EP30 Here's the Pitch: Raising an Angel RoundCheckable Health
Welcome back to the Persevere Podcast. Today, we have a new series for you called: Here's The Pitch. In this series, we create a hub for all that are seeking advice from other business owners and investors by inviting industry professionals to give feedback, ask questions, and give answers to founders. Here is where you will find answers to your pressing questions from industry professionals on how to get your company to the next level.
In today’s episode, we are discussing raising capital for an angel round of investors. Our guest today is Jess Azure, founder of Spadesso, a technology platform for spas and salons. Today’s two venture capitalists are Hannah Lange, venture financing manager of the North Dakota Development Fund, and Tim Weelborg, co-founder and managing partner of Homegrown Capital.
Our venture capitalist experts sit down with Jess as she pitches Spadesso and asks questions you need to know prior to pitching to angel investors and advice on when and how to receive funding.
If you are an entrepreneur like Jess looking for some guidance and experience with angel investors, this episode will give you the clarity you need to take the next steps.
Topics discussed in this episode:
- How Jess Azure is creating opportunities for Spas with Spadesso
- Are users of Spadesso searching for new practitioners?
- Explanation of Spadesso from the business end
- Will Spadesso become a subscription-type model?
- When will Spadesso hit the market?
- What is Spadesso’s marketing strategy?
- Who is utilizing Spadesso?
- Future growth for Spadesso
- Type of investor Jess is looking for
- Is having a co-founder important for financing?
- When is a good time to invite an investor in?
- What investors would find valuable when looking at your company
- Benefits of being part of entrepreneur groups
- Advice on projections
- Importance of having confidence in your numbers when pitching to generalists
To learn more about Jess’ startup, visit her website.
Follow Jess on LinkedIn.
Connect with Persevere Podcast:
Find Patty Post:
0:00:02.5 S1: Welcome to The Persevere Podcast, powered by Checkable Medical, and hosted by Patty Post, a female founder, entrepreneur, wife and mother of three, doing all of the things. The strength to persevere in business is powered by passion, grit and hard work. The Persevere Podcast is for entrepreneurs and business leaders who set out to innovate and change the world with their ideas, whether it's fundraising your start-up, product development, marketing, branding, or scaling your existing business, this podcast is for you. We'll discuss everything it takes to persevere and build the business you've always dreamed of. Let's make it happen.
0:00:53 S1: This is the Persevere Podcast for founders in their first five years of business who aspire to hit eight figures. Hi, I'm Patty Post, founder and CEO of Checkable Medical and I am your host. Today, we're having a new way of doing the podcast, and it's a new series, and it's called The Pitch, so this is Episode One of The Pitch, and our founder today that we are going to have pitch to us is Jess Azure, who is founder of a company called Spadesso and she aspires to raise an angel round, so this podcast is going to be in the format of...
0:01:36.4 S1: We have two venture capitalists myself as well as Jess Azure. Jess is going to pitch her business, and then we're gonna have the two venture capitalists ask questions to Jess, and then we're gonna have Jess ask a few questions to them. So let's get into who our venture capitalists are. So let's start with Hannah Lange. So Hannah Lange, she is Investment Manager of the North Dakota Development Fund, and she works with entrepreneurs to construct equity and debt financing packages to fund the growth of their businesses, and she spends most of her days analyzing businesses and from the pre-revenue, stage two, well-established companies, and really she evaluates how they are going to affect the North Dakota economy. Our next guest, venture capitalist, is Tim Weelborg, who is a managing partner of a new venture fund out of South Dakota called Homegrown Capital. Tim Weelborg is the general partner for Homegrown Capital. He has facilitated over 100 angel deals in the state of South Dakota, and he has started 14 angel funds in the state of South Dakota. He previously was an Executive Director for the Enterprise Institute, and the Homegrown Capital is primarily focused on investing in Midwest businesses that are in the early stage, but very small amount of pre-revenue, ideally they are in revenue.
0:03:17.8 S1: So our two venture capitalists will be asking Jess questions, and we will be getting right into it with Jess, she'll give her two-minute pitch and we will be underway. The goal of this episode is really for any founders out there that aspire to raise an angel round or even aspire to raise beyond that, that you're gonna hear firsthand what it sounds like from the investor's shoes, what are they listening to, and how does it sound when you're asking questions, when you're pitching your business, and you might even identify some things that she did really great or some areas of opportunities that she could have worked on, so with that if you are a founder and you want to be featured on the Persevere Podcast, please email me at email@example.com, and I'd love to feature you and hear you pitch, and then if you know a venture capitalist that would like to be one of the two that are featured in The Pitch, please email me too, I'd love to meet you and have you on the show. So with that, let's get over to hearing the pitch.
0:04:29 S1: This is Patty Post, and I am your host of The Persevere Podcast. Today, we have a new format, and I'm calling it The Pitch, and it's for all of you entrepreneurs out there who are looking to raise money. Maybe you're in the really early stage, the ideation stage of your business, and you are curious of, “when do I set out to raise my angel round? How do I do that? When's a good time?” Well, today you are gonna get live feedback, we're gonna hear from our entrepreneur, Jess Azure, and Jess is a founder, she's founder of Spadesso, and it’s a technology platform for spas. And we have our two venture capitalists. We have Hannah Lange, who is the manager of the Development Fund. Hannah worked with entrepreneurs across North Dakota and the Midwest to work with them on their businesses, they are a debt financing line of business within the state of North Dakota, and Tim Weelborg is a general partner of Homegrown Capital. Tim has started 14 plus angel funds in the state of South Dakota, and he has made hundreds of angel investments. So we have lots of experience here. Hannah is actually a two-time guest on The Persevere Podcast, so you might be familiar with her, and I must say she is one of our most highly listened to guests of the Persevere Podcast too.
0:06:00.2 S1: So thank you, all of you for being here today. The format is we're gonna have Jess give us a two-minute pitch, and then what's gonna happen is it's gonna go down like it normally would if she was pitching to raise her funds, and then we're gonna do a little bit of Q and A where then Jess has the mic and she can ask them some questions, so there's gonna be an interactive podcast today, then we'll let Jess go and we'll just talk a little bit about how to best prepare ourselves as entrepreneurs for this type of pitch and just pitching in general. So it's gonna be fast, but it's gonna be meaty, and with that said, let's get to it, so Jess, you’re on.
