“Raising Investment Capital Is Much Harder Than It Looks On Shark Tank” 5 Startup Strategies with Symon Perriman
“Robert Herjavec, enlightened everyone about some of the realities of the show: Pitches are much longer — The average Shark Tank pitch is about ninety minutes, and some last for over two hours. Investors are much smarter — Since most of the presentation has to be cut for the TV show, this means that the more complicated questions about financing, terms, equity types, etc. are usually skipped, as this helps viewers without industry experience to understand the show. Deals are more complicated — Often there are additional terms which are discussed off-camera before any deal is finalized.”
I had the pleasure of interviewing Symon Perriman, President and Founder of Seattle-based sports tech company FanWide. Symon is an internationally recognized business leader, industry expert, author, keynote presenter and technology personality. Prior to joining the startup world, he spent eight years at Microsoft, and he now also serves as a technical advisor for several startups and enterprise software companies. Symon holds numerous technology patents and over two-dozen industry certifications and recognitions, and has co-authored or contributed to six technical books. He graduated from Duke University with degrees in Computer Science, Economics, and Film & Digital Studies, and his passion for Duke basketball inspired him to launch FanWide.
Thank you so much for doing this with us! What is your “backstory”?
Supporting a sports team is one of the best ways to bring strangers together and make new friends. I was born in England, and my father was in the military, so my family constantly moved while I was growing up. When I was nine, we immigrated to the United States, and I found that sports was one of the best ways to make new friends and feel like a part of the community.
After I graduated from Duke University, I moved to Seattle to join Microsoft as an engineer. As a work transplant, it was tough to find other young professionals with the same interests until I began attending basketball viewing parties for our local alumni club. I was inspired by the passion of Duke basketball fans, and wanted to bring this same experience to fans of every team in every city. However, organizing these events was inefficient, and although we would bring up to a hundred fans to each game, the bars were often understaffed and unprepared, even though we were helping these local businesses generate new revenue. I wanted to simplify this matchmaking process between groups of sports fans looking for a host, and a bar that would make them feel like they were at home.
Over the next several years I managed people in dozens of countries, so I was traveling half the time. I hated trying to find my game on the TV in the hotel, wishing I could explore the city and socialize. I realized that sports fans in every city worldwide needed an easy way to get together to watch their team play, and that venues would pay a service to help them fill their seats.
Yitzi: Can you share the funniest or most interesting story that happened to you since you started your company
Last summer FanWide partnered with Ice Cube’s 3-on-3 BIG3 Basketball League, and during their opening game I was sat next to NBA legend Rick Barry, who was also one of the coaches for a team playing later that day. We chatted for a while, and what fascinated me was the he explained how the rules and strategies were different from traditional basketball. Hearing him coach “out loud”, and seeing all the mistakes that these former NBA All-Stars were making on the court made me realize that this was new for everyone. This league was a “startup” too, and while it had significant funding and support, everyone was still learning their roles and how to make the BIG3 successful.
So how does your company help people?
FanWide is a service that connects sports fans, alumni and fan clubs, teams, restaurants, and corporate brands. We organize in-person game watch parties and develop local fan communities for every pro, college and international team at sports bars nationwide, who pay us to bring them new customers through bidding to host events in an auction. Millions of out-of-market sports fans can use the free FanWide app to find the closest viewing party for their favorite team, wherever they are living or visiting.
Sports teams and leagues can use FanWide’s Sports Data Platform to analyze data from the hundreds of thousands of events that we have promoted to increase fan engagement, and they can also integrate FanWide’s services within their team’s own app. Fans from around the country can check-in at events to get discounts from the bar and report watch party attendance. This data used to improve accuracy for Out-Of-Home TV ratings, so broadcast and advertising partners can see a measurable increase in viewership among the younger audience that is unsubscribing from cable. FanWide also offers sponsors new targeted advertising channels through our digital platform and on-site activation at our events.
Yitzi: How have you used your success to bring goodness to the world?
Sports are loved worldwide, and if you support a team, that passion will transcend language, citizenship, or ethnicity. FanWide is now building communities for fans of every sports team in every city, helping the tens of millions of immigrants, work transplants, students, military and travelers improve their lives by becoming a part of a local community. Since launching in September, 2016, Fanwide has promoted over 250,000 events at 8,500 hosts for 10,000 fan clubs!
Yitzi: What are your “5 things I wish someone told me Before I Launched My Start-Up” and why.
1) Raising investment capital is not as easy as it looks on Shark Tank
FanWide is currently closing its $2 million Series A round, with commitments from about a dozen investors, but we pitched to literally hundreds. Why was it not as easy as it looked on Shark Tank?
While the popular TV show has inspired a generation of entrepreneurs to launch their businesses, keep in mind that it is still TV! In the real world, no one writes a hundred thousand dollar check after a seven minute pitch from a stranger. I remember that before FanWide’s first pitch contest at the Crowd Invest Summit, I told our team that if we won, we should get some checks from the judges or investors in the audience. We did win…but there were no checks.
