Venture360 Founder, Rachael Qualls

Startup Hustle Episode 6
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Getting the word out to potential investors can be a challenge.  In order to get some advice about doing that, we asked Venture360 Founder, Rachael Qualls to join the hustle and give us some advice.  Venture360 is a funding platform used by entrepreneurs and various types of investors to simplify and aid the entire process of raising capital.

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Matt DeCoursey: Hello, and welcome to Startup Hustle with Matt Watson and Matt DeCoursey. Have a special guest today, Rachael Qualls from Venture360.
Rachael Qualls: Hello.
Matt DeCoursey: Hey, Rachael.
Rachael Qualls: Hi. Thanks for having me.
Matt Watson: How's it going today, Rachael?
Rachael Qualls: Pretty darn good. Almost Christmas, life is good.
Matt Watson: Yeah? How's the hustle?
Rachael Qualls: The hustle is ... it's rough, man. How's the hustle for you?
Matt Watson: How did you describe it today, Matt? It was something about an onion ...
Matt DeCoursey: Being a startup founder is a lot like an onion. The further you get into it, the more you cry.
Rachael Qualls: I like the sport of it, so I don't know what that says about me, as a person, but ...
Matt DeCoursey: I've seen a lot of people crying during sporting events.
Rachael Qualls: That's fair.
Matt DeCoursey: For different reasons.
Matt Watson: You're a glutton for punishment.
Rachael Qualls: I really am.
Matt DeCoursey: So, Rachael, you're the founder and CEO of Venture360, and the reason we are really excited to have you on the show today is, your business does some stuff that will help other startup founders get things done. What are a few of those things?
Rachael Qualls: We help people ... Well, we've designed a lot of tools to help companies organize the fundraising process. That includes traditional ways of reaching out to angels and VCs, and non-traditional things like putting an investor registration link on your website and promoting it through other various channels. So, that's what we do. But I like your version of, you do stuff. Like, we should just stop there.
Matt DeCoursey: Maybe, yeah. What do you do? I oftentimes tell people, "A lot of stuff."
Rachael Qualls: Yeah.
Matt Watson: So, Rachael, how did you get into this? I mean, maybe we should start with your journey as a entrepreneur and your background, a little bit.
Rachael Qualls: I was a technology entrepreneur, and I've started a number of different companies. One of the limiting factors in the success of those companies was access to capital. I had a small amount of success, and decided a fantastic way to lose my money was to start angel investing, all by myself. I tell this story, and I laugh because I didn't have enough money to move the needle in deals. No one wanted to show me the best deals, and leveraging my access to investors became very important for me, to do great deals. So that's what I built.
I ended up building a service organization that helped angel investors like me pool resources. We have hundreds and hundreds of investors. They could pool those resources individually, where you control the money, or you could pool it into a fund. We had angel networks and we had funds, and that became the Angel Capital Group.
Once I realized that I was getting in good deals and we were doing lots of deals, it really became, well, now how do I get of said deals? Turns out, whole lot easier to give someone your money than it is to get it back.
The next evolution of what I wanted to build was a market. I believe, as I think any entrepreneur should, whatever you're investing this amount of time and tears into, it needs to be important, or you're not going to have the drive to see it through. I think it's really important for people to invest in the innovation of the future. Like I said, the next evolution I wanted to create was a market for private illiquid securities, so Venture360 was that dream. It has always been designed to be a market, we just didn't start there.
In order to build a market, we first had to organize how people were doing deals. We started out as Workflow process offer, we helped VCs and angels organize the companies who were applying for funding, the people they were taking money from, who was doing what deal, as one entity, and that's what we're in the market today.
2018 is when we will finally launch our market. I know we're probably going to get into more of this later, but to kind of give the reasoning behind that is, like I said, we started as a market, but we started in 2013 to build a market.
Matt DeCoursey: But you've been open, doing other things in the interim, before the market.
Rachael Qualls: Oh, yeah.
Matt DeCoursey: Yeah.
Rachael Qualls: Oh, yeah. So, it was a way of-
Matt DeCoursey: What are a few of those things and how can they help me, as someone who is organizing a fundraising process? And, you know, you talked about facilitating and improving the process between angels and actual company founders. Is that through paperwork? Is it through just a general ledger? What do you guys do that helps with some of that?
Rachael Qualls: We do all of it. We try to help companies, whether it's your first capital raise, or you're on a series D, how do you ... because nobody likes to raise money. It's hard and it's brutal. So anything that can make that a little bit easier, we feel like is a value-add in the market.
We do that with, one, creating a portal for you to organize the information you're presenting to investors. So, a profile with discussions and files and things like that. That profile, you can invite investors in, you can search a global database, you can directly share with the over 3,000 venture funds and angel groups that use Venture360 today. It depends on how you want to let the market know you're raising funding. And, again ... Sorry, go ahead.
Matt Watson: So that lets you create a profile, and it lets you create, basically, and deal room-
Rachael Qualls: Yeah.
Matt Watson: ... right? And then you can share that with VC firms or angel groups that are already part of Venture360, right? Or you can share that with just other random people that you find that might invest?
