293: How to Make Investors Love You - with Joe Dormani

EPISODE SUMMARY

The landscape of software startup investing is a delicate balance between initial funding and later-stage deals. As a partner at Thomson Reuters Ventures, Joe Dormani offered intriguing insights into their investment strategy with host and B2B SaaS Sales Coach Matt Wolach. Let’s delve into the key takeaways from his perspective and the company's approach.

PODCAST-AT-A-GLANCE

Podcast: Scale Your SaaS with Matt Wolach

Episode: Episode No. 293, "How to Make Investors Love You - with Joe Dormani"

Host: Matt Wolach, a B2B SaaS Sales Coach, Entrepreneur, and Investor

Guest: Joe Dormani, Partner at Thomson Reuters Ventures

TOP TIPS FROM THIS EPISODE

• Target the Sweet Spot
• Work on Strategic Fundraising & Understand Needs
• Go for Transparency & Reality
• Leverage Customer Stories
• Invest in Innovation

EPISODE HIGHLIGHTS

• Beyond Funding: Active Engagement
• Trusted Partnerships
• Joe's Journey: Tenacity & Strategy

TOP QUOTES

Joe Dormani

[5:11] "My story is kind of a 10-year slog of just trying to pick up all the skills and do all the things that need to be done."

[14:43] "Finding the right investor for any sort of situation is usually an advantageous situation."

Matt Wolach

[18:59] "Every company does not need to raise venture capital."

[21:22] "It's much better to just be transparent with what the reality of the business is."

LEARN MORE

To learn more about Thomson Reuters, visit: https://www.thomsonreuters.com/en.html 

You can also find Joe Dormani on LinkedIn: https://www.linkedin.com/in/joseph-dormani-2b119a38/ 

For more about how host Matt Wolach helps software companies achieve maximum growth, visit https://mattwolach.com.

Get even more tips by following Matt elsewhere:

• Sales Tips
• LinkedIn
• Twitter
• Instagram

Transcript

Matt Wolach: 0:10

Should you seek investment? And if you should seek investment, what should you go after? And how can you make yourself look good to an acquisition partner and invest partner? How can you make sure that you're approaching with the right pitch? And what should you say? And should you be honest about this or that there's a lot of questions when you're seeking funding. Fortunately, Joe Dormani. From Thomson Reuters ventures, he's an investor and he invests in all sorts of different great early stage SaaS companies, he lays out exactly what he looks for and what you can do in your company to make yourself look fantastic to an investor. There are specific things he talks about here that if you're looking for investment, you're going to want to hear them, check this one out.

Intro/ Outro: 0:48

Welcometo Scale Your SaaS, the podcast that gives you proven techniques and formulas for boosting your revenue and achieving your dream exits, brought to you by a guy who's done just that multiple times. Here's your host, Matt Wolach.

Matt Wolach: 1:04

and welcome to Scale Your SaaS very glad to have you here. Thank you very much for being here. Super excited about today, it's gonna be a really fun one. By the way, if this is your first time here, our goal is to help you scale your SaaS do exactly what the show says. So we're going to talk to you all about different ways to grow your lead volume, to close more deals, to set up your company for success, and to get to your ultimate goal. And today, one of those ways of doing that is going to be with Joe Joe domani is with us. I'm super excited about it. Joe, welcome to the show.

Joe Dormani: 1:36

Thanks, Matt. Super excited to be here. I'm excited about the conversation.

Matt Wolach: 1:40

Me too. So let me know. Or let me make sure everybody knows about you, Joe. So I'm gonna little do a little intro for you. So Joe is a partner at Thomson Reuters ventures. And really, he's currently an investment partner there. They it's $100 million corporate venture fund where he leads a team of global investors. And really, as an investor himself, Joe specializes in machine learning, enterprise automation and vertical SaaS startups, something that a lot of us here listening to this are definitely keyed in on. Joe has led over a dozen startup investments, m&a deals, valued in the hundreds of millions, also driven strategy for multibillion dollar organizations and helped scale high growth software products. Joe's passion for promising technology sees him as an active member of the New York Tech environment, where he serves as an adviser to several incubators and early stage startups. And I am super excited that he's taking time to join us. So Joe, thanks for coming on the show.