0:06:48 S2: Sounds great. Awesome, well, hello everyone. Thanks again for having me here today and for joining us, Tim and Hannah. I'm really here today to talk to you a little bit about my company, Spadesso. I’m a former massage therapist of eight years and a licensed esthetician. I've served in the spa industry as both a practitioner and an educator. I can tell you a lot about the industry, but today I'm here to talk specifically more about scheduling and booking, and with my experience, I can tell you that the lifeblood of any salon and spa is its scheduling and booking.
0:07:23.9 S2: So, in the US, we have about 1.2 million salons and spas, and we know about half of those are using some type of scheduling solution right now. The salon and spa industry, a software spa industry as a whole is about 186 million and it's expected to double in about four years so there's a ton of growth happening in this field right now, and before we kind of talk about how Spadesso plays into that, I think it's important to have just a tiny bit more background, the industry as a whole has really been shaken up in the last 10 years, moving away from that traditional employer-employee model and moving to more of that solo practitioner that booth rents and that took shape kind of about the same time as that golden age of social media, so it had never been easier to connect with, for providers to connect with their audience, but fast forward to today, and we know that that space has changed a ton, it's no longer that simple to connect in these spaces. And so, we're kind of left asking where are clients going when they're looking for someone new or they're just simply looking for an appointment that is available now, so these clients, they love scheduling appointments themselves, they're busier than ever, and so it's just easier to be able to do it on their...
0:08:46.0 S2: On their own time. And we know about half of the people who are scheduling their own appointments are looking for same day or next day appointments, and so we've taken that research and we took it a step further and we said, “How many places are you willing to check?”, and a good majority of people would tell us that you would check two to three different sites, and if they couldn't find anything, they just gave up their search, and so for me, I saw this as a huge opportunity lost in our industry, and I move forward creating an NVP that takes those last minute openings from providers and puts them on our platform. We're making search and booking faster and easier by allowing consumers to do it all in one place, but to me the best part is that we're helping providers with marketing and lead generation, and we're doing it by exposing them to consumers that are actively seeking out these services. So a good majority of the salon and spa providers that we have are either new to the industry, so think like one to three years or have recently gone out on their own as a solo practitioner, or they've moved from one market to another and they need to re-establish a clientele. With them, we're currently utilizing a transactional revenue model and we only charge them when we fill in appointment, we see a lot of opportunity to grow beyond this and introduce subscriptions for both consumers and for providers with that emphasis on maybe like tiered marketing and advertisement opportunity, and to be honest with you, we have a lot to do to get there. So really for us to make that happen, we're kind of looking for an investment of about 350,000 to help us build kind of a sophisticated scalable web app, and I'm sure you have a lot of questions for me, so I guess we can kinda dive into those, but I hope that maybe if you have a little interest or you have interested in telling me your thoughts on finding and filling appointments faster and easier.
0:10:41.9 S3: Awesome, thanks Jess, that was great. For all you listeners, this is Hannah speaking. So I had recently moved to a new city, and so I was trying to find someone to do my hair going forward, and it's kind of a pain to find someone who specializes in your area, but with that said, most people have their person and they are committed to that person. So how many people, I don't know if you have facts or any metrics on the amount of people who are actually searching for new individuals, a new provider.
0:11:12 S2: Yeah, so I'm actually really glad you brought that up because I do think that there are some elements within the industry that remain provider-specific, right? And so we know that I'm gonna be, I'll use myself as an example, I absolutely love going to the same person to get my hair colored and cut, it's just very important to me, develop a relationship, all that kind of stuff. However, I know that there is sort of this, there's a budding industry, and I think it's sort of like wellness is leisure, and so what we can kind of say is that when you look at things like massages and pedicures, you may have a favorite person, but massage therapists actually probably can only work about 20 hours a week, 20, 25, especially if they're doing some serious hardcore work, and so sometimes those practitioners get booked out maybe two to three weeks in advance, and so if I have an acute need, it's very hard for me to actually get in with them when I actually have the need...
0:12:08.9 S2: And so there are those exceptions that you're willing to make where you're willing to say, “I love Hannah, but in this instance, I'm willing to try someone new”, and then I think there's those people that are willing to pursue it as, it was more of like, think of it like art, you can have a favorite artist, but that doesn't mean you can't appreciate another artist or another bottle of wine if have your favorite wine. And so I think things like massage is very much the case that you could love something, but also be willing to seek out someone else. But I will tell you, and I'm sorry, I don't actually have, I don't have a total addressable market figure for you at this time, but I will also tell you that there's a lot of people out there that are terrible at scheduling, and are just simply willing to try someone new in the sense that this is what I have available and I need it now. And couple that with the coming generation that is probably more used to on-demand services, I see this as an opportunity for us to capture a place within the market.
0:13:11.0 S4: Nice job Jess. This is Tim. Say, just a few maybe boring questions to kinda help me, help me kind of get the context, maybe to ask some follow-up questions. One, where are you at from a business standpoint today, are you a formal entity? What's your current headcount? Are you actually selling your platform as a service or collecting transaction fees at this point?
0:13:36 S2: Yeah.
0:13:37 S4: Maybe just go back on there.
0:13:38.9 S2: Yeah, absolutely, I'd be happy to share some of that. So right now, I’m a solo founder, and my team consists of a couple different contractors that I work with on a regular basis to help us develop products and tools. One of my developers is in Spain, his name is José and actually his wife also helps me with the design things too. And then the other piece that we're trying to develop right now is our data collection and that, or data automation, I should say. I'm working with a Python developer for that. His name is Derek, he’s been really great, kinda started with one-to-one, built from there, and that's the majority of it. On the platform right now, we have about 12 providers. We started in April, I think we started with, I think it was three, and in that first month, I think we moved to four, and now we've kind of moved into that frame of 12, at one point we had 16, but we are also utilizing just some free offerings when we first got started. All the providers that we work with at this point, with the exception of maybe one who's still on a free account, they pay us per transaction, and so...
0:14:39.2 S2: Yeah, we invoice to them and we have customers that come and book. We've come across a few real issues, and I apologize if I miss one of your questions and I forget anything in there...
0:14:50.8 S4: What type of company are you? Are you a...
0:14:52.6 S2: We’re an LLC for sure. Yep, have been since 2020.
