WEBVTT 00:04.440 --> 00:07.320 Welcome back to the Career Hacking Village. 00:07.320 --> 00:11.780 Many of us think, do I really want to go work for somebody else? 00:11.780 --> 00:15.120 Do I want to, you know, report into an employer? 00:15.500 --> 00:18.140 Maybe I really want to start off on my own. 00:18.140 --> 00:28.660 So we're very happy that one of our own, who has done a phenomenal job starting his own company, wanted to share with us sort of the back end of what it's all about. 00:28.660 --> 00:33.060 So Bryson, share with us what it is about starting your own company. 00:33.060 --> 00:37.400 Welcome to Entrepreneurial Adventures, Starting Your Own Company. 00:37.720 --> 00:41.600 Kathleen, I'm going to correct you on one thing you said, done a phenomenal job. 00:41.600 --> 00:46.880 All I can say is I've been doing this for eight years, and I've started three different companies. 00:47.020 --> 00:53.260 I gave a keynote at a college a few years ago, and we were talking about entrepreneurialism. 00:53.640 --> 00:56.320 And somebody asked me, well, what's the metric of success? 00:56.320 --> 00:57.480 Like, how do you know you're successful? 00:57.480 --> 01:00.080 And I was like, I have no idea how to measure that. 01:00.080 --> 01:05.380 Every day that we get to continue to make payroll, and the company stays alive, is how I see success. 01:05.380 --> 01:20.200 So I don't know if it's been phenomenal, but I do appreciate the opportunity to continue to pursue the ideas and the passion with all of the great folks that I work with, and the fact that our companies have done so much for the community. 01:21.240 --> 01:29.700 All right, so I got a tweet that I wanted to include from Mark, and it was a great quote. 01:29.700 --> 01:35.500 An entrepreneur is someone who will jump off of a cliff and assemble an airplane on the way down. 01:35.500 --> 01:39.360 I guess the definition of success here is you don't crash. 01:40.700 --> 01:42.260 So who am I? 01:43.020 --> 01:46.600 I'm the guy who dresses up like a unicorn. 01:46.600 --> 01:49.540 So I founded Grimm eight years ago. 01:49.780 --> 02:01.680 While serving a large client, they gave the initial spark for the idea that became Scythe, and that's now my full-time job. 02:01.680 --> 02:12.000 I co-founded the non-profit, the ICS Village, and I'm a senior fellow at the R Street Institute, as well as the National Security Institute for National Security and Cybersecurity. 02:12.000 --> 02:16.900 So I have experience with a non-profit, a services company, and a product company. 02:17.880 --> 02:19.960 All right, this is me. 02:21.040 --> 02:22.980 I am not a lawyer. 02:25.200 --> 02:27.340 This is not legal advice. 02:30.460 --> 02:33.840 I'm not even one of the best entrepreneurs out there. 02:36.260 --> 02:38.900 I just want to really highlight this one. 02:38.900 --> 02:49.900 So besides my two dogs, that golden couch there is where I sat on day one, eight years ago, when I started Grimm and went, okay, so I've done the big adventure. 02:50.360 --> 02:51.700 Now what? 02:52.640 --> 02:53.840 That's where it all began. 02:53.840 --> 02:58.500 So starting with, why do you want to do this to yourself? 02:59.080 --> 03:07.340 Asterix, the reason we have so many people here on the screen is that it takes more than you to start a company. 03:07.540 --> 03:14.520 Your friends, your family, all of them are going to be a part of this journey for better or worse. 03:14.520 --> 03:23.660 And so when you're thinking about that question of why do I want to start this company, you need to think through why do we want to start this? 03:24.480 --> 03:26.500 The startup curve. 03:26.700 --> 03:32.340 When you actually finally take that leap, it's the honeymoon period. 03:32.340 --> 03:35.120 It's jumping into the great unknown. 03:35.120 --> 03:36.620 And it is so great. 03:36.620 --> 03:39.220 And it is wonderful for as long as it lasts. 03:39.220 --> 03:45.840 In my experience, it took about three to six months before that reality sets in. 03:45.840 --> 03:51.020 And then you're down in the, okay, what have I really gotten myself into? 03:51.980 --> 04:08.500 For the first two to three years of a company, you will find yourself every single month being confronted with some insurmountable challenge, some existential threat to your ability to continue to go. 04:08.780 --> 04:10.920 And you'll make your way through it. 04:10.920 --> 04:15.160 And at some point, you'll hit that point where things start to click. 04:15.160 --> 04:17.080 Things start to work. 04:17.080 --> 04:19.700 Those crises don't keep happening. 04:19.700 --> 04:25.020 And at some point, then people start to know who you are. 04:25.260 --> 04:28.620 And they start to come to you for that solution. 04:28.740 --> 04:30.520 And it takes off. 04:31.520 --> 04:37.320 So to be an entrepreneur, I believe requires only two primary skills. 04:38.080 --> 04:41.280 Passion, intolerance for bullshit. 04:41.320 --> 04:43.400 You don't need to be the smartest. 04:44.260 --> 04:45.360 Look at me. 04:46.060 --> 04:54.680 What you do need is a passion for an idea that each day that you're not doing that idea, it hurts you. 04:54.680 --> 04:59.880 There's an itch that this idea needs to get out there into the world. 04:59.940 --> 05:04.080 And when you're in charge, you are in charge. 05:04.080 --> 05:07.420 You are the CEO and you're the janitor. 05:07.420 --> 05:09.320 Nobody else is going to clean up. 05:09.320 --> 05:11.120 Nobody else is going to pick up everything. 05:11.120 --> 05:14.340 The buck literally stops with you. 05:14.520 --> 05:30.720 And so that tolerance for bullshit is you need that patience and the wherewithal that each day you're getting up, you're going at it and you're doing whatever needs to be done, which are going to be some really glamorous things on the high points and some not so glamorous administrative, 05:30.720 --> 05:39.080 HR, state registration, all of the litany of things that need to be done because nobody else is there to do them. 05:39.200 --> 05:40.760 That's your job. 05:41.060 --> 05:43.500 So you don't need to be the smartest. 05:44.060 --> 05:46.140 You do need to have some that you believe in. 05:46.840 --> 05:54.540 Do not do this for the money because that's one of the big jokes is starting your own company is one of the fastest ways to lose money. 