Joe Dormani: 2:34

Yeah, glad to be here. Thank you for the opportunity to talk about Thomson Reuters ventures and what we're looking at in the markets. Perfect.

Matt Wolach: 2:40

So tell me what have you been up to lately? And what's coming up for you guys?

Joe Dormani: 2:44

Yeah, great. So thanks, again, for the introduction to Thomson Reuters ventures. So yeah, a lot of what we focus on is in the series, a stage for startup investing. So you know, after initial financing about before some of the later stage financing deals that happened. So we're looking at companies that are 1 million to 5 million in ARR, we're looking, you know, a couple of specific areas that align to the focus areas of the corporation. So we're very big on legal Tech, we focus a lot on tax software, risk, compliance, automation, fraud prevention, detection, we do a little bit of news and media, everyone knows Reuters that the news business, but our our main sort of thematic focus across the markets that we focus on our machine learning natural language processing, and like you said, tasks, and Process automation. So really, that sweet spot of this series, a company that has, you know, really good product market fit into starting to really turn on the sales and go to market function and start starting to scale that business, build out their product, and really take market share. And a big part of what we like to do, when we make investments, when we look at companies that we work with, we have like a leg still in this sort of operating world, as part of, you know, the corporation that we were part of Thomson Reuters. So we'd like to get involved with the companies that we work with, you know, we like to see what we can do, you know, whether that be a partnership, or an integration, or if there are, you know, experts, or professionals in our network are in our businesses, that can help bring that expertise to the companies we invest in to help accelerate them. We like to roll our sleeves up and get involved with companies we work we invest in.

Matt Wolach: 4:24

I love that I think that's super valuable. And myself as a former founder of software and current founder, I guess, it's so nice when you have an investment partner who's able to come in and kind of give you some of their their capabilities and their their background experience so it can help you grow and the money is one thing but having that that knowledge and that inside those connections, even that capability to help you scale is so critical. And I'm sure that that your investments they love it.

Joe Dormani: 4:51

Yeah, I mean, it's it's a it's a big part of how we pitch and how we differentiate ourselves. We focus very specifically on those markets that I talked about. And you know, in those markets, Thomson Reuters as a brand, we have really good reputation with our customers. And we've really, really good relationships with our customers, we're very much a trusted partner to a lot of our customers. And a lot of what they lean on us to do, besides just buying the products that we we buys, help them navigate all the industry complexity, whether that be, you know, things like regulatory changes, or whether that be, you know, a dynamic technology environment where things are rapidly developing, new companies are popping up. And they do rely on us to help them navigate that new startup landscape, help them try new types of technology. So, you know, it's a really critical position for us. And, you know, it's advantageous for our customers, it's also advantageous for us as a fund, but it's, you know, importantly, also advantageous for the companies we investment invest with, they get access to customers, that they maybe wouldn't, maybe it would take longer time to access otherwise.

Matt Wolach: 5:58

Yeah, it makes a ton of sense you yourself, how did you develop a skill and passion for investing in tech? Where do you get this love?

