Investors Are (Almost) Forever

Cole Abbott

[0:00:10]

Wild and seemingly unrelated statistic. This is the, in the US the average marriage lasts eight years. So when you're thinking about your relationship with your investors, do you think your company's going to be around long? Longer than eight years?

Mark Abbott

[0:00:28]

Right.

Cole Abbott

[0:00:28]

There's a chance that your relationship with your investors could outlast your marriage, statistically speaking.

Mark Abbott

[0:00:33]

Statistically speaking, what AM I now, 36 years? So 36 years old in my marriage. You're married to your mother.Love you, Beth.

Cole Abbott

[0:00:42]

So, so, so the, the, the, the.

Mark Abbott

[0:00:46]

Point obviously is that you should be careful with regard to picking your investors, in particular the investors who are on your board. Because you know, there, there are investors and there are investors, right? All animals are equal. Just some animals are more equal than others. And so the, the, the people that sit on your board are very, very important relationships. In terms of our ideal stakeholders, you are far better off being pretty thoughtful with regard to who you have as a board member, an investor and a board member than not to state the obvious. And I think that there's a lot of reasons why some founders end up with, you know, sort of the best they can get because they really want the money. We could probably go down a different number of different rabbit holes in terms of the metaphors to go here. And if you can do it, and I would strongly suggest you should do everything you can to position yourself to be able to do this. Well, you should be very particular with regard to the investors that you bring on board, especially those who are going to be on your board, no pun intended. But even the investors who you don't bring on your board. I've seen many a founder deal with non board investors who are really, you know, a pain in their side. So generally speaking, you should be pretty thoughtful with regard to who you bring on as an investor and in particular, who you bring on as an investor that's going to join your board. And you know, there's a lot of different things that you can take into consideration. Having sat on dozens of boards and been, you know, the CEO with boards on numerous occasions, I still don't believe that I'm an expert on all of this. I have opinions, I have experiences, but I don't believe, I believe there are people who know this even better than I do. But I think when you, when you're thinking about bringing on investors, in particular investors who are going to be on your board, you want to bring people that make your life easier, not more difficult to state the obvious. And so there's a whole host of factors that goes into this, are they bringing something to the table as an example? Do they buy what you're doing? Do they deeply believe in what you're trying to do? Or are they just investing because they believe, you know, it could be a good outcome for them? You know, I think there are times when investors are attracted to the math of the business, but really haven't deeply thought through what you're really trying to do with the business. And so when that first moment, and it will happen, comes where there's tension, when there's stress, when things aren't going the way they were supposed to go, all of a sudden you start unpacking a bunch of stuff that you probably should have talked about before you ever took them on as an investor. So my personal bias is towards making sure that I've shared as much as I possibly can with prospective investors that they understand where I'm coming from, where we're going, what I value, what I don't value. I'm probably guilty of being over communicative and oversharing because I do not want to end up in a like, wow, we're totally incompatible. What you want me to focus on, what you want our company to care about right now is not what I want to focus or want to care about right now. You know, if I had an investors that wanted us to be generating, you know, enormous profits right now, when we have so much more to invest in, there would be major league tension if you're fortunate. And I would argue that even if you're not so fortunate, you need to be really particular, I think, with regard to your investors and especially the investors that end up on your board.

Cole Abbott

[0:05:01]

And to pull from the previous analogy, right. There's the element which we don't, we're not going to get into because then that's everything. Right. Of putting yourself in the position to be fortunate.

Mark Abbott

[0:05:11]

Right?

Cole Abbott

[0:05:12]

Right. Making yourself worthy of that relationship.

Mark Abbott

[0:05:15]

Successes. You know what luck is for those who have prepared to take advantage of it. Right.

Cole Abbott

[0:05:20]

And it's the same thing like if you go and you just think that you deserve a great mate for no reason. Right. You're not putting anything into it and you're not putting yourself be the person who deserves that thing. That's not going to go well for you.

Mark Abbott

[0:05:33]

Right?

Cole Abbott

[0:05:33]

Right. So the same dynamic there. But when you do, you are in the situation and you're trying to discern whether the relationship is good sort of in the early stages of that relationship, what are the key things to look out for.

Mark Abbott

[0:05:46]

Let's just focus on what we Talked about in last session or last, you know, podcast, which is Forever Agreements. Right. Do they buy into, like, what you view as the soul of this thing that you're building? Right. If there's a fundamental disagreement on any of your Forever Agreements, that's probably not a small issue.

Cole Abbott

[0:06:08]

And that's something you should have thought through before you get into this room.

Mark Abbott

[0:06:12]

Yeah, right. Yeah, yeah.

Cole Abbott

[0:06:13]

It's like you don't go into the relationship to figure yourself out.

Mark Abbott

[0:06:16]

Lots of people go into relationships, figure themselves out.

Cole Abbott

[0:06:20]

Well, they don't really do anything.