0:14:56 S4: Very good. Well, congrats on hitting that revenue kind of milestone, that's a huge hurdle and a huge filter for finance folks like us, so congrats on getting there. So I can't help but dig in right away to your business model from a transaction standpoint, which makes sense, what's holding you up or I hear you talk about moving to a subscription type model that seems to be kinda the current and perpetual buzz these days. What's holding you up from going down that path?
0:15:25.8 S2: So I do have some concerns for our providers, especially since our model is built around these practitioners who are solopreneurs, and I think that for them, they're already shelling out some money on a subscription for their appointments, their scheduling software service that they are using, and so I think for me it's about finding what does that figure look like that makes sense to them and makes sense for us as a business, but also, I think the other thing is, is that, I guess that's probably the biggest thing. And then I think that too, right now, our platform is we can get you signed up, we don't really necessarily have that user component just yet, and so that would be something that again, we just have to take the time to build out. So maybe that's more in thinking like when I first started, I think my goal was really just kind of testing that proof of concept and saying, “Is this something that we could get providers interested in?” When I think of, if I can reference something as an example, and when I think of lead generation within the real estate industry, when Zillow came along, that industry is very upset about what Zillow was doing to it.
0:16:34.4 S2: Right? And so I don't know that I necessarily wanted to come in and I was very worried that maybe providers would say, “What are you doing? We don't want you to help with this.” And so I really wanted to kinda test that, and now I think we have tested it in our providers, in fact, how to provide a reach out and just say, “Hey, it's been a little while since I've seen leads like what's going on?” And I just had to say, “Hey, you've been really busy on the appointment finder, I'm only seeing maybe four or five appointments a week, so I just figured you are busier.” So what I'm kind of saying is that it's not necessarily the case anymore. I think that the providers do want us to help with that, and they're excited about the ways we can partner.
0:17:14.8 S4: Do you see a future kind of where you could replace the owners, other kinds of scheduling software that they're paying for to free up some budget that they could exclusively use you, or do you intend to always be supplementary or just handling a component of their bandwidth?
0:17:34.6 S2: Yeah, I'm glad you asked because that is something that's definitely been on my mind and I'm kind of remaining open, I will tell you when I set out to do this, I don't know that my goal was necessarily to become a scheduler, I think there are several out there that are available to the industry, I think that some of them are in a way, maybe even over-built that there's a lot of people that are sign up for a product that they're not even using to its full capacity, but then there are also players that are in the marketplace that are huge and offer a scheduler for free, Square is one example. Square doesn't have a marketplace, and so we are able to meet that need right there, some of them do have a marketplace, and I think that's important to also add and we're talking about the competitive landscape, but the marketplace is very cumbersome, and why wouldn't it be, they have a duty. Everyone's on a subscription model, and suddenly now so and so’s appointments are kind of appearing more often or in front of another provider, I think that could create a dynamic where it’s like, but we're paying for the same amount, and it seems like you're promoting Susan's over Zen Massage and so I guess what I'm trying to tell you is that I'm very willing to remain open and see where the research and the data will take us, but I haven't discovered exactly what that right path is just yet.
0:18:54.9 S4: Yeah, very fair.
0:18:56 S3: How long do you think your development is going to take to get the finished product out the door?
0:19:02 S2: Yeah, so luckily, I have this really great mentor and so when those kind of questions come up I'm able to talk to him a little bit, he thinks that we've done a lot. When I initially started the project, I did create some layer frames to just frame out what my idea is and what my goal, overall goal was with the project. That, with some of the design elements that we have, he thinks that we could probably create within probably a 30-week time frame I believe.
0:19:26.6 S4: I'm always curious, kind of your thoughts, Jess or a founder's thoughts. It sounds like you’re certainly early stage, you're at revenue, which is awesome. I'm guessing you're finding these earlier adapters, low risk to try your service because if they don't pay anything unless you coordinate a booking, I like that. I can understand how you're starting out. But I was wanting to know, what do you see as the key catalyst that will help push from this early customer phase to perhaps this growth, the rapid growth phase in the angel and venture capital kind of context, we need traction and growth, so really maybe it's more of a marketing strategy type question, how are you gonna show up, are you rolling out geographically, are you kinda starting around home, are you moving out in a city by city, state by state, how are you gonna show up as a viable option for all of these solo practitioners, if that's kind of your key target market.
0:20:26.5 S2: That's a very good question, and I think that as we approach, we can have the two things that we need to do there, so right now, our product is only offering one-hour massages and haircuts, and we just simply try to pick maybe what would be the most popular services and oddly enough, massages are far more popular than haircuts are right now, and I don't know if that's too just a marketing thing, but again, kind of talking about that very provider-specific maybe, maybe that has something to do with it as well. Yes, so we have the area of opportunity to grow there, in my first approach with the current NVP was to kind of expand and move into other service offerings, and that was gonna be kinda maybe the first phase, and then I saw another area of opportunity for us that I think we could take on with potential would be kind of moving in kind of growing our provider base, right? So that’s another opportunity. Right now, as I mentioned, the good majority of our providers are in that category of new, but my goal was always to also capture some of those really great providers that you can't normally find that they're just always booked.
0:21:29.6 S2: And how do they continue to grow and develop, 'cause you should be always having a nice inflow of new customers, when I see providers that wanna focus on having just, when they say, “Oh, my books are closed now”, and I'm just thinking, I think that's not a very good practice personally, but that's just my opinion. So moving beyond that, I think there's a tool we could create that would allow our providers to do more self-service, and I do think with the development of our app, that would certainly, our web app, that would certainly help us with that piece, but then, you're right, absolutely. How do we expand geographically, and I do think that's a very targeted, in my mind, I always think that we maybe start with certain markets and begin with our marketing and advertising and be strategic about which markets those are, so we could stay certainly within the Midwest and move over to Minneapolis, I think Denver, and then I think there's other things that we have to be cognizant of. Within the industry itself, I think that sometimes, without getting into specifics, but we really wanna be careful and mindful of markets that have had...
0:22:33.7 S2: I think of like the nail industry in New York, I don't know if any of you recall, but there was kind of an expose piece on what was happening there and the exploitation of labor within nail salons specifically, and so my goal would ultimately be, as we start we need to expand in markets that maybe just have stronger regulation and, yeah, I think that would probably summarize my thoughts on that a little bit, but open. Certainly, we don't have to stay in the Midwest. I think it'd be really great to also see how this would do maybe in an area that has higher tourism traffic to really tap in, again, that leisure wellness.