Joe Dormani: 6:05

Yeah, so, you know, I often hear stories about how people get into venture and I'm always like, somewhat, somewhat jealous, and also somewhat intrigued by by others story, my story is, is kind of a 10 year slog of just trying to, you know, pick up all the skills and do all the things that need to be done to, to be able to participate in this in this ecosystem. So I sort of started my career on the startup side of the world. And, you know, very early on into my career, the company that I was working for, got acquired, and that was really my first introduction to this world where like, oh, companies get invested in and then bought and sold all the time. And I kind of fell in love with that world. And I was like, Okay, we're going to do all the things that you got to do to become part of this venture capital industry. So you know, I spent time learning about product and technology, spent time, you know, on financing, did the MBA thing went back to school, and then, you know, join Thomson Reuters in this post MBA rotational programs. So I got, I was very fortunate to work in corporate development, I was very fortunate to work and go to market strategy. And then I landed in sort of the product tech world for a number of years, kind of worked my threat and worked my way through to the corporate strategy side of the world, did a bunch of m&a for the for the corporation. And then when it came time for them to launch a fund, you know, I had also been working with a lot of incubators in New York, getting on startup advisory boards, kind of doing what I could do to interact with different companies in and around New York, and just trying to, you know, add value where I could, and while at the time, tr was ready to launch their fun. You know, this was one of those things where I was, you know, really well positioned, they really couldn't tell me no, you know, at that point, so we're lucky enough to, you know, spin the fund up, you know, get us get us started, you know, we brought on our Managing Director, timber Stephens, who used to run Microsoft ventures and 12. And so between her and myself, and our chief product officer, David Wong, and our Chief Strategy Officer, Dave Larsen, and we have a really well rounded Investment Committee. And now we have a team of a couple of investors in New York. So it kind of took this long, long journey to get here. But I was very fortunate along the way to pick up a lot of different skills that I think, serve pretty well, when thinking about direct investments in early stage companies. And really, we think of ourselves, and I think of myself as a company builder, as well. And bringing those operational skills to the companies we invest in, I think is a big benefit from for working with us. You

Matt Wolach: 8:40

said, You're fortunate, I actually think you did a great job. This is something that others need to follow more early on, you kind of identified exactly where you wanted to be, and you realized what you needed to do to get there. And so you went out, got the experience, went out, got the education, and did what you needed to do. So like you said, when there was an opportunity, they couldn't say, No, you had every piece of the puzzle that was needed. And I think that's not only the way to get the job, but now it makes you somebody who's extremely capable and extremely powerful within your role. So for everybody out there who's saying, Hey, I wish I could do this, which again, it is follow Joe's lead, and set your goal and then go out and get it. And I absolutely love that. So Joe, tell me, how does a company know you're a SaaS company or SAS leader, your founder? How does that founder know that? They should go out and get investment or should they try and stay bootstrapped? What would be some of your advice to somebody who's thinking like that?

Joe Dormani: 9:34

Yeah, it's a great question. And it's a it's a nuanced question, which I which I love. The way I think about these things is, is you got to sort of turn that question around on its head a little bit. And the way that I think about fundraising is you should have an idea of where you want your business to be over a certain period of time. You have to have some foresight, you have to understand the market. You have to understand product and problem you're solving. You have to Have an idea of what maybe maybe it's not a permanent end state, but maybe it's a mile, you know, big milestone for an end state. Where you want your product and business to be, and you have to work back from that is the way that I always think about it. So. And having an idea of what you're trying to achieve, can help dictate how you think about fundraising, how you think about the milestones, that you want to set yourself from an operational standpoint to be able to hit to justify that funding, like, every company does not need to raise venture capital, I actually think there there are many companies that can just be lifestyle business can stay Bootstrap. And it would be disadvantageous to take on venture capital specifically, to, to business that maybe doesn't really have the aspiration or want or need to rapidly scale or rapidly go out and capture capture market market share. So it really is about identifying what what you're trying to achieve over a certain period of time and working back from that. So if you feel like you're building a product in a market that has a bunch of opportunity, and you really need funding to go out and capture that opportunity, and you know, that opportunity feels somewhat time down, you know, those are some of the characteristics where it starts to make sense to go out and raise venture financing. Because with venture financing, you know, the expectation is that there will be this sort of rapid growth, this, you know, and it doesn't necessarily only have to be revenue, right, it could be other sort of growth metrics, but, you know, usage, you know, all different types of ways that we would be able to measure whether or not a product has product market fit. But so like, when we think about what is it good circumstances to raise venture capital, it's when, when you have a pretty good definitive idea about what you're trying to achieve with a certain amount of money, and where you have pretty good line of sight into what you might want to achieve from a development side, organizationally, maybe, you know, scaling, and go to market team or, you know, getting technologists or data scientists to build out the next set of capabilities from an infrastructure standpoint. So really should be dictated by that end state that you can clearly define, articulate, and then ultimately justify from a sort of thesis standpoint. And then, you know, like I said, we're working back from that, you know, what are the things that you're going to use that capital for, and achieve by raising that funding so that you can give confidence to to investors that you're going to be able to execute on on that end state? I think those are those are some of some of the conditions that I like to think about.