Mark Abbott

[0:06:21]

Right. Or not. Right.

Cole Abbott

[0:06:23]

Well, the same with the investors. Like, if it looks good on the paper. On paper looks great, right?

Mark Abbott

[0:06:27]

Yeah, yeah.

Cole Abbott

[0:06:28]

And if you don't want to go any. Right. We're speaking to investors now. It's like you probably should do a little bit more digging to make sure that the soul looks good. The Forever Agreements are sound and in line with what you believe. Yeah. And the numbers look good.

Mark Abbott

[0:06:41]

Yeah. I mean. I mean, this seems like mom and apple pie, but, you know, you shouldn't be talking to investors unless you have a decent sense for what you're doing. Right. How you're going to be the best at what you do, what the major guardrails and or North Stars or Northern Constellation is. Make sure that you're all aligned on that stuff. Because, you know, the chances are that if it's a decent investor and you don't have these answers, you're going to fail the interview, the first interview with them. Right. They're gonna be like, you know, what the heck? Right. This is, you know, I'm investing in some amateur. And it's interesting, too, because, you know, back to we. We almost always talk about stage of development. If you don't have a decent. Let's just say that, you know, you start to work on your Forever Agreements even, you know, before you do any work, and then maybe you get into stage one and you're in. You're really proving product market fit. I think it's pretty. Dangerous is probably the right word. It's either dangerous or naive. Reckless or reckless. To be going out and raising money when you don't even know what the hell you're doing. That's just not right. Reckless is a good word. Right?

Cole Abbott

[0:08:03]

Yeah.

Mark Abbott

[0:08:05]

So, yeah, I think.

Cole Abbott

[0:08:06]

I think that you're gonna attract certain investors that aren't going to be, you know, top tier, you could say.

Mark Abbott

[0:08:13]

Right.

Cole Abbott

[0:08:14]

With that sort of thing. Right. So then now you're into a relationship with that, and then that's not good for either party.

Mark Abbott

[0:08:19]

No. No, because you're now, you're, you're now into a, a version of a marriage that's built on, you know, nothing. Right. Nothing concrete, nothing substantial. There's nothing that you can point to when you run into tension. And there will always. Right. Meet moments where there's tension because there's no, you know, world universe where you go from an idea to exit and it's all, you know, roses and parades.

Cole Abbott

[0:08:50]

And you're more likely to run into tension and you're less well equipped to handle it when it comes.

Mark Abbott

[0:08:55]

Yeah. And, and you don't even have frameworks to say, hey, I thought we talked about this. Or hey, this is what, you know, we've been working on. Hey, this is the agreements we've had. Back to agreements based relationships. Right. And, and, and if, and they're right, you know, and if they're decent humans. Not all of them are. Yeah, right. If they're decent humans, they'll say, you're right. And now you can have a, a healthier conversation than if. Then it's like, well, you never talked about this. You never said we were going to do this. You never said we're. You cared about that. You never said any of these things. And now all of a sudden you're bringing these things up and that's a hard playing field to be on when there's no fundamental set of rules or set of understandings or you don't even know whether you're playing pickleball or volleyball. I know, I'm mixing metaphors where you.

Cole Abbott

[0:09:43]

Don'T know if you're playing pickleball or going skeet shooting. Like, that's a, that's a bad one to mix up.

Mark Abbott

[0:09:47]

That's a bad one. I like that one even better. Yeah.

Cole Abbott

[0:09:49]

It's like, don't. You know what, you should know what you're doing. Don't, don't show up to pickleball courts with a shotgun. I haven't done it, but I don't imagine it would go well. Uh, so you're. We say investors are ideal stakeholders.

Mark Abbott

[0:10:02]

Yes.

Cole Abbott

[0:10:02]

Right. It's not just 100% source of capital. A lot of people go into this and like, oh, we just need money, we need investors. And then that's, that's the end of that thought.

Mark Abbott

[0:10:10]

Yeah.

Cole Abbott

[0:10:10]

Right. That's how the relationship is viewed. But when we say ideal stakeholders, what do we mean by that?

Mark Abbott

[0:10:15]

So first of all, ideal stakeholders are stakeholders who we believe we can develop a high trust relationship with. Back to character composing connection. Right. So character wise. That's pretty straightforward when we're having a conversation, you're being genuine with me or there's no hidden agendas. Right. And what you say is what you do. You know, intent is clear and so, you know, we're not lying to each other and all that good stuff. Right. So character's pretty straightforward. I'll pause. Does that make sense?

Cole Abbott

[0:10:51]

Yes.

