plan that didn't mean I have to hire new sales person? I have to have a product. So what's the cause effect? Right.
Corey Ferengul:Be clear what the if we do this, that happens. And you want me to go, didn't happen, so that upside isn't happening. Yeah. It it it well and on that point, what
Mike Shannon:you know, something that I, you know, found was so important for me. Important to me things was being able to define what was the the shot or the swing that we were taking Yep. Hoping in a hypothesis to get to this Yep. Next thing. Now if that's core to the the the, you know, foundational p and l Absolutely.
Mike Shannon:Problematic. But if it's, hey. Here's how we think we'd take the next lead. And being able to look back and say, we did take that shot. Yep.
Mike Shannon:Here's what went different than what we thought. Yeah. I feel like I'm in a pretty good place. But if it was, like, I
Corey Ferengul:don't know. Yeah. I can
Mike Shannon:tell what's happening. Yeah. That's dope. And let's be clear.
Corey Ferengul:When you're raising money, you're dreaming. Right? You should be dreaming. You should be dreaming with the investors. Here's what it could be.
Corey Ferengul:So that's why we are going to be enormous. I don't care if we started at a 1, 000, 000, 000. You're investing because we're gonna be 20, 000, 000, 000. Yeah.
Mike Shannon:If there are 1, 000, 000, 000, it's because we're gonna be
Corey Ferengul:a 1, 000, 000, 000. Right? It's a dream. What gets you there to the dream? Yeah.
Corey Ferengul:Communicating that. Too many companies make the mistake of just focusing on the financials. Mhmm. If I drive to the future and here's just my financials, and you're not working with that investors through the process and letting them know how I get there, what I have to do, what's it gonna look like, and, like, you know, sitting down and have it when you're raising money from VCs, PE firms Yeah.
Mike Shannon:Having dinner really matters. Yeah. Okay. Build a rapport. Yeah.
Mike Shannon:How how do you get the time? So sometimes it's hard. You know, in in this async world too, it's like, it it sounds great to have a few dinners, but if time is scarce, well, how do you
Corey Ferengul:approach that? Well and maybe it's not sitting down and having a glass of wine. Yeah. Okay.
Mike Shannon:But but that would be ideal if you can do it. A a glass of wine
Corey Ferengul:before the investment is a good thing to do. Okay. Alright. So but I would say the What cook
Mike Shannon:well, let's stay on that with wine guys. Yeah. What what what's different about the the glass of wine versus cup
Corey Ferengul:of coffee? It's it it tends to be A cup of coffee tends to be a time meeting. We're in and out. We're trying to get through it. And, you know, cup of coffees, we're gonna catch you in the morning before our meetings begin.
Corey Ferengul:Yeah. Before I got time this afternoon, let's squeeze it in. Sitting down, when you're sitting here on the glass, you're not relaxing, and time goes a little different pace. Now the conversation's more organic. Alright.
Corey Ferengul:It's not on the clock, and you're getting to know each other because Alright. Look. At the end of the day, that first board meeting is about trust. Alright. What trust have you built in them through the process, and then how are you building more trust today?
Mike Shannon:Yeah. So let's say I I managed to get, you know, the future board member investor sit down for 1 with me. Yeah. I have a question you
Corey Ferengul:started asking. How do they see the business? What do they think of the drivers for growth? What are the areas what are the areas that concern them Mhmm. About what you've shared?
Corey Ferengul:Yeah. What when have they seen this before? What how have they helped the firm's companies do this? Yeah. You know, what what are their model returns?
Corey Ferengul:Yeah. What should they have? Once again, I go to the public side, go and say, what are the model returns your fund needs? Yeah. Right.
Corey Ferengul:Just as important to go into a VC or a PE firm.
Mike Shannon:Yeah. Now that and that's something I think at the earliest stage from a founder standpoint. What what are the dynamics, what your fund needs are not even that's not even a question that comes to
Corey Ferengul:our mind.
Mike Shannon:That's right. I know what I need.
Corey Ferengul:I can't Does that matter to you later? Well, yeah.
Mike Shannon:It ends up matter because now all of a sudden, you know, you're going you know, let's say you get past the point of, like, early product market fit. It's like, alright. What are the routes that we take? Yeah. I like, you can be in situation, producing this more than me, where across the board, everybody has potentially the different scoreboard
Corey Ferengul:Yep.
Mike Shannon:That you're competing against. And so yeah. Knowing it's so easy, especially, like, you know, for us, we were young founders too. We're 21, 22. Yeah.
Mike Shannon:And you you just view it like, well, the investor is just this king of their own universe. That's right. But in many cases, they don't have their own staples. Right? So it's not like it's their oh, they've got their own, you know, boss per se.
Mike Shannon:Yeah. So it's this big ecosystem that everybody has a role in Yeah. And understanding beyond our, like, isolated startup, what gear we're moving for somebody else
Corey Ferengul:Yeah.
Mike Shannon:Is important, but sometimes hard to also understand.