Rachael Qualls: Right. So, unlike a crowdfunding platform, where you're limited to who else is using that platform, with Venture360, it's your platform. It is white labeled for your company. You can, again, connect with people within our community, or you can ... What I really like about our platform, and one of my favorite features is putting a link on your own public facing website, where investors can register for more information, so your SCC compliant, plus you're attracting outside of your usual suspects for invest.
Matt Watson: What other kinds of tips do you have for our listeners that are trying to raise capital? Do you have any good tips for them, besides to just keep trying?
Rachael Qualls: I think you need to treat it like sales, right. Sometimes in sales, you know, look, some will, some won't, so what? Who's next? The other thing is, you need to broaden your market scope. If you're just going after angels and VCs, you need to know that your chances of getting funding are very slim. So who else is investing? Who else knows about or likes your product? Again, marketing through your website is extremely important and relevant. One of my tools, I think customers make the best investors. They already know your market. They already know your product. Putting a link on your website and promoting the fact that you're raising funding, again, in an SCC compliant way. And then, once they register, they're in your Venture360 platform, and you're organizing everything from taking commitments to doing the deal, to doing your cap table.
Matt Watson: So when you were running this Angel Capital Group, what were some of the things you looked at in all the companies that were applying? Because I imagine you had to deal with hundreds and hundreds of applicants that were [crosstalk 00:07:07] coming through.
Matt DeCoursey: I actually want to add a second part on to that, that's very relevant to ... You mentioned that the chances of getting funded by an angel group or VC are also really slim. Can you tie some of that in with Matt's question, as well, about why your chances are so small?
Rachael Qualls: Your chances are so small because not many people invest in this asset class, first of all. So your pool of potential investors is microscopic. Of the 8.5 million accredited investors in the United States, who could do these deals, less than 300,000 ever do, do. So then you're dealing with that. Then, you have to rise above the noise of everybody else who's raising money.
Matt Watson: You're competing with every other company that's trying to raise capital.
Rachael Qualls: Right.
Matt Watson: And I don't think people ever think about it that way.
Rachael Qualls: Yeah.
Matt Watson: To your point earlier, about the amount of money you have, when you were trying to invest, gave you access to different types of deals, right?
Rachael Qualls: Right.
Matt Watson: I'm in the same boat. A buddy of mine is trying to get me to invest in some company that already produces a lot of profit, and we can acquire a business that makes $3 million a year in profit, and we can buy it super cheap. Should I do that, or should I invest in some startups that, 90% of them are going to fail, right? So depending on the type of investor, they have access to so many different types of investments. You're competing against all of them.
Rachael Qualls: Yes.
Matt Watson: I don't think people think about it that way.
Rachael Qualls: Yeah. Then it's also about the investor and their maturation into this space. The deals that I probably would have done, when I was on day one, are different than the deals that I would do today.
Matt Watson: You're a little more gun-shy now, probably.
Rachael Qualls: Yes.
Matt DeCoursey: That was a point I was going to throw in there. I think that any seasoned investor, someone that's disciplined when it comes to backing anything, is like a great hitter in baseball. Like, you got to take a lot of pitches and wait for the one that's exactly where you want it, the way you want it, and then you knock it out of the park. With that, it takes a little while to learn it. You swing at some bad pitches, you chase some things that ... you're swinging at that pitch that's in dirt, and you're never going to hit it anywhere, even if you wanted to, but I think some of that comes with inexperience.
Matt Watson: I think the angel groups are such a huge resource for the investors and the startups, both, because, as an investor, I don't have time to deal with all the pitches. I don't have time to talk to all these different companies. Especially if you're not an investor that is very savvy in the industries and stuff that you're talking about, it's just hard to get comfortable investing in any of these things. But if you can work through these groups, you can get a lot more confidence, and they'll help filter the good deals down, and it's easy to invest a few thousand dollars in a whole bunch of different deals, right?
That's what an investor should do, is make a bunch of small bets, and that's usually the mistake that these investors make, is they make one big bet in a really dumb idea, instead of making a lot of smart, small bets. I think the angel groups help a lot on that side. But then they also help a lot on the startup side, that they can be a huge asset from connections, and raising capital, and potential mentors, and advisors, board members, and all those things, that ... They play a huge role in the ecosystem.
Rachael Qualls: I agree. I agree. A dynamic that we haven't talked about, too, is that once, let's say an angel group seeds a deal, that company's going to need more money. So what you get into is, you're getting into deals that are bigger than an angel group, of maybe even 20 or 30 wealthy people, can manage. So they have to double down. That's how they get in deeper to these deals, is by sort of ... What we're not really servicing is the chain of capital. That needs to change, and that needs to improve.
Matt DeCoursey: So funding is also like an onion. The deeper you get into it, the more you cry.
Rachael Qualls: Yeah, yeah. It hurts a lot more when you're getting into real money, than a few thousand here and there.
Matt DeCoursey: One of our early episodes is titled, Getting Funded Sucks. It was an attempt by Mr Watson and myself to try to prepare people for what you're going to run into when you go out and just try to raise money. What do you think the number one thing that people do poorly is, when it comes to a cap raise?