0:23:09.1 S4: Maybe as a slight kind of twist or follow-up on that, have you actively gone out and tried to gather customers, and if so, are you seeing some general funneling, like how many folks do I get to talk to, they want, what is the conversion rate? Do you have any sort of hypothesis at this point or stats that you've discovered?
0:23:30.5 S2: So it's kind of curious because I always thought that our target demographic would be, I think that obviously, when we talk about spa, a lot of people think or assume that’s more women. Right? And so I kind of always thought like our avatar of a consumer was a woman, professional, maybe has one to two kids, maybe pulling in anywhere between 75, 90K, something like that, a little higher, maybe even. But I'm actually always surprised 'cause I do think, I think that we can span, I think some of our consumer data has shown some Gen Zers, and we even have somebody who's probably in their mid-50s using the product as well.
0:24:11.4 S4: Let me clarify it and maybe even just offer some help in terms of why I'm asking, I think as you build out this business plan and your financial ask and you tweak this pitch, and as you go out and talk to investors for real, I think that they're really gonna look at your financial projections, which are gonna be based on a set of assumptions, and I think one of those is like, listen, here's the market, and here's our product or service, and we're doing awesome things, that connective tissue is of how you are selling and what's that marketing strategy, and what's that response rate? How many, today, maybe it sounds like if I'm perceiving this correctly, that you put it out there and whoever shows up and inquires or ask for this, you're gonna sign him up, maybe there's some word-of-mouth referrals going on, but perhaps not an active marketing campaign where you're trying to push out and find these people. If I was selling books door-to-door, what I would wanna find out here is, listen, I need to knock on 100 doors, 10 of them are gonna invite me in for lemonade, and one of those is gonna actually buy my set of books...
0:25:14.1 S4: And so I can say, Listen, if I wanna sell 10, I need to go talk to 1,000 people or knock on a thousand doors, right? And so then we can kinda just start to do that, and there's the reality check of, listen do I think Jess can go do that, Jess and team, do these financial projections start to make sense given that it’s just math, if we believe the assumption, that's kind of what I was getting at. And it sounds like you're in the process of building that. But that's something that I think could be helpful, not only for your financial projections and those assumptions, but when you talk to investors, if you can kinda go out with, here's kind of our strategy, and even if you're gonna make a guess it to call it something fancy like a hypothesis, but here's what we assume is gonna happen and what our conversion rate would be, those would be interesting things, and that is not easy, but the more work you can do towards figuring that out, I think the more solid your projections will be, and of course, that'll get the investors excited, hopefully.
0:26:10.7 S2: Yes, thank you for that. I totally agree with you, and I think that it's honestly, one of the more, I don't know if it's more scary piece. To follow up on that, we have done just a teensy tiny bit of work in that digital marketing sphere, but we barely scratch the surface, so you're absolutely right. If I were to say, we've done 2,000 impressions and from those 2,000 impressions, we've gained 12 consumer clients, that's where I think I get a little muddled yet, and I think there's opportunity for us, but also I definitely think that's an area of growth, for sure.
0:26:45.1 S4: Cool, I think that'll help you too, as you look to expand into other areas that you can kinda use that as your playbook and budget ahead.
0:26:56.6 S3: Have you connected with any of the schools in this industry?
0:27:01 S2: Yeah.
0:27:02 S3: It seems like that’d be a really great target market.
0:27:04 S2: So I definitely think that's something on the plate and something for sure worth pursuing. I think that's a great area where we can try to start finding some of our next, our next provider, providers for the platform, for sure. It just hasn't quite happened, I do know someone within the Fargo-Moorhead area that would be a great contact for that too, but thank you. Yeah.
0:27:26.3 S4: Sounds good. So I've got maybe just a couple of questions kind of disconnected, one is an awful one, which I suspect you're dreading, but I'm gonna launch it here at the end, but the easier one perhaps is from a competitive standpoint, a lot of times we talk about intellectual property or do you have anything as defensible from a mode that you kinda create with this product that would prevent others from copying that, especially any of those tools out there from a scheduling standpoint that are perhaps prevalent in the industry today, any competitive enters that way?
0:27:58.2 S2: Unfortunately, at this point, I don't really feel that what we have and how we're kind of doing all that, I don't know that I would necessarily have anything that would be patentable, I certainly welcome any conversation with someone to take a look, to tell us if they thought that actually we did, but no, I don't think that we would have anything like that that really gives us a competitive edge at this point.
0:28:20.4 S4: Okay, alright, I'm gonna launch a thing, Hannah, you can keep asking too, but really my last question, which is, we would never let an entrepreneur out to the pitch room without asking this question, which is, for 350,000, what are you gonna get? What are you asking for? In terms of your investment, what's that valuation?
0:28:41.3 S2: Oh, I know you want evaluation, honestly, I am not even remotely close and prepared to ask for the company valuation on it, especially as I can't even provide you guys with a total accessible market, and this is, I think, areas where my pitch is definitely needing growth and development for sure.
0:29:01 S4: Fair enough.
0:29:02 S2: But thank you for asking it because it's in hearing it in these scenarios where I'm like, Okay, now we gotta go do it, right? Team wants to know. And so I need to figure that out.
0:29:14 S3: Have you prepared financial projections, and if you have, how long do you anticipate it taking to get to profitability?
0:29:21 S2: I am so appreciative of you asking. I do not have any projections at this point yet.
0:29:26.6 S4: Maybe just one more question, 'cause we've got a little bit of time. Kind of with this round of 350K that you're kind of zeroing in on, does that, I heard you talk about building out the app. Is that mobile or web or both?
0:29:42.8 S2: I would prefer for us to develop web apps, so we can be compatible on both, but obviously, if we had to narrow it down and they said we can develop for mobile, 86% of almost all of these appointments are happening on a mobile device, and that in number is probably only increased, so it would make sense then, we can develop certainly from that sphere, I just, at the same time, web app, I think sometimes can be, isn't it a little more shareable at times too, so however will we need to approach that.
0:30:12.8 S4: Okay. And that's for context. Really what I was getting at, is that 350k, is that used for your contractors on the technical side, or do you plan to build out technical talent on your team for this project and others?