05:56.060 --> 05:57.660 So what is the idea? 05:57.760 --> 05:58.900 The ideation phase. 05:58.900 --> 05:59.340 All right. 05:59.420 --> 06:03.000 First of all, if you've got an idea, talk to people. 06:03.180 --> 06:05.080 Then talk to some more people. 06:05.460 --> 06:09.740 Have them introduce you to even more people and talk to those people. 06:09.820 --> 06:12.400 And by talking, I mean, listen. 06:12.800 --> 06:16.240 So a lot of folks get so afraid to share their idea. 06:16.240 --> 06:18.960 They're like, hey, I don't want somebody else to steal my idea. 06:19.520 --> 06:25.380 Personally, if somebody else can do what I'm doing better than me, I am happy for them to do it because I shouldn't be doing it. 06:25.380 --> 06:26.800 But people are afraid. 06:26.800 --> 06:31.440 People are scared that if I give somebody something, they're going to take it away from me. 06:32.000 --> 06:40.700 You have to kind of get out of that because you're going to find that if your idea is really that good, most people can't execute it. 06:40.700 --> 06:52.140 There's a great phrase, and I think it's usually attributed to Ben Franklin, even though he probably didn't say it, which is that genius is 99% perspiration and 1% inspiration. 06:52.820 --> 06:55.060 Great ideas are a dime a dozen. 06:55.140 --> 07:00.640 The execution, the follow through, the day in, the day out of doing that makes the difference. 07:00.640 --> 07:04.420 And then, again, you, the entrepreneur, it's your network. 07:04.420 --> 07:05.520 It's who you talk to. 07:05.520 --> 07:07.480 It's them being willing to help you. 07:07.540 --> 07:09.800 And I can speak from personal experience. 07:09.800 --> 07:16.800 When I first started my own company, I came out of a very small closeted world in the intelligence community. 07:16.800 --> 07:20.120 I didn't have really a lot of contacts in the civilian world. 07:20.640 --> 07:25.400 And it took me a while to figure out how important that was. 07:25.400 --> 07:33.200 And as I started building those relationships, by asking and asking for help, people want to help you. 07:33.360 --> 07:34.320 Let them. 07:34.720 --> 07:36.940 The best technology doesn't win. 07:37.660 --> 07:42.140 So, the idea here is that we're looking for this concept of a value proposition. 07:42.140 --> 07:51.920 By talking to lots of folks, we figure out how to explain our idea, how to shape the idea, and more importantly, why would someone buy this idea? 07:51.960 --> 07:53.660 That's the value proposition. 07:53.660 --> 07:58.240 It's a very short, this is what we do that makes us money. 07:58.280 --> 08:10.580 And then, the expression of that idea that comes into code, into practice, that is the minimum level of features that somebody would buy it, is the minimum viable product. 08:11.740 --> 08:14.480 So, products versus services. 08:14.980 --> 08:20.480 This is important because we need to understand the economic model of what's underpinning our idea. 08:20.520 --> 08:24.280 If we're a services organization, we're going to grow organically. 08:24.280 --> 08:29.640 We're going to have people, one hour of a person's effort equals one hour of pay. 08:30.440 --> 08:37.120 Products have the allure of one hour of effort is worth whatever somebody's willing to pay for that. 08:37.760 --> 08:44.800 That multiple is why you see those kinds of acquisitions that seem very exciting, where people pay a lot of money for a product. 08:44.800 --> 08:50.260 You don't get those same multiples on services because people don't scale. 08:50.780 --> 08:59.100 When I started Grimm, I had folks in the private equity and VC community coming to me and they would be like, well, what's your business model? 08:59.100 --> 09:02.720 And I would explain, well, we hire the best team of hackers. 09:02.920 --> 09:06.920 And I emphasize that the team because hacking really is a team sport these days. 09:06.920 --> 09:10.120 You can't just have the single prima donna who can make everything happen. 09:10.120 --> 09:11.220 It needs to be the best team. 09:11.240 --> 09:13.060 And they're like, all right, well, that sounds great. 09:13.060 --> 09:14.420 How are you going to grow that? 09:14.760 --> 09:20.120 I was like, well, as much as we can continue to find the best team that we can fit that with. 09:20.120 --> 09:22.100 They're like, well, that doesn't scale. 09:23.140 --> 09:25.220 No, it doesn't. 09:25.620 --> 09:36.920 Unless you're going to give up on that idea and try to figure out some other way of commodity people, which is really the pyramid of I have some expensive people and then I just hire lots of cheap labor. 09:37.300 --> 09:44.380 And even then, you're still scaling by person and the money that they're making is still one hour of work for one hour of pay. 09:46.300 --> 09:48.560 So you want to do this. 09:48.560 --> 09:50.840 First thing, incorporate. 09:50.920 --> 09:53.920 You need to establish a legal structure. 09:54.320 --> 10:00.440 So the different kinds of structures are limited liability corporation and S corporation or C corporation. 10:00.440 --> 10:14.540 To start with, the simplest one is a limited liability corporation, which is just providing you the legal protections so that you as an individual have legal protection and coverage for doing work. 10:14.540 --> 10:17.100 Check the name availability. 10:17.340 --> 10:22.700 The IRS and states have the ability for you to look up the names that already exist. 10:22.820 --> 10:30.500 There are also ways that you can use names that don't necessarily have collision. 10:30.520 --> 10:36.500 Like I used an acronym to start Grimm, SMFS, to keep this PG rated. 10:36.500 --> 10:39.240 I will not share what that stands for, but use your imagination. 10:39.500 --> 10:42.820 And then we use Grimm as the doing business ad. 10:42.820 --> 10:47.640 So that's the trade name that actually ties to our logo and what we're doing, just like Scythe. 10:47.800 --> 10:52.500 With the IRS then, you need to go and register for an employee identification number. 10:52.500 --> 10:57.260 So you go to the IRS website, you request an employee identification number, they come back to you. 10:57.260 --> 11:00.520 That's basically the social security number for you. 11:00.520 --> 11:01.860 Why does the IRS want it? 11:01.860 --> 11:03.720 Because they want their taxes. 