Rachael Qualls: That's a really good question. The one thing that people do poorly? Lack of follow up. You should go into it assuming you're going to get a no, sort of, okay. I know that's, in some ways, bad advice, because maybe we should all be overly confident. But, let's-
Matt DeCoursey: I think it's great advice.
Rachael Qualls: But let's just assume you're going to get a no, all right. Your follow up with that investor needs to be meticulous and timely, because they may have said no in the short-term, but maybe their dynamic changes. Maybe they have more capital free up. So keeping them up to date on your progress, your successes, you cultivate sort of a following, whereas if you keep asking, maybe eventually it'll be a yes. So don't take no as no forever. No's just no for now.
Matt DeCoursey: What do you consider reasonable and quality follow up to be. Is this just an email occasionally? Is it just a, "Hey, I just wanted to update you on our progress"? Should I text at 3:00 in the morning?
Rachael Qualls: I can just tell you what I liked, as a potential investor, is that if I said no, a lot of times ... Maybe it's a little like dating, it wasn't really you, it was me. Maybe we didn't have enough investors at the end of December to pool to do your deal, so I had to tell you no. Maybe it was a lot of other factors. A newsletter type of email, chances are, if they were interested enough, or maybe you were too early or whatever the no reason was, a newsletter keeping me updated on your progress, press releases, chances are later stage VCs are stalking you. I know, right now, who's stalking Venture360 to see what kind of traction we get, what our revenues are looking like, so that they can pull the trigger at a later stage.
Matt Watson: Some of it's dating, right?
Rachael Qualls: For sure.
Matt Watson: Like, they said no on the first date, but you want to keep reminding them why you're the one they want to do business with, right, and keeping them up to date, and teasing them with your progress.
Rachael Qualls: Yeah, showing perseverance, like all these things that they want to see once they do invest.
Matt DeCoursey: I asked my wife out for three years before I got a date with her.
Rachael Qualls: Really?
Matt DeCoursey: Yeah.
Matt Watson: Did you keep her up to date on your progress?
Matt DeCoursey: I kept running into her and, yeah, I was like, "I just wanted to let you know, I'm still single, so I'll send you an email in a month, letting you know that."
Rachael Qualls: See ... ?
Matt DeCoursey: No, that isn't how it worked. I kept running into her in different places and she always had a boyfriend, but I kept asking, so ...
Rachael Qualls: There you go.
Matt Watson: Eventually you won her over.
Matt DeCoursey: It's funny because I actually gave up, and then she called me down the road, and she was like, "Hey, what's up?" I was like, "Oh, wow." So, [crosstalk 00:13:38].
Rachael Qualls: Perseverance.
Matt Watson: Perseverance.
Matt DeCoursey: Yeah.
Matt Watson: So, what other kind of tips do you have for investors?
Rachael Qualls: For investors? Well, again, my goal is to build something that gives people access to really great deals, regardless of your location, or your money, or whatever else. The ease with which you can do those deals, so it's not 10 months of due diligence and a $15,000 legal bill, right. You can just click a button and get in deals. And then make it easy for them to get out of it. The advice today is a little bit different than what I hope to be able to give once all of this comes to fruition in the future, which is, and like any other stock strategy or investment strategy, today you're going to have to go there a very manual process of leveraging your resources.
I personally believe in doing deals at every stage, and putting small amounts of money in every stage. It does sound sexier to do the $3 million profitable company deal, buy it cheap, but chances are, you're going to have to take an operational role of some capacity. It's not going to be without its headaches. Investing 5k in a startup or something that, mentally ... maybe it's 5k for you, or maybe it's ... whatever is that threshold of materiality. But get in the sport and start playing. That's how you're going to learn what not to do. But do it with amounts of money that are reasonable for you.
Matt Watson: So, should I invest all of my money in bitcoin?
Rachael Qualls: Well, yeah.
Matt Watson: All of it?
Rachael Qualls: No.
Matt DeCoursey: Didn't you already do that last week?
Matt Watson: No, I found that I randomly owned half a bitcoin, I didn't realize I owned.
Rachael Qualls: I did, too. I did, too.
Matt Watson: You did, too? You had bitcoin and didn't know it?
Rachael Qualls: Well, I had multiple accounts, so I've been a longtime investor in bitcoin. I say longtime, I think I started in like 2014. But, yeah, and then I ran into an account that I forgot I even had, that had a little less than a half a bitcoin in it, because I'd sold all of it. Yeah.
Matt DeCoursey: It's a pretty good thing to find, right now.
Rachael Qualls: Right?
Matt DeCoursey: It's almost like finding a used Honda Civic in your garage.
Matt Watson: It's sure ... It's a lot better than finding a couple of nickels under your couch, right?
Rachael Qualls: I know. I was like, that is fantastic. And then I promptly sold it.
Matt DeCoursey: Yeah.
Rachael Qualls: Yeah.
Matt Watson: Well, I held onto mine, so, I don't know.