0:30:25.9 S2: Yes, so I think that that, with that figure, it was in mind that we would contract out to have it built, and I mean, honestly, I would prefer to, if I'm being honest, I would prefer to have a team, but I think that you just have to approach it. And there's pros and cons to both sides of it, right?
0:30:45 S3: Jess, is this your full-time job right now? Or are you still working on the side?
0:30:50 S2: Yeah, actually, no, this is what I'm doing, I'm doing this full-time right now, and I have some other things on our plate, my plate, but not anything that is full-time, so yeah.
0:31:03 S3: If you just talk about if everything went as planned, what is your vision for the company?
0:31:11 S2: Yeah, if everything went as planned, my vision for the company stems from two different things. This is a really great question. I do, I do wanna improve search and booking, I think that's a necessary element, but I think that there's opportunity there, and I think when you look at our platform, who we serve right, were a two-sided marketplace, and so we serve to kind of groups of people, but our core group and our core group that we service are salon and spa professionals, and those professionals are really who are at the heart of our decision making.
0:31:48.1 S2: And so how do we help them? And I think when we look at, we look at service providers, there is something very unique and special about what they do, but there are a lot of limitations to that right, and so how then do we help them continue to grow their business because some of them don't have interest in hiring five employees and those five employees are never going to be able to replicate them in what they do, and so I think it would be really fun if we can change the dynamic of it for them and say, when we look at how you schedule an appointment and providing, basically what I'm trying to get at is that I would like to provide them with the tools that help them maximize and capture the most revenue for what they're doing, and some of that stems from when you look at the hospitality business and how they measure and sell their available inventory and how they treat that inventory, I think there's an opportunity for us to bring that to salon and spa providers, and so ultimately, when I set out on this, that was something that I wanted to bring to the industry, but we can't do that by just suddenly coming, I know the resistance and I know the things that they would say to me if we said that initially and said, “Hey, we think that your time is very valuable and we think you need to approach how you schedule and how you charge for that time very differently.”
0:33:13.6 S2: So I'd really like to bring that to them. I also think that there's some opportunity within the industry, I know that it used to be that professional product was a huge portion of salon and spa sales. And I do think that there have been some things that happen in the industry that have really got away with that, and I think that there's opportunity for us to, if our platform can grow that perhaps, or something we can do to help bring that back to the provider as well, but that's another huge undertaking, so I don't know, I really love this industry, and as I envision what we do with it, I see it growing so much more than just filling and scheduling appointments, but that's where we start. Does that help answer maybe some of your questions?
0:33:58 S3: Yeah, and I can really feel your passion for what you do, so that's great, and that's super important in a pitch as well, so you're killing it. Maybe one more question for you is, what are you looking for in an investor? Are you looking for someone that's been in the industry or are you kind of just looking for an angel who is willing to support you?
0:34:16 S2: Yeah, so I think that I'm very, very green in my journey, and my company is obviously very young in infancy as well, so for me, I really am looking for someone who can provide guidance and yeah, I need support for sure, who is willing to maybe help me also see some of the blind spots, and again, I'm a little green to how some of those relationships can work, but that would kind of be important to me as well, as far as brains industry experience is...
0:34:56.1 S2: Do you mean like maybe it has brought a web app to market before or has developed like…
0:35:02 S3: Yeah, someone who's done development or someone who has been a hair stylist before, owned a salon or something like that.
0:35:11 S2: Yeah, I guess when I think about that individual or a group of people, however you wanna put it, I do think about being able to tap into their network and being able to also, I don't think that necessarily salon and spa industry experience would be necessary by no means, but I do think having that experience of working with a company that's bringing a web app to scale and has seen some of the pitfalls that can happen, I think that would be a wonderful element. But again, being open too, sometimes I don't know that I necessarily wanna limit myself, and so what would work best. I don't think it would be, I don't think it would be a good, I don't think that I would have success bringing this forward if I brought it forward with just someone who already had salon and spa experience, and we were like, I think this is a great idea. Let's go and do this.
0:35:59.9 S2: I think we need someone who can tap into the information or the knowledge of developing a tech company.
0:36:06 S3: Yeah, you always wanna surround yourself with people who are more knowledgeable in things that you aren't so knowledgeable and so I totally agree with your approach there.
0:36:15 S2: Yeah, yeah, for sure. Thanks Hannah.
0:36:17 S1: Really good job. Good with questions? Any other lingering questions from Tim and Hannah?
0:36:25.5 S4: Not for me. Jess, good job.
0:36:27 S2: Thanks guys.
0:36:28 S3: Not for me either.
0:36:29 S1: That was really, really great, Jess. I'm very impressed. I actually had a couple of ideas for you, this, I probably shouldn't be saying this, but I think that there's an opportunity for you to use AI in your platform, because if Hannah goes on and she books a massage tomorrow, and then she books a massage again in three weeks, then that's when you can start taking that data and you can predict and you can say to her, “Hey, Hannah,” and I can't remember, I liked how you phrased it, leisure...
0:37:04 S2: Oh, leisure wellness, yeah.
0:37:06 S1: Leisure wellness, yeah, I think you could trademark leisure wellness, and then you could start predicting like, “Oh, Hannah, it's your birthday, there happens to be three openings in Fargo for a facial, maybe you should book these with a 20% discount”, things like that, that's where you could take AI, you could take machine learning and then predict what Hannah wants to do next, that's where I think you could get it a little, a little sexy in your development. I might be way off, but that's just from my standpoint.
0:37:42 S2: I think that's absolutely, I totally agree with you, and I think that there's so much potential out there, so I think sometimes when we talk about my limitations as a founder, I certainly think not having that technical background is where I struggle because sometimes it's like, well, what is possible, but what is also realistic for us developing a realistic timeline, and a realistic budget and all those kind of things, and that's where I think I am never gonna pretend like I know more in that, I know enough to be dangerous.
0:38:16.6 S2: So I think that's wonderful Patty. Thank you for that. No, I totally agree with you. So I love that.
0:38:21 S1: Then I would just say, ask those developers those, José and ask him those questions because engineers are really good at taking direction and doing what you ask them to do, and I'm really guilty of this since I've learned through experience that maybe sit back, ask other entrepreneurs or other tech founders of, “Okay, what does this mean? What is machine learning? How can I apply the type of technology that's used in software for FinTech or in other markets, and how can I apply it to my technology?” Yeah, that's what I would encourage. I always encourage people to look outside of the industry too, 'cause we can learn so much from them and like Hannah and Tim, they're asking those questions because they see so many different deals and so many different types of technologies.