11:03.720 --> 11:04.900 They want you to pay them money. 11:04.900 --> 11:07.160 When you make money, they want it. 11:07.720 --> 11:15.020 Then at the state level, you need to create a local registration for each state that you're doing business in. 11:15.020 --> 11:17.900 If you have an employee in that state, you have to register in that state. 11:17.900 --> 11:20.840 If you sell in that state, you'll have to register in that state. 11:21.540 --> 11:39.520 I'm not going to go into a lot of the details, but the clever states to register in are one of the most well known, which is Delaware, and they are the the paragon for the ease of use and simple business friendly laws. 11:39.540 --> 11:44.080 A couple of others that are variations of that that are also well known are Nevada and Wyoming. 11:44.080 --> 11:46.500 As always, I'm not a lawyer. 11:46.660 --> 11:48.720 So make your own choice. 11:48.720 --> 11:53.000 And then a lot of places, you also need to register down at the county government. 11:53.260 --> 11:57.240 While you're doing this, I also recommend that you register with the U.S. 11:57.240 --> 11:59.240 government for procurement purposes. 11:59.420 --> 12:00.360 So this is not the U.S. 12:00.360 --> 12:00.620 government. 12:00.620 --> 12:01.660 This is not the side of the U.S. 12:01.660 --> 12:03.280 government that wants to take money. 12:03.280 --> 12:04.300 This is the side of the U.S. 12:04.300 --> 12:06.140 government that helps you get money. 12:06.320 --> 12:10.080 And so the two ways to do that are with the SAM system. 12:10.080 --> 12:11.520 I believe that's just sam.gov. 12:11.740 --> 12:15.880 Register for a CAGE code, and then Dun & Bradstreet will give you the same thing. 12:15.880 --> 12:18.000 Register and you'll get a DUNS number. 12:18.180 --> 12:18.760 They're free. 12:18.760 --> 12:19.900 It doesn't cost anything. 12:19.900 --> 12:21.760 It's actually fairly easy to do. 12:22.780 --> 12:34.500 And that just sets you up in place that if you ever need to do any kind of that stuff, and there are a lot of commercial companies that also will sometimes request a CAGE or a DUNS number, you're already set up and you don't have to worry about it again. 12:35.140 --> 12:38.080 So starting with your best friend forever. 12:38.240 --> 12:40.380 This is, of course, a common challenge. 12:40.600 --> 12:43.600 Business never goes as planned. 12:43.760 --> 12:47.800 And you can destroy a lot of relationships and friendships by doing that. 12:47.800 --> 12:53.460 So starting with, be clear on what are the roles, what are the expectations. 12:53.820 --> 13:00.660 One common mistake that a lot of people make is they immediately set the percentages of equity at the start. 13:00.660 --> 13:02.660 You don't necessarily have to do that. 13:02.660 --> 13:06.900 So, for example, you might decide, hey, we're going to start this business. 13:06.940 --> 13:10.980 And after the end of the year, we're going to look and see what's happened. 13:10.980 --> 13:14.880 And then maybe that's when we'll assign what the equity percentages should be. 13:14.880 --> 13:19.060 And the advantage for doing that is that you can actually make it fair. 13:19.060 --> 13:24.140 Maybe somebody started off and then, for whatever reason, decided to go do something else. 13:24.140 --> 13:31.440 You're not now still tied to that person with them owning a percentage of the company because it's not even a financial question. 13:31.440 --> 13:33.680 It can also be a question of control. 13:34.120 --> 13:37.240 Equity decides who gets to make the decisions in the company. 13:37.240 --> 13:38.840 So what if things change? 13:38.840 --> 13:40.680 What does success look like? 13:40.680 --> 13:47.660 That's something where that question where I got asked at the college keynote, what does your success look like? 13:47.660 --> 13:49.480 And I was just like, well, I keep going. 13:49.560 --> 13:56.980 I don't have some measure of success for what I'm doing for any of these companies other than particularly with Scythe. 13:56.980 --> 14:01.100 I just have a particular idea that I think really can help the industry. 14:01.100 --> 14:03.200 And I want to see that get out there. 14:03.240 --> 14:05.400 Now, that's not to say that money is not important. 14:05.500 --> 14:10.740 Money is the lifeblood of a company, especially if you have employees. 14:12.180 --> 14:14.980 You don't put food on the plate with ideas. 14:14.980 --> 14:16.980 You put food on the plate with money. 14:17.220 --> 14:20.860 And so making sure that with your friend, you both have those ideas of expectations. 14:20.860 --> 14:22.200 Who does what? 14:22.200 --> 14:24.000 What's the compensation going to be? 14:24.000 --> 14:26.000 And then what are you trying to accomplish? 14:26.000 --> 14:27.880 And what does that success look like? 14:28.480 --> 14:30.880 To raise or not to raise? 14:30.880 --> 14:32.580 That is the question. 14:32.580 --> 14:34.580 So let's start with the easy one. 14:35.220 --> 14:38.560 Starting a services company, probably not. 14:38.620 --> 14:40.740 You're growing by people. 14:40.740 --> 14:45.060 As you make more money, you hire more people and you grow organically. 14:45.080 --> 14:49.540 Very little reason and very few investors that will invest in a services company. 14:49.540 --> 14:54.440 As with everything, there are no absolutes, but just as a general rule, probably not a good idea. 14:54.780 --> 15:04.000 Products, you probably are going to look to raise at some point because there's going to be some element of speed to market to expertise. 15:04.000 --> 15:09.340 So my own personal example, I had a consultancy, Grimm. 15:09.340 --> 15:12.160 Grimm generates a good amount of cash. 15:12.160 --> 15:22.760 We use that money to invest in incubating the idea of Scythe for a couple of years and doing R&D with the Fortune 50 client that we were working with. 15:22.800 --> 15:27.420 And then I realized, okay, I want to take this software to market. 15:27.480 --> 15:32.200 I know absolutely nothing about commercial software and how to go to market. 15:32.200 --> 15:47.280 And so it wasn't the money that was important to me for the investors, but it was finding the right investors who could help provide me that expertise and experience so that I didn't learn some costly lessons that might kill the idea and successfully bring it together. 