Rachael Qualls: You did? Well, I have, again, other accounts that I'm still holding onto some, but ... So, if you're investing in bitcoin ... Why did I invest in bitcoin in 2014? Because I believe in the concept of the long term tale of it. Whether or not I ever made money on it, I wanted to be part of that story, so that's why I did it. It wasn't a short-term trading play for me, and never has been.
Matt Watson: I think some of us, we do things because we want to see them succeed, right.
Rachael Qualls: Yeah.
Matt Watson: So we invest in bitcoin because we want to see it succeed. Whenever I go to restaurants and I can pay with my phone, I always pay with my phone, because I think that should be the way it should always be done.
Rachael Qualls: Yes.
Matt Watson: Because I feel like it's more secure. One of these days, if I don't have my phone ... It's like someone can steal my credit card number, but they're not going to steal my phone, right. Some of these things, we just do them because we want them to work.
Rachael Qualls: That's almost all I do. I vote with my dollars, period. My investment dollars and my spending dollars.
Matt DeCoursey: I have a question for you, and I think that one of the things that Startup Hustle's about is the good, the bad, and the ugly. What's something that you really learned from, that you didn't do well? Maybe you still don't do it well, maybe you do, just something that we can-
Rachael Qualls: Oh, Matt. It's more than an hour.
Matt DeCoursey: Yeah, I get it ... that's something that you can pass along to the future founders or people that are just getting started?
Rachael Qualls: I didn't manage stress well. Every little bump in the road felt like the end of my business. So the older I've gotten and the more mature I've gotten, the more I've learned that it's just temporary. It's okay. It sucks right now. This doesn't have to be company or life. You just kind of have to roll with the punches a little bit more. I've gotten better at that.
Matt Watson: Startups are full of turbulence.
Rachael Qualls: Yeah, and it just damned near killed me. The stress of, and the weight of, taking investors. I took people's money. Like, what if ... ? You know. The weight of that was just tremendous.
Matt DeCoursey: It's a lot of responsibility. Yeah.
Rachael Qualls: It's an inverted pyramid, when we're talking about corporate structure. I'm the CEO, but I'm at the bottom, okay. I work for my employees, my investors, my customers. Again, the weight of that can be very, very heavy sometimes. My advice, and something I wish I did better, just, it's okay. It's all short-term. It's all going to be okay.
Matt Watson: Just got to figure out how to solve the problems and get past it, move onto the next problem, because you know there's the next one.
Rachael Qualls: Right. And how ... ?
Matt DeCoursey: Do you have a ... ? Mr Watson, do you have a, "I could have done something better," for this episode?
Matt Watson: Rephrase the whole question for me.
Matt DeCoursey: I tell you what, while we think about it, one thing I could have done better was getting GigaBook out there faster. Sat on it way too long, because I felt that I was busy doing other things that were profitable.
Rachael Qualls: What would have changed if you had gotten to market faster, though? Would you be farther along by now? Like, what's ... ? What would have changed?
Matt DeCoursey: I would have gotten better customer information and data, in order to be able to determine what was really important and what wasn't. Like, during that interim, we built things that were speculative, we hoped people would use, and then they didn't even care about it.
Rachael Qualls: You overdeveloped for the market.
Matt DeCoursey: Oh, yeah. Well, we were so busy doing other things. We had a couple of other businesses that were, for all intents and purposes, printing money, and it was easy to just say, "Oh, we'll get to that later. We'll get to that later." Well, next thing you know, one remarkably, overly complex platform later, we're still trying to untangle that knot a little bit, and make things a little easier.
Matt Watson: I think we have a little bit ... At Stackify, I think we have a little bit of a similar problem, where we kind of built four or five products, and maybe we should have built one product and focused on that. Having the four or five is a strength, at this point, but it took a lot longer to get here, than if we were focused on one thing.
Matt DeCoursey: Yeah, we were mediocre at five things and not great at any of them, and I think that if we would have just focused on being great at one or two things, it would have been a different story.
Well, while we sit here and think about all the things we could have done better, let's take a quick break, and when we come back, I'd love to talk to you about ICOs and your marketplace.
Rachael Qualls: Cool. Let's do it.
Speaker 1: Startup Hustle, with Matt DeCoursey and Matt Watson. Online at StartupHustle.xyz. We'll be right back.
Back to the show. Startup Hustle, with Matt DeCoursey and Matt Watson. Online at StartupHustle.xyz.
Matt DeCoursey: And we're back. Startup Hustle with Matt and Watson. Wait a minute ...
Matt Watson: Where are you going with this?
Matt DeCoursey: I think that's what you originally wanted to call the show, wasn't it?
Matt Watson: Well, we do need different names, instead of Matt and Matt, so I think if you're Matt and I'm Watson, that would be good. Then we could call it the Matt Watson Show.
Matt DeCoursey: I'm all for it. What do you think, Rachael.
Rachael Qualls: Oh, yeah. No, that's what you should do.
Matt DeCoursey: I think that really defines who's who. Or maybe, at least, the pecking order, here in the studio. Rachael, what is an ICO?