0:39:13 S2: Yeah, and I have to say too, I love those founder stories too where maybe it's somebody like me and they're developing something for some industry and they find another completely un-thought of applicable industry and I certainly wouldn't be opposed. I just, I kinda know where my lane is and I've been kinda trying to stick in it I guess you could say for this round at least anyway, but...
0:39:33.9 S2: Yeah, yeah, thanks, Patty.
0:39:36 S1: They appreciate that. Don't you, Tim and Hannah, where it's not the entrepreneur that's chasing after 50 different things?
0:39:42 S4: Yeah, very wise.
0:39:44 S1: How about your questions? I know you had some questions Jess. You definitely have time for that, should we move into that now, and you had some really great things to, that you'd like to understand. So why don't we get into that?
0:39:58 S2: Awesome, okay, so why don't we start with that and kind of talking about founder experience, especially since I was just referencing that, one of the things that I really wanna know, previous non-technical founders obviously have shared their stories. I always think of Brian from Airbnb and talking about how they really weren't getting very serious traction because they didn't have a co-founder that had that experience as a developer, and so I guess my question for you is that, would you take a project, if I came to you with projections and everything that I needed, a full business plan, all of those kind of things together, would you seriously consider my project without a developer co-founder on board? I guess my question is, is that having that other co-founder...
0:40:50.5 S2: Is it still needed? Is it still relevant in today's climate with all the different tools that are out there and, yeah, please elaborate.
0:40:57 S3: I don't think they necessarily need to be a co-founder. I think a lot of people do outsource that, I think if you can articulate what you want the product to be and you can understand it, I think that means a lot. I don't think they need to be necessarily a co-founder, but it helps when you do have people on your team, the more talent you can have on your team, the more it's gonna help you. That's what I would say.
0:41:21 S4: I agree with that and first of all, you founded the company, right? I know you can technically add a co-founder at some point, but maybe that ship has sailed, in my opinion. You know, I don't think, it doesn't make you ineligible for this type of financing at all, but certainly, as Hannah mentioned, teams and the awareness of the talent that's needed on that team, or how you're going to get it in an outsource capacity until you can afford perhaps to bring it in house, I think that's important and attractive. I am attracted to companies that have technical talent on the team already, so it doesn't make you ineligible, but perhaps if you had that in there that would make you even more exciting or attractive to a venture person. One is it's a technical project, and we are at least a component of that, and if money, the next round is tough and the projection is, the reality isn't quite happening as perfectly as the projections were laid out, someone that can write some code and do some of that without having to cut a big contractor check every month, that's kind of...
0:42:23.8 S4: Nice right? …Take care of business. So it kind of depends. Once again, I think you look at it as an entire kind of plan, which team is a very huge component of that at these early stages, but even though, that's kind of my two cents on that.
0:42:40.0 S2: Cool, cool, thanks guys. That's actually very helpful. Okay, other questions I had is, so I think that the one I would maybe focus on is, so here I am, we've got this concept, we got an NVP up and running, certainly we don't have traffic in the hundreds and thousands at this point, when do you see a good time to start seeking outside investment, is there still some work that I have ahead of me to obviously to talk about some of the things that I do need to prepare pitch-wise. But is this a good time? Are we, six months down the road, I'm always kinda curious what's the timing on inviting an investor in.
0:43:19.7 S4: From my perspective, that's a great question, and an impossible one for me to answer, 'cause the answer is it depends, the great business school kind of answer. So first of all, different financiers, angels, there are different folks that are looking at different stages, so I would look at it more from a your standpoint on one, this is gonna sound contradictory, right? One is, is that you wanna perhaps raise capital before you need it, so that you're not in a pinch and having to stall out progress. At the same time, don't take it unless you need it. Any way, shape or form, equity financing, it's gonna be the most expensive capital you can take on, assuming you're successful, right? If it's a crash and burn, then that's a different story. So you don't just take it, right? And generally speaking, the further you can develop something which would decrease the risk, increase the revenue, the opportunity, the attraction, everything, the better valuation you're gonna get, right? The same dollars from today, if you're gonna take dollars six months from now and you achieve these various milestones, that same dollar, you're gonna have to give up less equity in taking that...
0:44:30.8 S4: So that's attractive to you. So if you can bootstrap, but at the same time, you also have to manage the speed to market, right, listen, is there a huge risk if I don't get this out and everywhere fast. So a lot of times for me, where I like to see venture dollars and even sometimes later stage angel dollars go to is kind of the growth of a company. Speeding it up, typically adding a sales type function in-house, so that's once again, that's a very tough question to answer, in my opinion, and it's so variable, but those are some thoughts from my standpoint.
0:45:03.9 S2: No, I really see where you're scaling, a scaling speed and also hanging on to equity. Absolutely.
0:45:11.0 S4: The good news is, is there's no one right or wrong answer, there's a lot of ways to achieve success here, it has to match what you want and can do, but I think that there are types of money at every stage, so it's just a matter of when you think you're ready to take that on.
0:45:28.1 S3: Yeah and like Tim said, there's a lot of ways to raise money nowadays too, so don't just think you have to go straight to venture capital, 'cause like you said, it's gonna dilute you and it's gonna help you out later rounds if you have a least amount of dilution, so just keep your mind open. Sometimes I tell companies, just go search for grants that might apply to you, you never know what's out there, you never know unless you try. So people like to see bootstrapping, they like to see the grit and hard work behind that. From my standpoint, a more later stage, I guess, probably between your seed and your series A, and so I have to have a business plan, I have to have financial projections and so those are gonna be the biggest things on my end, and then some kind of sales or proof of product market fit, a lot of times people have their NVP and they're like, Okay, now I have this, it works, and now I'm ready to build the thing. So I need to bring on a developer, so that's usually where we come in. From my perspective, that's what I would be expecting.
0:46:28.4 S2: Okay, that's helpful too. Thanks Hannah. Yeah, I love that. Okay, I think that, any other questions I have. Maybe, do you guys have any other thoughts or ideas on recommendations in building this as a SaaS?