15:47.280 --> 15:49.680 So you're not just looking at it from a money perspective. 15:49.680 --> 15:52.400 You're also looking at it, what do they bring to the table? 15:54.630 --> 16:10.150 I wanted to call out, Haroon Mir had a great video on bootstrapping ego and really looking at that perspective again, where we talked earlier on the BFF slide about control with equity. 16:10.150 --> 16:18.830 You're constantly in this balance because as you bring other people in, and of course they bring and buy their money in, what they're buying is part of the company. 16:18.830 --> 16:21.970 That equity in that company represents control. 16:21.970 --> 16:31.730 And so there's this balance of how much control do I want to give up for other folks, balancing that with the potential that that capital can be used to really grow us. 16:31.730 --> 16:35.730 So I highly recommend checking out this video by Haroon to go in more detail. 16:35.930 --> 16:40.010 So the types of investors, all investors are not created equal. 16:40.510 --> 16:45.450 So the venture capital types are, there's funds and there's private equity. 16:45.450 --> 16:47.330 So these are the big institutions. 16:47.810 --> 16:54.750 And the biggest thing that I would say is if you are looking at raising, it takes some time to start to learn what the different types are. 16:55.090 --> 17:05.450 And particularly at the seed round, there are not a lot of investors who actually invest small amounts at that level, because it's a different time commitment for them. 17:05.450 --> 17:06.850 It's a different amount of risk. 17:06.850 --> 17:17.870 And they typically have very large funds where them writing a $500,000 check is almost a waste of time for them because they need to write really big checks to get the funds that are sitting there out. 17:18.510 --> 17:22.610 Save yourself the time and ask upfront what they do. 17:22.610 --> 17:24.670 What kinds of check sizes do they write? 17:24.670 --> 17:26.390 What rounds do they typically come in? 17:26.390 --> 17:34.430 Because you're going to find that there are a lot of later stage investors who want to chew up your time early and they're not going to give you money. 17:35.290 --> 17:38.550 Angels are smaller investors. 17:38.650 --> 17:43.970 They typically are writing check sizes of 25k to $100,000, sometimes more, sometimes less. 17:43.970 --> 17:45.230 That's just a range. 17:45.710 --> 17:49.970 These are typically folks who have been successful. 17:49.970 --> 17:52.290 Typically they were entrepreneurs. 17:52.930 --> 17:59.130 They want to continue to keep their hand in supporting other entrepreneurs in the industry. 17:59.130 --> 18:02.170 They're going to be very friendly and supportive. 18:02.590 --> 18:03.910 There's always friends and family. 18:03.910 --> 18:07.070 Friends and family are a good way to get started. 18:08.290 --> 18:17.530 Then there's this other sort of side concept called incubators, where what they'll do is it's typically a program that provides you office space. 18:17.730 --> 18:20.370 Pre-COVID, office space used to be a thing. 18:20.390 --> 18:34.290 Now that it's not a thing anymore, I don't know what incubators do other than perhaps they connect you to online seminars where they'll introduce you to different executives that might be in an industry that's a potential buyer. 18:34.290 --> 18:39.050 They'll introduce you to other VCs and investors and introduce you to other entrepreneurs. 18:39.110 --> 18:44.650 And then finally again, the government has a small business innovation fund called SIPR. 18:44.670 --> 18:46.710 The link is here. 18:46.710 --> 18:52.890 And different elements of government will put out different proposals. 18:52.890 --> 19:01.190 So if your technology or your idea matches one of those potential areas of interest, this is free money. 19:01.190 --> 19:03.550 They don't take equity with this. 19:03.750 --> 19:05.590 It comes in phases. 19:05.590 --> 19:09.090 Phase one is typically I think like $150,000 to $150,000. 19:09.490 --> 19:13.150 Excuse me, phase two can be $150,000 to $250,000. 19:13.150 --> 19:24.310 And then phase three, where they're trying to help push and scale into the government as well as commercialization, you're looking at a good half a million, $750,000. 19:24.710 --> 19:26.630 And so again, that's like free money. 19:26.630 --> 19:28.470 So just something worth considering. 19:29.830 --> 19:38.330 All right, so you've decided after all this thinking, you've got this idea, you're passionate, you want to do it, you've fleshed it out, so you're going to raise. 19:38.330 --> 19:39.590 You need a pitch deck. 19:39.610 --> 19:44.270 There are five core elements to the pitch deck. 19:44.390 --> 19:47.410 One page, what's the problem? 19:47.430 --> 19:50.490 One page, how does your solution help with it? 19:51.270 --> 19:59.450 You could use a few more pages after that, but if you can't condense in one slide how your solution works, you probably don't have it refined yet. 20:00.070 --> 20:02.110 Proof, do you have beta customers? 20:02.110 --> 20:03.310 Do you have examples? 20:03.310 --> 20:10.550 Tell me what you've got other than, that sounds like the greatest thing since sliced bread, that tells me that somebody else thinks about this. 20:10.550 --> 20:13.510 This is how investors are trying to fit. 20:14.150 --> 20:19.550 Is this just a great idea in somebody's, you know, in the proverbial engineer's garage? 20:19.550 --> 20:22.410 Or is this something that other people are going to believe in? 20:22.650 --> 20:25.410 Funding, how much do you want? 20:26.070 --> 20:28.170 This took me a while to get around that. 20:28.170 --> 20:32.030 I'm supposed to actually say how much money I want to actually do this. 20:32.030 --> 20:38.010 I just got so carried up in the selling, I forgot I needed to actually say how much money do I want from you? 20:38.010 --> 20:40.790 And then, what am I going to do with that? 20:40.870 --> 20:43.570 And then your vision, what does that look like? 20:43.570 --> 20:47.850 The schedule, the milestones, when will we get to a minimum viable product? 