Rachael Qualls: An initial coin offering.
Matt DeCoursey: What the hell does that mean?
Rachael Qualls: Right? Nobody knows, but everybody's in.
Matt DeCoursey: Sounds about right, lately.
Rachael Qualls: Right? I think the way that we're leveraging tokenization of assets or things of value and creating a marketplace for them is the future.
Matt DeCoursey: What is tokenization?
Rachael Qualls: I just think we're trying to figure it out. Tokenization is ...
Matt DeCoursey: Speak to us as if we're five-year olds, or maybe even Labrador Retrievers.
Rachael Qualls: It's creating ... That's a really hard thing ... If you guys have anything better, while I'm trying to put it into layman terms.
Matt Watson: Well, I think what you're referring to is partly the blockchain, right? Because the blockchain becomes this distributed journal that everybody has access to.
Rachael Qualls: That's right.
Matt Watson: Is that part of it?
Rachael Qualls: But the token is the thing of value that the computer recognizes as part of this blockchain, right.
Matt Watson: Which is your private key, right? It's your private cryptography key.
Rachael Qualls: That's exactly right. So a block is a defined set of terms, and the token either locks them or doesn't unlock them.
Matt DeCoursey: So technically, for ... when we boil this down, that's like a share of stock, or something like that, but we don't call it that, because then it would need to be SCC compliant?
Rachael Qualls: Right. So that's where Venture360 is going, is that we track about $5 billion in assets of shares, of stock. People own things on our platform.
Matt DeCoursey: Most of that's mine, by the way.
Rachael Qualls: Yeah, we know, buddy.
Matt DeCoursey: Yeah, I know.
Rachael Qualls: Yeah.
Matt DeCoursey: You're welcome.
Rachael Qualls: You're welcome. You're welcome, society. So what we're doing is we're turning that into these tokens, but, really ... So we need understand that an ICO is not secured by anything. You don't own anything, other than that token, right. But as we move into the securities markets, we want people to own actual pieces of stock, and own companies, and then you're trading things of value, that have value. Right now an ICO doesn't have any value, perceived.
Matt Watson: So it's not backed by any sort of shares in the company, or voting rights, or ... ?
Rachael Qualls: Mm-mm (negative).
Matt Watson: So why the hell would somebody-
Rachael Qualls: Right?
Matt Watson: ... be part of it?
Rachael Qualls: Right?
Matt DeCoursey: Transferability.
Matt Watson: No, I know, there's some of them like ... it was like file sharing ... some file sharing company that did ICOs, and that's because the ICO was ... basically, you'd rent out of space on your computer, and you would receive these tokens, but then you could sell the tokens and the people who bought the space paid with the tokens or whatever. So it was kind of a currency. Like, that's a different sort of ...
Rachael Qualls: It's tied to value, right?
Matt Watson: That actually has a little bit of value tied to it.
Rachael Qualls: That's right. It's a different ball game when it's tied to some sort of value, than if it's ... we're doing a coin offering-
Matt Watson: But if I'm Stackify, and I want to give up 10% of my company and turn that part into coins or something, can I do that? Does that make sense?
Rachael Qualls: As far as right now, you cannot do that outside of, again, what something like Venture360 is building, the tokenization of securities that are then traded and SCC compliant.
Matt Watson: How would that work, then?
Rachael Qualls: On Venture360?
Matt Watson: Yeah.
Rachael Qualls: You'd click a button to tokenize your securities. Our technology would do that. We actually ... It's backed by Ripple, so it's a bit different than blockchain, but let's not go into the complexities of that.
Matt Watson: Okay. I've heard of Ripple before.
Rachael Qualls: Okay. Then that becomes ... and, basically, you define the terms of your market, so who can participate in your market. Because these are private companies, Matt, you might not want just anyone owning voting shares for your company, right. You're probably going to want to control access. You may not want people trading below a certain threshold. Maybe you don't want your stock to be able to tank. In Venture360, you will control your own market. Then you'll be able to decide whether or not you want to open that up to everybody to participate, or, again, have a very controlled environment.
Matt Watson: So your site would then act as the exchange?
Rachael Qualls: That's exactly right.
Matt Watson: Much like a bitcoin exchange but this would be an exchange of my stock, and it would be through Venture360.
Rachael Qualls: And more importantly, you can take that stock and put it on other exchanges.
Matt Watson: Okay.
Rachael Qualls: So, although we will be one of the first, we understand that it's most important to be able to have liquidity, and that comes from having more people participate in the market. You'll be able to take that share, you'll have a mobile wallet, or a wallet of some sort, and you'll be able to trade that share for a value of something else.
Matt Watson: Will they actually keep their private key, or whatever it is that kind of represents that-
Rachael Qualls: Yeah.
Matt Watson: ... or is it still more like, I have a cap table and I just know that Rachael owns three shares that are digital shares?
Rachael Qualls: Both. You, as an individual, will be vetted ... So, by vetted, we're going to ... Again, there's a lot of legal hurdles that go into doing all this, and doing it well, which is what we've been investing the last year or so into figuring out. So there's you, as the person, and then there's an issuer or a company. And the key and the lock that ties you two together, then as you trade that, so ...