Matt Wolach: 12:36

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Joe Dormani: 14:58

Yeah, and it's another are one that can be come up? Through? You know, there's a lot of angles to answer that question. But I think it largely builds off the last couple of points that I was making, which are, I think, I think you have to have a really good story for why you're building the company. Some of the things that make make an attractive company are having the right leaders in place who understand the market that they're going after, and understand that the business that they're building, so that they're well qualified to go and build that company that product, and build that business in that market. Being able to explain that story, being able to explain the market that they're operating in, why it's a big market, why the dynamics of the market dictate that now is the right time to be building this company, why the product that they've developed is differentiated and has the ability to sustain that differentiation over a long period of time, you have to be able to not only tell that story, and explain a lot of those things. But you also have to be able to demonstrate an ability to execute on the things that you say that you're going to go into go do. And the best way what what I always get most excited about is when a founder can tell me look over the last six months, we've said we were going to get from, you know, 250k to 750k, in ARR. And we did that we said we were going to hire three engineers, and build four features. Over the last nine months, we did that. And we hired two go to market people, one on the sales side, one on on marketing side, they're going to drive XYZ top of funnel and you know, ABC in new sales arr. And we did that. So that's my track record in this company, right? I'm just giving examples doesn't have to be those, those are the those don't have to be those metrics or those things, it's really any set of things that can give the investor confidence that when you say, if you invest in me, I'm going to build this business and scale it to 5 million in ARR over the next 24 months. And I only need however much the funding round is they're asking for to go do that. So to me, the way to gain credibility is to have that really strong story surrounded by demonstratable track record for things that you that you've achieved. And they don't have to be these like amazing things that maybe are super hard to achieve. They can just be we had an idea six months ago, we have POC today, right? So it really depending on the size and stage of a startup like, you know, it can be a variety of different things that you can use to demonstrate your track record. And then you know why it makes sense for you to raise a certain amount of financing, and what you're gonna go do with that funds, but really telling that story around, you know, how you're going to execute what you're gonna do with the investment, why this market is interesting, why you're uniquely positioned to go execute on it, you know, those are some of the key ingredients that I think of that for, like the successful companies that we invest in, like those are, those are all generally present.

Matt Wolach: 18:13

I love it, I think it's so important. I really respect that because it's such a great look at it. I mean, so many times we say we're going to do something, and then it doesn't happen. If you can show if you can demonstrate that you can execute, that you can actually deliver. I mean, that's got to be super attractive to an investor to see that they had these plans, they went out, they did exactly what was needed, they made it happen. Now they've got these plans, I have a lot of belief and trust that they can go make that happen to I mean, that's gonna feel great as an investor to see that history of execution.

Joe Dormani: 18:46

Yeah, it is great. And it also helps bring clarity, I think oftentimes, when we're trying to frame up an investment, it's not trying to predict what is going to happen. It's more so identifying a set of conditions on what you sort of need to believe and identifying where the risks are to that thesis. Right? And if you can help an investor bring clarity to that to those points. I think you either get to a quick No, which is almost just as good, or you give you help them get the condition for it. Yes.

Matt Wolach: 19:21

Love it. So tell me, what are some of the early mistakes companies are making that are making them not a good investment? So that's the good thing God ask you, what would be some of the things that make you say, Oh, we don't want to be a part of this. Yeah.