20:47.850 --> 20:49.290 What does that look like? 20:49.290 --> 20:58.710 Now, a lot of people get caught up on this part because investors might ask for, hey, tell me the potential addressable market, which we'll talk about shortly. 20:58.710 --> 21:04.090 They might say, hey, how am I supposed to know how much money we're making in two years? 21:04.150 --> 21:08.550 They're not looking for you to tell them a correct number. 21:08.570 --> 21:11.050 What they are looking for is your thinking. 21:11.050 --> 21:12.630 How did you get there? 21:12.630 --> 21:13.970 Does that make sense? 21:13.970 --> 21:14.950 Is it logical? 21:14.950 --> 21:18.230 So they're really just trying to get a better understanding of going inside your head. 21:18.510 --> 21:24.910 At the end of this presentation, I have numerous lists of wisdom from different entrepreneurs. 21:25.030 --> 21:31.210 This part includes Rangoola as well, and a link to more details on how to put together your pitch deck. 21:31.210 --> 21:33.930 And again, don't be afraid to share your pitch deck. 21:33.930 --> 21:37.310 I've had numerous folks send me examples of their pitch decks. 21:37.310 --> 21:47.070 I have shared my pitch deck, which I have spent two years refining through different versions as I've continued to learn what the hell I've built and what the hell our team has built. 21:47.170 --> 21:53.070 And I don't know if that one ever goes away, if you ever figure out exactly what you built in completion. 21:53.070 --> 21:56.330 Maybe once you're Apple, you have figured that out. 21:56.330 --> 21:58.890 And even then, it seems like they're still coming up with new things. 21:59.890 --> 22:01.370 So the process. 22:01.530 --> 22:02.070 All right. 22:02.070 --> 22:03.370 So first, caveat. 22:03.830 --> 22:08.910 Everything Cishet white male founders tell you probably will not work if you're not in that group. 22:10.150 --> 22:12.450 I am a Cishet white male founder. 22:12.450 --> 22:23.330 So the point here, and my good friend Katie provided this quote here, is the raise process is a very insular community. 22:23.450 --> 22:28.610 I can speak to one bias that I personally experienced, which is the West Coast bias. 22:28.610 --> 22:32.930 A lot of VCs, a large portion of the money, are on the West Coast. 22:32.930 --> 22:40.790 Now, that has been shifting, and there have been numerous centers of additional innovation and investment outside of it, but it is the main draw. 22:41.050 --> 22:49.670 And numerous West Coast investors that I talked to, the first question they would ask me, because I'm on the East Coast, is, so when are you moving to the Valley? 22:50.850 --> 22:52.690 I'm like, well, I'm not moving to the Valley. 22:52.690 --> 22:54.630 I'm going to stay on the East Coast. 22:54.630 --> 22:56.290 And that was a non-starter. 22:56.890 --> 23:02.610 Then there's a challenge which we see in InfoSec and IT in general, which is the tech bros. 23:03.150 --> 23:11.810 The, hey, I'm a tech, you know, I'm a guy, and there's an inherent bias about anybody who doesn't fit the certain way that they look. 23:12.010 --> 23:23.010 And then, of course, the challenge here is because the community is so insular with the investments, it is based on relationships, but you're stuck in this chicken and this egg of how do you build those relationships? 23:23.190 --> 23:30.490 And so this is an area where, again, having built that network can help you crack it, but Katie sums it up really well. 23:30.490 --> 23:38.810 This is a very insular community, and you're going to hear a lot of advice from the Ted style talks of like, well, this is how you do it. 23:38.910 --> 23:45.210 And a lot of it won't apply because that privilege doesn't automatically just confer. 23:46.470 --> 23:47.970 So capital. 23:47.970 --> 23:48.950 All right. 23:48.970 --> 23:53.270 Taking capital, getting an investment is like getting married. 23:53.430 --> 23:59.470 You could have the prenuptial, which is a convertible note or straight equity. 23:59.470 --> 24:01.430 So there's really two different ways of doing this. 24:01.430 --> 24:15.270 One, convertible note is almost like a loan under set circumstances that once a round is finalized at some point in the future, the money that they invested converts into that equity in that future. 24:15.590 --> 24:20.030 And then, of course, there's just the straight equity, which is I'm buying this amount. 24:20.410 --> 24:21.390 I'm giving this amount. 24:21.390 --> 24:22.690 I get this amount. 24:24.110 --> 24:28.670 I think it is an apt metaphor to talk about this like marriage. 24:28.910 --> 24:34.790 Whoever you're jumping into bed with as a part of your company, they're going to be there for a long time. 24:35.090 --> 24:39.190 And if it goes poorly, it's going to be very, very messy. 24:39.190 --> 24:40.370 So think very carefully. 24:40.370 --> 24:51.210 Do not get caught up so much in the money assigned to a name and really think through who and why you want to work with the various folks that you're bringing into your idea. 24:53.210 --> 24:59.210 Some of these folks who are the major investors are probably going to want to have formal influence through your board. 24:59.210 --> 25:03.190 And there's really two formal roles there. 25:03.190 --> 25:12.030 One is a director, which means that they get a formal vote as a part of board assigned to the amount of their control, which we've talked about. 25:12.030 --> 25:19.330 And then observers, where they don't have a formal vote, but they are allowed to be and to talk at the board meetings. 25:19.330 --> 25:32.170 And then there could be other kinds of folks on the board, like some people bring in independents, some people bring in folks that represent that are independent, that represent different potential customer types for the industry. 25:32.370 --> 25:41.830 But that board is going to be the captaincy that provides the advice for execution. 25:41.830 --> 25:52.970 So this is probably the biggest thing that I've seen a lot of founders and CEOs struggle with, is in most places, you do not work for the board. 25:52.970 --> 25:55.290 The board works for and with you. 25:55.290 --> 25:57.370 They're there at the end of the day. 25:57.370 --> 25:59.570 They have their meeting, they say their things. 25:59.570 --> 26:05.710 It's the CEO who's responsible for going and executing that and making sure that that actually happens. 