Matt Watson: I would think the key to this would ... So, if we back up for a second. One of the benefits of publicly traded companies is the companies have to continually report how they're performing and a lot of the valuations are based on multiples of revenue, or multiples of EBITA, or whatever, right. So in this-
Rachael Qualls: Is it?
Matt Watson: Well, sort of, right.
Rachael Qualls: Is it a value-add? So, what-
Matt Watson: But in this scenario, well, how will these people know what the value of my company would be, is my point?
Rachael Qualls: It's actually the same, conceptually, as the public market. There's only one thing that affects value in the public markets, and it's investor psychology. How much is that other person on the other side of the exchange willing to pay you for that stock? Doesn't matter what the analysts say, these are short-term [inaudible 00:26:02]. But it actually doesn't even matter how the company performs. If there's a market crash, everybody's going down together because investors are-
Matt Watson: But if I'm buying a share of Stackify for $7, how do I know if I'm getting one-billionth of the company, or one-hundredth of the company, right? There's got to be more information, somehow.
Rachael Qualls: Yeah. Well, that's all in the platform.
Matt Watson: There's got to be like a market cap, or something that would help.
Rachael Qualls: Again, Venture360 started out as workflow process software, to build in these things. So not only disclosing your cap table or your percentage ownership, but also, performance and things like that are already built into our system.
Matt Watson: That's why I think that would all be very important. So, I could see Venture360 being kind of a closed ... not really closed, but kind of a centralized ecosystem where all that information lives.
Rachael Qualls: Right.
Matt Watson: There's an exchange, the information, all the information about my company. But how would that work if there are other exchanges? How ... ? Would all those other exchanges have to know my information?
Rachael Qualls: Yeah, so it's a bit of a conceptual thing, at this point, where you could take that stock that you own, Matt, of your own company, and trade it on some other exchange.
Matt Watson: Where I guess I'll have to grant access to that information on my site, somehow, or ...
Rachael Qualls: Yes.
Matt Watson: Then they would ... could get the information on my site, but they can't buy or sell-
Rachael Qualls: Uh-huh (affirmative).
Matt Watson: ... stock through my site. I'm going to guess, you'll probably have a plugin on my site that would allow it, would be my guess.
Rachael Qualls: That's right. [crosstalk 00:27:18].
Matt DeCoursey: I have a question. When you do an ICO, is that a one-time thing? Like you have to create a finite number of tokens, or coins, or whatever, that time. Are those able to be diluted or is ... ?
Rachael Qualls: I think it depends on how you set it up.
Matt DeCoursey: I just want to keep making tokens, over and over again. I think that's kind of like, that's what you were asking, like, you know, that understanding-
Matt Watson: I think that's a great question, right. We just are completing our first round of funding at Stackify.
Rachael Qualls: Congratulations.
Matt Watson: We've just [crosstalk 00:27:50].
Matt DeCoursey: Yeah.
Matt Watson: And I did survive it. The question then is, I think forward to the future, okay, a year from now, maybe we're going to raise a couple more million dollars, or whatever. But leveraging something like this, could I always be sort of raising, like, every couple of months, so it's not ... So it's kind of like an IPO, where they're releasing a little bit of stock to sell, right. It's not like the first IPO, but whatever that would be called, kind of secondary, third, fourth.
Rachael Qualls: Yeah, they do it all the time. That's how companies who are public raise money.
Matt Watson: To me, that would be a big value of this, of continuing to make that available to my investors, without it being such a giant process of a whole round.
Rachael Qualls: Exactly.
Matt Watson: Could that somehow eliminate the ... having to going and doing a convertible note, and trying to pre-sell the round, and doing all that crap? Could I just sell a little bit, kind of continually, through something like this?
Rachael Qualls: Yeah. I mean, so that's what we're going to be able to change and evolve. How private deals are done today, I think we're going to change drastically, because they're done as a result of a very inefficient market, where investors want to control things. They have to, because they don't have liquidity options. I think we're going to see things kind of turned over on their heads, as far as ... Again, more companies are going to get funded, hopefully more innovation will come to light, investors will be willing to continually invest because they're getting liquidity along the way instead of 10 years later. And it changes the game.
Matt DeCoursey: Well, that's the thing that's the most attractive to me, is we always talk about the companies that have just failed or are killing it. What about the 90% that are in the middle?
Rachael Qualls: Exactly.
Matt DeCoursey: I think, every time I talk to people that do investments or VCs, incubators, whatever, they're always talking about how their money's stuck in these companies that are doing what I call middling. You're just stuck in the middle. You're not really great enough to raise more money, and you're not really going away, and they get ... their capital gets stuck and they're not able to do new investments in other things. I like the idea of putting 25 grand into a company and being able to transfer that, because right now if I did that, my legal costs of transferring that-
Rachael Qualls: That's right.
Matt DeCoursey: ... might come up to half of that, just to sell it to someone else. Not to mention the effort of having to find someone to do it.
Rachael Qualls: Right?