Corey Ferengul:Yep. And, look, good news is, typically, when you go to that first board meeting after you do some sort of a fundraising event, everybody's on the same page. Everybody's in the same time horizon.
Mike Shannon:Yeah.
Corey Ferengul:So for the first 1, for the second 1
Mike Shannon:Yeah.
Corey Ferengul:A little different. Then you probably brought a new party to the table. Yeah. And that new party has a different timeline and different return horizon. And the old parties, they probably already made some money on it.
Corey Ferengul:Sure. Or, you know, and so on. So and also it gets more complicated as the CEO to manage the dynamics of each of the investors' requirements, timelines, how they operate, and so on. Yep. Right?
Corey Ferengul:But, I mean, let let's go through the number 1 thing of all this communication, all this data, it is all about trust. Yeah. At the end of the day, if they don't trust you as the executive, nothing matters. Yeah. And so I know some executives are like, I'm really good at dance in, and I can tap all over.
Corey Ferengul:Don't do it. Yeah. Don't go in there and just spill garbage. Yeah.
Mike Shannon:For your own sake, don't do it. But but but
Corey Ferengul:for your own sake, go in there and say, here's what's going on. The more transparency now transparency doesn't mean putting it out there with no explanation, no understanding, and, you know, no actions. Yeah. If you get something bad, here's why it went bad. Here's the actions we're taking to deal with it.
Corey Ferengul:Bad news travels fast. Make sure if it's bad, they know. But they know agenda point in the meeting or you build the context to it? I usually put upfront with quick context. Quick context.
Corey Ferengul:Gotta share with you. Here's what we're seeing. It's gonna result in this. Let me take you through it. But what I'm taking you through is not just what happened, why we think it happened, what actions we're taking to correct it.
Corey Ferengul:Yep. Don't make them say, what are you gonna do? Because they're gonna ask that. Damn it. You know it.
Mike Shannon:Now I can recall in my experience, and with you on the board, 2 versions of this. 1 where I went in, okay, we're meeting to the week and they're gonna find this out. Okay. And even if I bought it first thing, now it's, you know, me with the, you know, the Shark Tank pants. Yeah.
Corey Ferengul:Yeah. I had
Mike Shannon:to turn. Another version is I got, you know, a little wiser was you get a
Corey Ferengul:call Absolutely. You know, 1 on 1.
Mike Shannon:Right? As does, you know, Troy and Jamie, whoever's on our board. And it doesn't mean you're happy about the news, but but now, you know, we've been able to digest it 1 to 1. And the thoughts that I have for how we course correct, you've been able to opine on that. And now as we get to the meeting, there actually is no news to travel fast.
Mike Shannon:It's already gone. That's right. And so now we're actually rolling our sleeves up. That was a way easier board meeting than when I came. It's bad news, and you're like, what the heck?
Mike Shannon:Yeah. Yeah.
Corey Ferengul:You you made a really important point there. It wasn't just call, but it was also the what do I think and what actions are we gonna do. Yeah. And you would always say, well, we're gonna talk more about it in the board meeting, but here's what our initial thoughts are. We're still working.
Corey Ferengul:Yeah. We'll tell you what else we're gonna learn and what else we have decided to do. Yeah. But you didn't just come and say, bad news. This is a mess.
Corey Ferengul:Later.
Mike Shannon:Right. Right.
Corey Ferengul:And hang up. Yeah.
Mike Shannon:Now the the internal side of that too have 2 versions of, you know, you've probably seen us as an exec team, founder team in the meeting. Certainly, you're you're wanna roll up your sleeves and be thinking through things. But, if it's still fresh to us and we're coming to our ideas versus we've had an internal meeting, and we we have digested and come up with some of those plans ourselves.
Corey Ferengul:Yep.
Mike Shannon:You know, that I think has to happen along with the CEO's 1 on 1 calls.
Corey Ferengul:Yeah. So what we're saying is if you get to a fundraising event, you get to some sort of new financial event, that first board meeting first off, you're setting the tone for transparency. You're setting the tone for trust. You're setting the tone for how you're gonna operate here on out. So walk into that knowing what metrics you want them to be looking at, what are the most important things they should be thinking about, help guide the board as to how to interact with you.
Corey Ferengul:We recommend you be as transparent as practical. Yep. And if it's bad news, don't wait for the board meeting for it to come out. Yep. Preview it.
Corey Ferengul:Talk to people in advance. And if you're walking with bad news, walk in with why we think it happened and how we think we're we're gonna resolve it, what actions we're gonna take, and we're here to hear more from you.
Mike Shannon:Yeah. And wrapping it up with what the theme of this was, that first meeting after the financing, having that in mind Yes. Through the financing because Yeah. It's not a, we don't care what you said. We're here cutting it anyways.
Mike Shannon:That's for the underwriting process. The expectations are what's been communicated. Absolutely. So just prepared for the first meeting. Happy Monday.
Mike Shannon:Thanks.
Listen to Momentum Mode w/ Corey Ferengul & Mike Shannon using one of many popular podcasting apps or directories.