26:06.110 --> 26:14.090 And yes, they're accountable to the board, but don't get lost in the fact that the board is there to help you, not just tell you what to do. 26:15.190 --> 26:17.150 So addressable market. 26:23.270 --> 26:29.070 Addressable market is really, really, really, really, really, really, really hard to do. 26:29.070 --> 26:31.770 Like I said, it's more around the thinking. 26:31.830 --> 26:39.690 The best way to do an addressable market buildup is saying, okay, I think there are these kinds of customers. 26:39.690 --> 26:45.810 So I have a blue unicorn or red unicorn and a purple unicorn who represent different kinds of customers. 26:45.810 --> 26:49.310 And they're willing to pay roughly this amount, or this amount and this amount. 26:49.310 --> 26:51.030 And I think there's this many of them. 26:51.050 --> 26:59.010 This is the preferred way to try to build up an addressable market as opposed to vulnerability management. 26:59.010 --> 27:00.290 It's a $4 billion market. 27:00.290 --> 27:02.110 I think I can get 10% of it. 27:02.110 --> 27:04.590 Therefore, my addressable market is $400 million. 27:06.990 --> 27:10.230 And that's not going to cut it. 27:10.230 --> 27:15.110 They want to see you understanding, hey, I think that I can charge this kind of customer this amount. 27:15.110 --> 27:17.990 And I think there are this many of them, this many of them, and this many of them. 27:17.990 --> 27:19.050 And then put that together. 27:19.050 --> 27:21.130 And now you can show all of your thinking. 27:21.130 --> 27:25.810 Like I said, they're not looking for the correct answer because they don't know. 27:25.810 --> 27:26.790 This isn't a test. 27:26.790 --> 27:28.050 You're not being graded. 27:28.050 --> 27:31.310 It's really how believable is it and does it make sense? 27:31.310 --> 27:36.430 Is that something that somebody could see playing out as you execute? 27:37.330 --> 27:39.910 That's how you get your overall addressable market. 27:39.910 --> 27:41.370 So, economics. 27:41.770 --> 27:45.030 A person does not cost a person. 27:45.030 --> 27:48.970 Most people think of what a person costs, or in this case, a unicorn. 27:48.970 --> 27:50.790 I love my unicorn references. 27:51.410 --> 27:55.290 And it's not just the salary that makes up what a person costs. 27:55.290 --> 27:56.310 Whoop, going the wrong way. 27:56.310 --> 27:59.510 So, hourly salary is the base cost. 27:59.510 --> 28:02.950 And then on top of that, you have multiple elements. 28:02.950 --> 28:06.910 Fringe, general administration, and overhead. 28:07.250 --> 28:10.850 So, fringe is benefits. 28:11.070 --> 28:14.610 Health insurance, holidays, paid time off. 28:14.610 --> 28:21.610 What are the different kinds of benefits that are 401k match that are offered to an employee? 28:21.610 --> 28:23.770 Then you have the back office element. 28:23.770 --> 28:25.710 So, there's two elements of back office. 28:25.710 --> 28:29.150 General and administration is like headquarters. 28:29.190 --> 28:31.990 What does it cost to administer the overall company? 28:32.230 --> 28:35.470 Overhead are specific project costs. 28:35.550 --> 28:46.790 So, in a product company, you're probably not going to have specific project costs, but in a consultant company or a services-based consultant company, you might have specific client costs that you need to have. 28:46.790 --> 28:49.730 And those roll up, and that gives you this multiple. 28:49.850 --> 28:58.830 So, on average, you're going to see a multiple of an employee costing anywhere from about 1.3 times their salary up to the low to mid 2. 28:58.830 --> 29:04.170 So, up to about 2.5 for a very high-end expensive company. 29:06.570 --> 29:07.610 Hiring. 29:07.770 --> 29:09.870 Hey, you know people, right? 29:10.030 --> 29:17.790 And that's typically where you start is in the very beginning when you're looking for those first hires, you're probably going to be looking at friends in your network. 29:17.950 --> 29:25.410 One of the challenges that come with hiring and when a company is small is the mistake that folks make around rank. 29:25.990 --> 29:40.650 Chances are the person that you hire to be in charge of sales or engineering or business partnership, they're probably not going to be the same person that's in that role if you do become very successful. 29:40.650 --> 29:51.130 The difference between running a company in sales for a company that's small and 10 people, that job changes when it's 500 people. 29:51.150 --> 29:56.910 Their ability to grow with that becomes challenging and that rank can make it difficult for them to grow into that. 29:56.910 --> 30:01.090 So, that's something where in the very beginning try to punt that as much as possible. 30:01.330 --> 30:04.930 The real big part on this of course is incentive. 30:04.930 --> 30:08.310 What are the different kinds of incentives that I can offer for this? 30:09.150 --> 30:18.850 I remember when I first started Grimm and we were three people and I was looking to hire engineers and one of them was just like, well, how much of the company I'm getting? 30:18.850 --> 30:27.390 I was like, I mean, we've been in business now for a year and a half or a year, whatever it was, and you're not bringing anything to the table. 30:27.390 --> 30:34.750 You have a salary and all of the benefits, you put no blood, sweat, and tears in this, and fundamentally you're not going to help grow the company. 30:35.410 --> 30:39.070 Equity really wants to be tied to like serious growth. 30:39.750 --> 30:54.930 Now, what I've done is, so I want everybody to feel like they're a part of it, is hey, maybe you're not getting like significant equity, but we are going to align everybody by giving out, all employees are going to have options in the company, which ties to equity. 30:54.930 --> 30:59.990 So what an option is, is a way to be a non -taxable event. 30:59.990 --> 31:10.350 Again, not an accountant, not a lawyer, but the phrasing here is important because if I give you direct equity, which is worth something of value, that's a taxable event immediately . 31:10.370 --> 31:24.250 If I give you options, which are essentially saying, hey, today's price for what we're valuing this at, the company's going to grow, you get to benefit off of that delta, that's what an option does for you. 31:24.250 --> 31:29.890 So that as the company grows in value, you have an option to take advantage of that growth. 