Matt DeCoursey: Well, that's probably the most expensive part.
Rachael Qualls: Right.
Matt Watson: I think one of the biggest benefits of this, as you've described it before, would be ... and I think the whole reason you set out to do this is, as an early stage investor, say, a seed stage series A, that I could sell my equity to somebody else who's willing to come in and provide liquidity, or even liquidity to the founders.
Rachael Qualls: Yeah.
Matt Watson: Right? Because a lot of times, like at VinSolutions, it's on paper. At some point in time the company was worth like 50 to 100 million dollars. I didn't get paid very much. I had employees that made a lot more money than I did, and I didn't have the liquidity to sell ... like, $100,000 worth of stock would have been awesome at some point in time. I could see this being really valuable for that.
Rachael Qualls: Again, as a former VC, my job was to find the next greatest untapped market, and I feel like I found it in my own. As private equity, I think, is the next greatest untapped market.
Matt Watson: What is the actual ... ? Is there an actual name for this, yet? I mean, it's not an ICO, right. What is the name ... ? Does digital shares ... ? What is the name of this going to be?
Rachael Qualls: Yeah, right? Let's think it up today.
Matt DeCoursey: Are we going to say, this sounds like a good opportunity to name it?
Rachael Qualls: Right?
Matt Watson: Is there an industry name for this?
Rachael Qualls: No, it's never been done before. It's not like I'm following a template. This is what I ... This is what we do.
Matt Watson: I mean, one of the problems with going public for companies, is potentially they need a CFO, and there's a lot of overhead, and reporting, and dealing with investors, all this kind of-
Rachael Qualls: Dealing with the government, dealing ... yeah.
Matt Watson: ... all this kind of crap, right. How does that relate to the idea of having digital shares like this?
Rachael Qualls: In an ideal world, you ... And, again, going public is for much later stage companies.
Matt Watson: Is this going to be a little more like being on the pink sheets, where you're just like, "There's sort of information, there's sort of not information"?
Matt DeCoursey: There's something that I've encountered, because I've talked to a couple of people that are currently getting ready to orchestrate ICOs or something similar, and they're spending huge amounts of money to market the whole thing.
Matt Watson: Yeah.
Matt DeCoursey: I mean this is kind of like, you know, we talked about in previous episodes with your startup or your platform, just because you build it, doesn't mean they're going to come. You have to draw people to it.
Rachael Qualls: That's right.
Matt DeCoursey: Search ICO and Google's just loaded with ads for, "This is the next great ...," you know, this or that.
Rachael Qualls: Let's take it back down home for a second, instead of talking about public markets. How are most companies funded today? Through local investors. It's still-
Matt DeCoursey: I was going to say through founder deposits. In my world
Rachael Qualls: MasterCard and Visa, thank you.
Matt Watson: Yeah.
Rachael Qualls: But it's a-
Matt DeCoursey: Overly leveraged bad decisions.
Matt Watson: VC, Visa card.
Matt DeCoursey: Yeah. [crosstalk 00:32:37].
Rachael Qualls: Yeah, right. But it's a local up approach, okay. So you're going to get funded by friends, family, angels, and VCs who are local, and then they're going to bring you up-chain, in theory. Let's talk about how this could play out in the other 90% of companies, right, who are raising capital, need capitalization, and getting outside of banks. Let's ... you're going to eat at a restaurant. You really what they're doing is cool and novel. You open up your phone, you look at them on the exchange, you buy some shares. This is a local thing that most people can relate to, instead of talking about [crosstalk 00:33:06].
Matt Watson: I love that idea.
Rachael Qualls: Right.
Matt DeCoursey: I do, too, as an advocate of small and medium sized business.
Rachael Qualls: Done.
Matt DeCoursey: That's the thing, it's so difficult, and the whole process is so intimidating, too. I love the technology and the concept here. I have a question that I think is probably in the minds of some of our listeners. How is all of this secured? Meaning like, the technology. How do I know someone isn't going to steal my tokens?
Rachael Qualls: Right? We have partnered with a state-of-the-art security company, knowing that that's the best way to do this, was not to build our own developers and figure it out, on top of everything else we're trying to figure out the security. We partnered with a state-of-the-art security firm for just that, that I can't talk too much about, yet, but-
Matt DeCoursey: Sure, yeah.
Matt Watson: And it builds on top of Ripple, which is a known thing-
Rachael Qualls: Builds on top of Ripple.
Matt DeCoursey: And what's Ripple?
Matt Watson: ... which is a competitor to Ethereum-
Matt DeCoursey: Okay.
Matt Watson: ... and other blockchain, right?
Rachael Qualls: It's not even blockchain in its pure form. Again, it's arguably better, because you have some inefficiency issues, as those chains grow, that Ethereum is now ... and bitcoin. It's interesting, bitcoin, people think, because it's becoming so expensive to mine, but that was the point.
Matt Watson: Right.
Rachael Qualls: There are enough coins out there, that you shouldn't ... Mining new, becomes not as relevant.