0:46:46.3 S4: Yeah, I think one is, I just think that's worth time investigating that. I think the stickiness of that model, I think is attractive to an entrepreneur and an investor alike, and I would continually talk to your existing and future customers about what that might look like. I think there is a price point that works, and I can certainly appreciate how you're starting, 'cause there isn't a lot of risk to that client or that customer, but maybe as they continue to see that value and you can add more, I think there's probably a way that you can do that. Yeah, I think it's a pricing kind of component and just kind of dialing that in, I guess is where I would look, but I would encourage you highly to go after that. It's a lot easier to value a company that has recurring revenue like that, so that's one advantage to doing that, if nothing else, but in this financing context.
0:47:40.1 S2: Yeah. Okay, I like that. Sounds good.
0:47:43 S3: I would agree with that as well, another just making it maybe like a hub, like something that you can integrate a bunch of things with, so can this connect to my booking platform and can this also connect to QuickBooks, if it can be that one connector between everything it could be more valuable to people. That was just an idea that I had.
0:48:03 S2: I like that. Cool. I’m gonna write that down actually.
0:48:06 S1: So different APIs Hannah, is that what you mean? Like the API that would connect to the different platforms?
0:48:12 S3: Yeah, yeah, that's what I was thinking.
0:48:14 S1: So that's a José question that he's probably super familiar with, but hasn't served that up to you on a platter yet.
0:48:22 S2: Love it. Yeah, I think beyond that, I think my last question would probably center around, just any other resources you guys would have, recommend, or you suggest I connect to at the stage for where we're at, our NVP and that kind of thing.
0:48:42.8 S4: Yeah, I think maybe the alphabet super providers out there, check them out, see what they can offer and encourage you just to immerse yourself in that customer world, I think one maybe scary or misstep some folks have that come from the industry, is that they believe they are their target market and know everything about that, not at all implying Jess that you're thinking that, but I think sometimes we can have some blind spots if that's the case, so continue to go talk to that market, and especially if you've got this early adopter power group that's willing to give you some feedback, I think take that and live in that world. I think that will help and ultimately help accelerate that product market fit. I know North Dakota has some great financing programs. I'm gonna send you my Venmo account here, but no, I mean, North Dakota is awesome for all the reasons, but they are able to act at various levels in this financing thing, and some of those, like to Hannah’s point are not dilutive, don't get caught chasing grants and having this kind of mission lead and do what you're gonna do, right? But then find those tools that will support your strategy and plan to attack that market, but I think investigate that if there's low interest loans forgivable loans, things that there are patients like equity, those are extremely valuable, and not every ecosystem or state has those kinds of tools.
0:50:11.2 S4: So definitely worth time to foster those connections and see if that works for you.
0:50:16.8 S2: Cool. Thank you.
0:50:18 S3: Yeah, I second that. I mean, you're in Innovate ND right now, which is a great program. There's also accelerators that you can look into that can help to grow your business, so I know North Dakota’s generators now in town, so that could be someone that you make a connection with, other things like ILT Academy, and it's just having those people around you who are I guess experts, so I think you're working with the SPDC on creating your financial projections, so just keeping those connections and fostering them, I think is just gonna be super helpful for you.
0:50:52.8 S4: I don’t have a specific program for you but if there's any program or community of the founders, especially the closer to a technology company trying to, you know, that would be huge. I think that'll help give you some sanity, it accelerates your learning curve, I think that's great, and that might exist at a national level for what you're looking at, I don't know that, but certainly the Fargo community has a number of founders, Patty included, that are pretty generous in giving back, talk to those folks, and the closer to what you're doing, the better, but they all have kind of life and you've got scar tissue that they're willing to share to hopefully, prevent or like I said, keep you from making some of those mistakes if they are.
0:51:36.1 S3: Yeah, and also the North Dakota Women's Business Center is also a good research for female founders, and then to put a little plug in for She Starts Week, it's a week that's happening in September where we're gonna have a ton of events in Fargo to help founders like you gain some tactical skills to help grow their business, so North Dakota has a lot of opportunities, so I'm glad you chose this state to grow your business in.
0:51:59 S2: And it's actually, it's really wonderful, and I'm always impressed with the things that we're able to do with the small amount of people, and I don't know, I think it's pretty great myself too, but yes, I can actually attest to that. Hannah and Patty, all your listeners need to help, actually it was through She Starts Week last week, that I felt comfort and hanging out in proof of concept and trying to say what am I trying to do and how do we get to the very simple element of it and develop it, and it was through one of those sessions that, I think really kind of helped, it was a catalyst, I should say, for me getting that traction, so I will be there again this year.
0:52:40.3 S2: And I can't wait for it actually.
0:52:42 S3: Awesome, great to hear. Maybe we can put that in the show notes, Patty, the link to our She Starts Week website?
0:52:47 S1: Heck, yeah.
0:52:48 S3: Awesome.
0:52:49 S1: We might even live stream because Checkable is hosting one, so we might even live stream ours, that's what we were talking about with, trying to do a little set up in our office like that, so we will definitely put a link there and several other links will do it to Homegrown Capital and North Dakota links as well. I do have two questions of two things that you're working on, one of the forecast and then the other to identify the total addressable market size. From your perspectives, how do you recommend entrepreneurs really start pursuing that, start getting their arms around that because I'm still working on projections, and it's a really scary thing if you're not a numbers person, and it almost feels like, “Well, I don't know how to predict the future. Why are they asking me these questions?” Well, it's the most important answer that an investor wants to hear. So, from your two perspectives, I'd love to hear what sort of the formula first step that you recommend entrepreneurs take when creating their forecast and then identifying the market size.
0:54:00.3 S4: Hannah, you want me to try?
0:54:01.4 S3: Yeah, you go ahead first.
0:54:03.2 S4: Yeah, okay, so also no right or necessarily wrong way to do this, but how I kinda look at that, two questions there. One is the …addressable market. Yeah, one is, we want to see big markets right, to have a venture scale business that needs to be big, generally speaking, rather than a tiny sliver of something, and I think you wanna drill down as much as you possibly can into finding obviously, what is truly addressable for you and it hits a sweet spot for your product or service, and that's easier said than done, you understand that and a lot of public research tools and stuff, industry reports, it's gonna get you part of the way there probably. I'm not sure, you had thrown out that stat, Jess for instance, of 180ish million. Was that right? 186 million dollars. And you classified that I think as software for salon. Where my mind goes with that, just to illustrate, that is like, “Hey, what else is included in that? Does that include QuickBooks? Does that include…” You know it and then you start to try to figure out exactly what is comparable, but that's better than nothing, right.