31:29.890 --> 31:33.710 And then finally, of course, is the bonus, which you want to make sure is clear on that. 31:33.710 --> 31:41.870 Keeping in mind, particularly as a young company, bonuses can be very challenging because you need that cash in the beginning to grow because cash is king. 31:43.190 --> 31:44.810 Cash is king or queen. 31:44.810 --> 31:46.130 Cash is royalty. 31:46.490 --> 31:48.110 We're going to be correct. 31:48.110 --> 31:50.410 So we talked about benefits. 31:51.270 --> 32:00.430 One thing that I'll throw out there to help make your life easier, I'm not necessarily advocating for it, I've never used them, is the PEO, the Professional Employer Organization. 32:00.430 --> 32:07.950 So there are companies out there that what they do is effectively you and your employees become an employee of their company. 32:07.970 --> 32:16.350 And you benefit from the scale of all of those employees to provide savings back that you're paying for. 32:16.350 --> 32:30.670 So they provide all of the benefits and the health insurance and the 401k, they'll do the HR stuff, and you pay for that, but it costs you less than it would to go and get it on your own, is the theory. 32:31.630 --> 32:42.430 So just another option on how to do otherwise, like we talked about earlier with tolerance for bullshit, you will have to go and learn all of this yourself. 32:42.630 --> 32:47.630 I personally went and I learned more about health insurance than I ever thought I would know in my entire life. 32:47.970 --> 32:51.230 And that's the way it goes if that's what you want to do. 32:51.710 --> 32:57.950 Back office, other considerations for back office, support for contracts. 32:58.010 --> 33:01.470 Most folks are not experts in reading through terms and conditions. 33:01.470 --> 33:09.810 You are going to get lots of terms and conditions because any customer is going to have a formal element there. 33:10.170 --> 33:12.610 Legal, you need to get counsel. 33:12.610 --> 33:15.210 We talked before, I'm not a lawyer. 33:15.210 --> 33:17.010 This is not legal advice. 33:17.010 --> 33:19.790 You will want counsel to help with some of these elements. 33:19.970 --> 33:25.130 As you grow, human resources will become more important because in the very beginning, everything's very simple. 33:25.130 --> 33:27.470 You don't really even need policies probably. 33:27.530 --> 33:31.270 At some point, I promise you, somebody will do something dumb. 33:31.270 --> 33:32.530 You will get to that scale. 33:32.570 --> 33:38.850 That's where you really need to preempt those with having human resources and policy to get ahead of that. 33:38.970 --> 33:41.470 Payroll, people need to be paid regularly. 33:41.670 --> 33:43.310 You cannot screw that up. 33:43.410 --> 33:45.150 Somebody should be doing your payroll. 33:46.210 --> 33:50.090 Accounting, accounting is critical because this is the system of record. 33:50.090 --> 34:00.210 If money is the lifeblood of the company, accounting is what tracks where all that money is going and keeps you out of hot water when the IRS comes knocking and saying, hey, we think you paid this amount. 34:00.210 --> 34:01.610 You owe us this much. 34:01.830 --> 34:03.710 And then finally, business insurance. 34:03.710 --> 34:17.750 You are going to need to have various kinds of business insurance, anything from general liability to errors and omissions if you're doing professional consulting, different kinds of property insurance. 34:17.930 --> 34:27.910 What I would recommend is that first contract that you get from a customer is going to stipulate exactly what amounts of insurance you need to have. 34:28.210 --> 34:36.950 You will have enough time between getting that first copy and having to sign it and execute it to go and get insurance from somebody specifically to those amounts. 34:37.090 --> 34:41.590 So just me providing like a little cheat there. 34:41.610 --> 34:42.710 They'll tell you what to get. 34:42.710 --> 34:44.230 Go get it when you need to get it. 34:46.890 --> 34:49.270 You actual office itself. 34:50.270 --> 35:02.210 So now that COVID completely is a thing and nobody knows what an office is anymore, the remote work from home element is much more common. 35:02.490 --> 35:06.210 Really pay attention to the culture and the scale to do that. 35:07.010 --> 35:11.590 In the old days, getting space was something a lot of people rushed out to go do. 35:11.590 --> 35:15.550 Like I need a place to hang my shingle because I don't feel like a real business until I do that. 35:16.390 --> 35:22.190 I think that the pandemic has helped make that easier where folks don't feel obligated to do that anymore. 35:22.190 --> 35:24.730 But it is a consideration if you want. 35:25.390 --> 35:33.370 And of course, we talked about incubators as an option, but there's also dedicated, of course, now shared workspaces depending on what you want to do. 35:33.590 --> 35:37.030 And then on top of that, of course, is where do you want to put your equipment? 35:37.030 --> 35:38.470 What are you doing for storage? 35:39.030 --> 35:41.250 And tracking different assets. 35:42.150 --> 35:43.530 Intellectual property. 35:43.530 --> 35:50.430 So intellectual property is how you formalize what's valuable inside your company. 35:50.430 --> 35:53.670 Most obvious that everybody knows about are patents. 35:53.670 --> 36:04.030 A patent is where you go and with a lawyer file for disclosing what the idea is. 36:04.030 --> 36:05.630 And there's different kinds of patents. 36:05.630 --> 36:07.670 I won't go into the details there. 36:08.450 --> 36:14.310 And then there's this concept of trade secrets, which are, hey, I'm doing something that's proprietary to me. 36:14.310 --> 36:18.170 And by not disclosing it, it's essentially my own IP. 36:18.170 --> 36:22.050 Not as well protected, though, as a patent where you formally identify that. 36:22.050 --> 36:26.350 And then two other elements, which are trademarks and copyright. 36:26.530 --> 36:32.810 Trademarks are I have a particular image, like the Scythe logo is trademarked. 36:32.830 --> 36:37.850 So that somebody can't come and work off of that. 36:37.850 --> 36:43.510 And then a copyright is anything, any written work that you publish is yours. 