Matt Watson: The problem with bitcoin is, for somebody to even facilitate a transaction, it takes hours and hours and hours of processing power, just to process the transaction. It's very inefficient in its ability.
Rachael Qualls: You mean, mining new or trading back?
Matt Watson: No, to execute a transaction. Like if I go buy something online-
Matt DeCoursey: Because it has to go to so many different places, and computers that are on, and just the bandwidth. Like, the whole, everything that goes into it.
Rachael Qualls: Interesting. I don't have experience with this in scale. Okay.
Matt Watson: Yeah, so when you go spend money with bitcoin, it doesn't happen instantly. It takes minutes, or hours, to process. And all of the miners are the ones that are also processing those transactions. So that is the big fundamental flaw with bitcoin, is it doesn't scale. It doesn't scale, at all.
Rachael Qualls: It doesn't scale with today's technology-
Matt Watson: No.
Rachael Qualls: ... but I do believe that ... you know.
Matt Watson: That's why there's been these forks to Segwit-
Rachael Qualls: That's right.
Matt Watson: ... and Bitcoin Cash, and some of them have been trying to fix these problems.
Rachael Qualls: It's so [crosstalk 00:35:11].
Matt Watson: The community, as a whole, is, I think, a little bipolar in how to solve those problems. But somebody like Ripple and Ethereum have come at it from a different perspective, and they have less baggage to carry around with them, so if they want to fix these issues, they can fix them, and they don't have this giant community that is carrying around on their back, I think.
Rachael Qualls: Yeah.
Matt DeCoursey: Do you know what's even better than bitcoin?
Rachael Qualls: Matt coin?
Matt DeCoursey: This Respect the Hustle T-shirt that we're going to give Rachael-
Rachael Qualls: Nice.
Matt DeCoursey: ... if she can beat Matt at rock, paper, scissors.
Rachael Qualls: Oh, yeah.
Matt Watson: And I've never won at rock, paper, scissors.
Matt DeCoursey: I would probably give it to you, anyway, but I just want to see if Matt really-
Matt Watson: Okay.
Rachael Qualls: That's not okay that I've never won, and then he's going to win with me.
Matt DeCoursey: We'll see. We'll see. I'm giving him a chance, here. Let's see where we go.
Matt Watson: All right. You ready?
Rachael Qualls: All right. Ready.
Matt Watson: Yes.
Rachael Qualls: No.
Matt DeCoursey: Congratulations, Matt.
Matt Watson: The streak is over.
Matt DeCoursey: Okay, I'm going to get ... You win the T-shirt but-
Rachael Qualls: See, case in point.
Matt DeCoursey: ... you should be a gentleman and give it to Rachael.
Matt Watson: All right. Here you go.
Matt DeCoursey: There you go.
Rachael Qualls: Thanks guys. You're so sweet. I'm wearing it.
Matt DeCoursey: If you want to get more information about Rachael's platform, if you want to participate in it as an investor or a founder, you go to venture360.co, or also, dot com.
Rachael Qualls: Yeah.
Matt DeCoursey: There's also an interview with Rachael and I, on the Matt DeCoursey YouTube channel from a while back, where we talked about some of the similar stuff. Is there other places where we can find some information about you and your business?
Rachael Qualls: You know, we have one of the largest pre-launch products right now, on Product Hunt, too. So you can get in on some good deals if you go through Product Hunt. And, you know, the great thing about Venture360 is our subscription's $60 a year right now. So you're going to get your own private capital raising platform for 60 bucks a year.
Matt Watson: Can you tell us a little more about what you're doing on Product Hunt?
Rachael Qualls: We're testing out some of the new features and products that we're launching, as far as the capital raising goes, through their new Ship [inaudible 00:37:12], so this is all new to them and us. I think we have about 800 subscribers pre-launch, which is pretty good. They get in on some special deals and perks for going through Product Hunt.
Matt Watson: What is your service, though, on Product Hunt, that you're ... ?
Rachael Qualls: It is the capital raising platform.
Matt Watson: Okay.
Rachael Qualls: Right.
Matt Watson: Okay.
Rachael Qualls: Yeah.
Matt DeCoursey: Yeah, we'll make sure to post links to all that on the StartupHustle.xyz website, along with some more information about you and links to Venture360.
Rachael Qualls: Cool.
Matt DeCoursey: Yeah.
Rachael Qualls: Well, it's been a pleasure. Thanks for having me.
Matt Watson: Yeah. Thanks a lot for having us and-
Matt DeCoursey: Thanks for educating us on so much of this stuff. We're trying to figure it out, but-
Matt Watson: I think we're slightly more educated and more confused, but, I think-
Matt DeCoursey: I'm in progress-
Rachael Qualls: That's how I feel, daily. That's all right.
Matt DeCoursey: I'm actually going to go launch like 15 to 20 ICOs. Or whatever we decided to call it.
Rachael Qualls: Just see what sticks.
Matt DeCoursey: Anyway, thanks for tuning in, everybody. We'll see you down the road.
Matt Watson: Thank you.

Rachael Qualls Startup Hustle Venture360

Startup Hustle Rachael Qualls Respect the Hustle