The following day the keynote was presented by Shark Tank’s Robert Herjavec, who enlightened everyone about some of the realities of the show:
- Pitches are much longer — The average Shark Tank pitch is about ninety minutes, and some last for over two hours.
- Investors are much smarter — Since most of the presentation has to be cut for the TV show, this means that the more complicated questions about financing, terms, equity types, etc. are usually skipped, as this helps viewers without industry experience to understand the show.
- Deals are more complicated — Often there are additional terms which are discussed off-camera before any deal is finalized.
I have since met with many other entrepreneurs who said they had the same misperception, and were expecting to get checks on the spot after pitching to investors. My advice is to still feel inspired by the show and follow your dreams, but the reality is that when pitching to investors, you have to take it one step at a time. If you get a follow up meeting, then you have achieved your goal, and don’t be disappointed when it is not as easy as it looks on Shark Tank.
2) Keep the investment terms simple by using standard ways to raise capital
FanWide decided to use a newer type of capital raise, known as “equity crowdfunding”, specifically using Regulation D, 506(c), which allows numerous accredited investors to invest in fixed equity units. Equity crowdfunding is conceptually similar to online crowdfunding from websites like Kickstarter or Indiegogo, but instead of thousands of people investing $25 in exchange for a t-shirt, we were asking dozens of investors for $25,000 in exchange for equity.
We though that since we were a consumer-facing app, it would be easier for us to raise capital in smaller amounts from more individuals, which was why we ended up speaking with so many investors. The challenge with this type of raise was that it is fairly new, so the terms and requirements are still unfamiliar to even seasoned investors. We were offering common stock (but investors always want preferred stock) and we (actually the SEC) required that all investors had to prove that they met the financial requirements to be an “accredited investors”. This step was a blocker for several interested investors as they had to either provide us with their personal tax records, or have their financial representative send us a letter proving that they met the requirements. In retrospect, we should have kept the investment terms simple, offered preferred stock, and avoided equity crowdfunding.
3) Focus your time on finding investors within your industry
During our months of fundraising, FanWide went to every startup event that gave us an opportunity to meet with or pitch to investors. I was on the road every week for three straight months, and ultimately we met our lead investor at a sports-related pitch contest, Sports Tank. We wasted thousands of dollars and dozens of days going to unfocused events, where there were very few investors that were even interested in sports. This was part of the reason why we ended up pitching to so many investors.
I became particularly frustrated when I went to a startup conference in Whistler (B.C.), with the expectation to meet with over forty investors. What the organizers did not disclose what that all the investors focused on social or environmental causes, and none were interested in sports tech. Make sure that you focus your time on finding investors within your industry, as not only are they more likely to invest, but they may also be able to help you strategically, through their professional networks and prior experience.
4) Do not count the cash until is in the bank
As startup founder, you want your business to grow as quickly as possible, so when you get a commitment from an investor, it is very exciting. The investor may have good intentions and even give you specific amounts they plan to invest on certain dates, but not everyone keeps their promise. This means that you still cannot count your investment even when you get a verbal commitment, nor a written commitment, nor when the paperwork is complete — the money is not real until it is in your account and you can spend it.
FanWide received its first verbal commitment from an investor for $500,000 just two months after launching! This angel investor was a recently retired executive of a publicly traded company and very credible, and committed the money to us in two months, but this date kept sliding and after almost a year we are still waiting… I made the mistake of scaling up our business based on this investment, and while we had received some other funding to support this growth for a quarter, we still needed this capital to maintain our programs and staff. This ended up causing significant disruption to our business, planning, expenses and morale, as we had to scale back several months later, and lay off some of our team. Even if you think that you have closed your round, make sure that you keep engaging new investors, and do not count your cash until it is in the bank.
5) Make sure that your core team is financially stable and understands the risks
Startup life is hard and your net worth will probably decline in the near term. You will make less than a corporate job due to a lower (or no) salary, inferior benefits, earning equity that you cannot sell, and the lost opportunity cost from lost tenure and promotions. Make sure that you and your core team are financially stable and will not endure hardships if payments get delayed, and set the expectation that this could happen. One of challenges of being a startup is that you will likely have to offer lower than average wages, so you will probably attract younger or less experienced talent, who may not yet have financial stability. Have these honest conversations up front about the pros and cons of joining a startup with anyone that you are hiring, so that they are sure that they can accept the risks of this career decision.
Yitzi: I have been blessed with the opportunity to interview and be in touch with some of the biggest names in Business, VC funding, Sports, and Entertainment. Is there a person in the world, or in the US whom you would love to have a private breakfast or lunch with, and why? He or she might see this, or I might be able to introduce you.
Mark Cuban, as we share the same passion for sports, technology, media and data. I believe that we have a similar vision in how emerging digital trends can change industries, and FanWide’s fan engagement and data analytics technologies would complement many of Mark’s own projects.