36:43.510 --> 36:48.690 Somebody can't take it and just do whatever with it, claim it as their own. 36:50.610 --> 36:51.870 Talk to a lawyer. 36:51.870 --> 36:53.650 They're usually not this good looking. 36:55.930 --> 36:57.570 How to get clients. 36:58.150 --> 36:59.930 So, we are running out of time. 36:59.930 --> 37:01.590 So, I'm going to try to speed through these. 37:04.750 --> 37:12.470 Go to market is this concept of once I've built an idea, how do I take it and scale that across being able to sell it? 37:12.990 --> 37:16.170 Acquisition, though, is where we're just looking at, like, how do we go and get those clients? 37:16.970 --> 37:19.590 And again, this is where your network comes in handy. 37:19.850 --> 37:22.030 They will introduce you to potential clients. 37:22.030 --> 37:25.930 They will introduce you to prospects who are like, hey, yeah, I'm willing to try that out. 37:25.930 --> 37:32.790 One of the most interesting things I didn't really understand until I became a software vendor, because everybody picks on the vendors, right? 37:32.790 --> 37:35.450 Oh, vendors are like this and vendors are like that. 37:35.450 --> 37:36.850 At least they have good swag. 37:37.010 --> 37:38.850 And I love the free booze at the parties. 37:38.850 --> 37:40.650 Like , that's all vendors good for. 37:40.650 --> 37:49.550 Is there a lot of folks who understand, particularly in the InfoSec community, we in InfoSec don't really solve problems, right? 37:49.550 --> 37:55.130 We solve pieces of it, which clients then build out to a defense in depth measure. 37:55.130 --> 38:07.650 And there are a lot of clients who understand that they need to invest or they want to invest in being early adopters on what's the next technology, because they believe that can help make everything better for everybody else. 38:07.650 --> 38:10.050 We talked about contracts. 38:10.050 --> 38:13.650 The tissue paper of contracts is what's called the non-disclosure agreement. 38:13.650 --> 38:16.110 This should be a very simple document. 38:16.470 --> 38:21.250 The good news is when you're starting out, most of your clients already have all this paperwork for you. 38:21.250 --> 38:23.950 And so you can just follow along with that. 38:23.950 --> 38:33.850 The contract for the work itself, being very explicit with expectations, the period of performance, and then of course, how and when do you get paid? 38:34.350 --> 38:42.590 One of the things that was the hardest part around doing a business is I thought that getting the work was the hard part. 38:42.590 --> 38:46.550 Doing the work was easy because we're an expert, we know what we're doing. 38:47.210 --> 38:50.610 I didn't realize the hardest part is getting paid. 38:51.130 --> 38:53.250 Clients do not pay on time. 38:53.570 --> 38:56.590 Clients, you have to chase them. 38:56.590 --> 38:58.630 You have to focus on getting paid. 38:58.630 --> 39:00.370 A lot harder than it sounds. 39:02.210 --> 39:09.870 In conclusion, every month, you will face a random existential crisis that no amount of planning can prepare you for. 39:09.870 --> 39:11.210 You'll get past it. 39:11.210 --> 39:12.390 You will survive. 39:12.390 --> 39:15.590 And at some point, it's not happening. 39:15.610 --> 39:18.070 And you're not alone in doing it. 39:18.690 --> 39:20.450 I wanted to throw out some resources here. 39:20.450 --> 39:22.050 There's a Security Founders Slack. 39:22.050 --> 39:28.350 There's a Future Founders channel for those who are interested in getting started but aren't quite there. 39:29.070 --> 39:35.820 Some recommendations that I have that for ones that have done well for me, Gusto providing all the payroll and benefits administration. 39:36.270 --> 39:38.790 Pilot is easy and cheap accounting. 39:38.790 --> 39:42.070 The challenge there is it doesn't handle a lot of complexity. 39:42.250 --> 39:43.830 They only show up monthly. 39:44.050 --> 39:49.650 I liked Brex because that was a credit card that I could find that was not tied to my personal credit. 39:50.390 --> 39:56.890 Since then, additional credit cards have come out that also do this. 39:56.890 --> 39:58.350 So, I'll just throw out a handout. 39:58.350 --> 40:01.050 I think Stripe also does that now and I think there's two others. 40:01.290 --> 40:06.090 And then, any entrepreneur that you know will be happy to help as best as possible. 40:06.090 --> 40:14.470 I like to think of being an entrepreneur as like joining an exclusive club where the only requirement is the desire to join because every member will help you. 40:18.510 --> 40:24.290 And then, I have numerous entrepreneurs here who have provided their advice. 40:24.290 --> 40:27.490 So, all of that will be available in the slides. 40:27.970 --> 40:30.550 And I'm ready to take questions, I think. 40:31.230 --> 40:39.050 And questions will be in Discord and other venues when we share them with the community. 40:39.170 --> 40:40.490 Bryson, this is great. 40:40.490 --> 40:41.830 Absolutely wonderful. 40:42.430 --> 40:48.450 We might not be able to get to the remainder slides in the YouTube recordings. 40:48.450 --> 40:49.910 Yeah, I don't expect that. 40:49.910 --> 40:54.090 I'm just going to make sure that the slides are shared so that everybody can go through them on their own. 40:54.170 --> 40:58.110 So, where should people find those slides? 40:58.830 --> 41:02.910 I will post that in Discord when I figure it out next week when this airs. 41:03.030 --> 41:04.390 Sounds great. 41:04.670 --> 41:08.570 I just want to make sure we have a solution provided before we do it. 41:09.850 --> 41:11.070 Well, great. 41:11.550 --> 41:13.710 That was just absolutely wonderful. 41:13.710 --> 41:32.150 I thought that you were very methodical about laying it out because there are so many people, as we know in the community, have a really great idea and they want to charge out and do it and don't understand that infrastructure and passion and your tolerance for bullshit are really key things that need to happen. 41:32.470 --> 41:34.110 Bryson, I know you're really busy. 41:34.110 --> 41:37.590 Thanks for all you do for the community and thanks for being part of DEF CON. 41:37.590 --> 41:39.050 Take care. 41:39.050 --> 41:40.230 Thanks for having me.