Joe Dormani: 19:35

And look, it's hard to be a founder, it's hard to raise money. It's hard to build companies. So you know, any any, you know, feedback that I might have is said with a lens of immense respect, right? It's like, I wish I could build super successful startups. I can't so I have to invest in them. Right. So, you know, that's that's the caveat. But that being said, some of the things that I've observed arrived in, you know, the opportunity that I have to meet so many companies that are that, you know, things don't go well, when companies try to blur the actuality of the business where maybe the story isn't as good as a founder would want it to be. And there's just not transparency about what the realities of the company are, it doesn't make for good situation, you don't want investors coming on board, when they don't have clarity on what you're trying to achieve, or what the current state of the business is, it just usually doesn't wind up with good results. So I would encourage more transparency. Even if the reality is not, we know, it's not ideal or not, what you would want it to be, it's much more, it's much better to just be transparent with what the reality of the business is today and find the right investor for you. Because it's, there's plenty of capital out there looking for opportunities to and with that capital, a lot of unique experience, finding the right investor for any certain situation is, is usually an advantageous situation. So I would say, you know, more more transparency, and then, you know, that sort of extends to another thing that that we see a lot of time, which is over raising or trying to push for, you know, a higher valuation, then, you know, what, what the current company over the market might justify. And oftentimes, we see some of this done for vanity reasons, or just because, you know, there are investors in the market who have, you know, who are willing to have a little bit, we'll call it maybe less financial discipline, right, bigger checks, underwrite, you know, riskier situations. But, you know, taking a little bit more dilution, finding the right investor and finding a relationship with with that investor, that is going to bring something of value for the business to the table is is a much better scenario than just, you know, taking taking the highest valuation, and, you know, raising as much money as possible. Sometimes that's the right thing to do. And, you know, but very often, I think it's a bit of a trap for founders.

Matt Wolach: 22:23

Well, yes, super good advice. So as we wrap up here, what advice would you have for early stage companies who are looking to seek investment about ready to go out and start having these conversations? What would you tell them?

Joe Dormani: 22:34

So, you know, I think, I think, one of the best stories for a company to tell an investor, it's actually not what the company's management can tell you about the product. It's actually what the customers can tell you. And obviously, different companies are at different stages and cost getting customers are hard. But getting feedback from customers is something that is generally not as hard as selling. So if you can supplement your story for why a market is interesting for why your product is really great with, and here's what five customers have told us about this, the product that we're building, and their willingness to buy, or here's what our customers tell us about when they use our products, and the difference it has made in the way that we operate in the way that we it has changed our behavior. Before we did do things one way now we do things another way. Having that customer feedback, along with all the other aspects of the story around the company is just a differentiator, right, it is something that will set you apart from you know, many of the companies that are kind of going through the fundraising process. And it's, you know, it's it's not the easiest thing to do in the world. But I will say that is one thing, you know, getting to observe and participate in product development, with a large corporation like Thomson Reuters, and observing and working with the companies in our portfolio, and the startups, the good startups do this. And the product teams at TR we are, they're very much customer centric, and you know, building great products, we've seen it up close, and, you know, build so much credibility and trust from a brand perspective. So, yeah, my advice would be when thinking about your fundraising process, think about bringing the voice of your customer to the forefront of that pitch.

Matt Wolach: 24:32

That's amazing advice. And it echoes exactly what I teach my clients as well, stories, success stories of your customers sell and get more customers. Well, it's the same thing for investment. If you're showing success stories, if you're showing that people absolutely love working with you love the product. It's going to work really well. So that is awesome advice. And I'm really glad that you came on to share it, Joe. This has been amazing guys. He's Joe Normani from Thomson Reuters ventures. Joe, how can people learn more about you and Thomson Reuters ventures? Yeah,

Joe Dormani: 24:59

so easiest ways to check check me out on LinkedIn, I try and post on a regular basis. So you can just look me up Joeseph Dormani on LinkedIn. And then we have a website trventures.com to check out what we're doing, what we're invested in and how we think about prioritizing companies that we engage with. Perfect.

Matt Wolach: 25:18

We'll put all that in the show notes. So if you're listening, you'll be able to grab it there. But Joe, this has been awesome. Thanks so much for coming on. Thanks, man. It's been a pleasure. Absolutely. Everybody out there. Thanks for listening and make sure you're subscribed to the show. You don't want to miss any other amazing leaders like Joe coming in and sharing all of their best advice with you. So hit that subscribe button right now. And then we will see you next time. Take care. Bye bye.

Intro/ Outro: 25:42

Thanks for listening to Scale Your SaaS for more help on finding great leads and closing more deals. Go to Mattwolach.com