0:55:10.9 S4: Hearing that, it helps to kind of one is it acts as a filter for folks to say, “Listen, does it have you in the skill that we’re interested in?”. So that's helpful and don't be afraid of that. You don't wanna be talking to someone that it isn't a fit for very long, at least, but you start with what's publicly available, and then this is kind of where a segue into the projection question, is for me, you have to make and state these assumptions right like listen, okay, I understand that and I do, for instance, just like, okay, yeah, QuickBooks, probably is a part of that, go back door that and try to figure out how many folks are using QuickBooks, and maybe you find out that small businesses are 80% of them use QuickBooks or something like that. So you can start to extrapolate and play with that and start to remove that manually and say, “You know what, based on some research and some calculations that we've done”, you can defend that if you need to, but “Here's what we think our total addressable market is”. We would look at that, and I'm honestly, once again, I'm interested in size, but I'm interested in that you have the ability to make those assumptions probably more than I am to actually remember when it comes down to it, like, listen, she knows what she's doing in order to do that, hands down, you know more about your industry than I ever will.
0:56:25.0 S4: And that's almost always the case, especially if I'm a generalist, right? My partner has some sweet spots, you certainly can go deep on, but almost everyone's gonna be more knowledgeable about their industry then I am, so I'm interested in their thought process on that. With Patty on projections. It's just math. Okay, it's just pretty formatted math, so it's not a home-grown spreadsheet, no pun intended there, and I think it's the assumptions that drive it, and I think that the longer you start to operate, the more body of data that you have and can generate, and that's where I was kind of hitting Jess up earlier about, what does that funneling look like? One is you can show actual funnel and conversion, or this is my best guess, and you're gonna state that and tweak or adapt as you keep going, so that's how I look at that. You can drive it down to a single unit of sale and say, “Here's how that funnel works”, and the rest is just math in terms of how many doors you're knocking on.
0:57:25.2 S3: Yeah, I would second pretty much all of that, and as far as projections, yeah, I just wanna see that you can talk me through why you assumed what you did, and then making sure that your projections aren't bigger than your total adjustment market or your serviceable addressable market, I've seen that a couple of times. So doing the research and actually using the research in what you're doing I think is super important. So where my mind went, Jess with yours is maybe looking at how many people graduate from college each year in each of these industries. Okay, I'm on average, they're gonna book three times with me a year, and I'm taking a dollar from them each time, take that times, whatever, and that's my total addressable market, and then say I'm gonna knock on 10 people's doors a month and I'm gonna get one person to say, yes, so that's, that's my total serviceable addressable market or a serviceable obtainable market, so you can just work back, but you could do it how Tim said too. It's all about if you can justify why you did that and you have the facts to back it up.
0:58:28.6 S4: Let me amend one of my comments too. There is one wrong way to do that, in my opinion, and that's to arbitrarily say that I'm gonna get 1% of a big market. Don't do that. Yeah, and I was just kinda talking this build up approach right, and then at the end of it, it might work out to something like that, and it's just find a state that, but here's a big market, and if you get any percent of it, that's a great result. Yeah, we know that, good job. We're looking for something deeper than that.
0:58:56.0 S2: It's so helpful to hear too, you guys highlight how you get to those assumptions, so that “how” is super important in seeing that thought process is then, I always think I would probably prefer to do conservative projections, but is that always realistic? And that kind of thing. And so that helps, I think.
0:59:14.6 S4: And don't spend any time, anybody worrying about formats and things like that. There are no cost professionals out there, like small business development center folks and others that will take that magical knowledge from you and put it into the format that banks, investors that we expect. It's probably more than what we need truthfully, but it standardized as that, so don't spend any time worrying about how to make those.
0:59:41.8 S3: Yeah, I can speak for the banks in North Dakota, they all want the SPDC version of projection, so if you're looking for projections, go to the SPDC, they'll help you.
0:59:52 S1: Shout out to Paul Smith.
0:59:59 S3: You’ll have to tag him in this as well.
1:00:03 S1: I think one, to finish up how you just answered, always have confidence in what you're saying Jess, because when you came up with those numbers and you did the research, just as Tim was saying, he's a generalist. Hannah is a generalist, they want to look to you, that you have confidence in what you researched and what you're bringing to them, and when we don't have confidence and we get lost in the numbers that, it just makes it confusing. So if there's, from my standpoint, practice and really know those numbers. So then when you talk to them, it's like looking at the back of your hand. No big deal.
1:00:48 S2: Gotcha, agree.
1:00:51 S1: There was so many great things. Really, I look at this is all of the questions that were asked, how well you prepared Jess, from the standpoint of the investor side as well as an entrepreneur side, I think we're gonna have a lot of takeaways and even to just have on a blog for entrepreneurs, and that's really the point of this podcast.
1:01:12.7 S1: For entrepreneurs that are in their first five years of business that scale to eight figures, so this one in particular was for raising an angel round, and I think that it was an absolute perfect first episode, so I thank you, each of you for rolling along with The Pitch, and I think it went really well. I'm very proud of you, Jess, and I wish you all of the best. I think you're gonna do great.
1:01:40 S2: Well, that means a lot because Patty, I fangirl over you all the time. I think what you're doing is incredibly phenomenal, and I'm so excited for your company, so just keep doing what you're doing. I'm so excited, just to keep seeing you grow so thank you. That means a ton.
1:01:55 S1: You're very welcome, and Tim and Hannah, I know you're super busy, I'll let you go so you can give back to making some deals and helping other entrepreneurs and growing this economy. So thank you for everything that you do.
1:02:08 S2: Yes, thanks guys. And thank you so much for your time and feedback today.
1:02:12.2 S4: Thanks, Patty for hosting and Jess, great job. Keep at it. Think you're onto something.
1:02:16.2 S3: Yeah, thank you so much, thanks for having me Patty.
1:02:19 S1: Thank you for listening to The Persevere Podcast, powered by Checkable Medical. Head over to perseverepodcast.com for notes, links and additional resources from today's show. To continue hearing insights and gaining knowledge from those persevering, succeeding and making their dream a reality, be sure to subscribe through your favorite podcast app. Now go make it happen.
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