Mark Abbott

[0:10:52]

Thank you. Competency, another really good one. Right. So I'm competent, you're competent. We agree that each other is competent in our particular domains. And so you're competent as an investor, you're competent as a board member. Maybe you're not totally competent as a board member, but maybe you have a decent breadth of competencies that you'd like to see in a board member. Right? Because no board member has all the competencies. Because you think about, you know, in boards, a lot of times you'll have someone who's really good on the financial side, someone who's really good on the strategic side, maybe someone who's really good on the brand sign, someone who's really good on the technology side, someone who's really good on the. Where the industry is going. Right. There's a bunch of different competencies that can be brought to the table. But generally speaking, each party is bringing a healthy level of competencies to, to that relationship. Complementary competencies make sense. And then connection gets into that last section, which is, you know, we're aligned on goals, we're aligned on values, we're aligned on what's important, we're aligned on what we're not going to worry about plus or minus, you know, this year, next year. We're aligned on, you know, whether or not we're going to lose money for a year, for a couple of years. We're aligned on, you know, just how we're pursuing the game that we're playing. We're aligned on strategy, right? And as I said earlier, we're aligned on, on forever agreements. And once again, I think I am certain on one end of the continuum of making sure that we're all aligned across these three things. I think I probably have seen enough over my career where I think it's really good to talk about this stuff and to be transparent about it and to turn these things, expectations into agreements in terms of the core things that matter versus probably the average, you know, person who goes out and raises money. But for me, I, I just, you know, from an ideal stakeholder perspective, from a character competency and connection perspective, I'd rather over communicate, over share, make sure there's Nothing major. That is going to be problematic. And if there is something that's major problematic, I'm lucky enough to be in a position where I'm not going to make that trade. Some people will make that trade. I would super encourage people to not make that trade to the best they possibly can because I think the probability that something is going to end up, you know, creating a lot of issues is not immaterial.

Cole Abbott

[0:13:48]

Kind of leads to. There's a cost to taking money and signing up for that in a bad relationship.

Mark Abbott

[0:13:56]

Right. Yeah.

Cole Abbott

[0:13:56]

It's metaphorically. It's like making a deal with the devil.

Mark Abbott

[0:14:00]

Right.

Cole Abbott

[0:14:01]

It's like you're going to sell your soul to the thing. And I don't think a lot. You see that a lot in particularly movies around the mob.

Mark Abbott

[0:14:10]

Yeah.

Cole Abbott

[0:14:10]

It's like, oh, yeah, you get money from it and it's all good and you're stupid and you're yelling, whatever. And it's like, oh, and then they try to kill you. That's great. Right. The whole movie.

Mark Abbott

[0:14:17]

Right.

Cole Abbott

[0:14:18]

Not that extreme.

Mark Abbott

[0:14:19]

Right.

Cole Abbott

[0:14:20]

Archetypically, it's pretty similar.

Mark Abbott

[0:14:21]

Right.

Cole Abbott

[0:14:22]

We see this in, in mythology, we see it in films and it's.

Mark Abbott

[0:14:24]

Right.

Cole Abbott

[0:14:25]

It's the same thing of like, oh, you just really want money right now and you're going to be inauthentic, whatever. And deal with the people that know they can take advantage of that.

Mark Abbott

[0:14:34]

Yeah.

Cole Abbott

[0:14:35]

And there are people that know that game within the legal bounds fairly well.

Mark Abbott

[0:14:40]

Yes, they're out there. Yeah.

Cole Abbott

[0:14:41]

Have you seen that in your experiences investing in companies or coaching, have you seen that people get taken advantage of strongly like that?

Mark Abbott

[0:14:51]

I mean, to the place where we're. A board member encouraged the founder, CEO to go do a bunch of stuff so that ultimately the founder, CEO not doing bad stuff, just going. And, and, and, and, and I'm trying to remember the use case here, but where they were encouraged to pursue a, a component of the strategy where the board member knew they trip up and then the board member came in and swooped up the entire company and took it over.

Cole Abbott

[0:15:26]

Seems pretty realistic.

Mark Abbott

[0:15:28]

I mean, this is this. I know the founder. Yeah, right. And then the stories about SO one. So now once you realize the devil's on the other side of the table right now, all of a sudden, you know, you find yourself in this really bad position and the devil has, you know, a bunch of stuff, including the devil now has been working, you know, the back channels with the other board members and painting you in a bad light. And it's just like someone, you, it's a horrible. So I'm trying not to use the expression, but, you know, when did you stop, you know, beating your children? Right. You can't answer that one in any way because their implication is you beat your children. Right. You say, I don't beat my children. Well, he just said you do. Right. And so now all of a sudden you can't, it's hard to refute all that. So the founder ends up getting themselves into a pickle. And then of course, you know, if, if the other board member gets the entire board members to sort of side with them. And now all of a sudden you don't even have the company to rely on. Right. To support you in refuting the acquisition accusations, which are not even, they're trumped up so that the, so the board member can end up owning your company. And so, you know, you don't, you can't even rely on your own company to back you. It's your company. Right. So, yeah, I know of situations where it gets, you know, you, you basically because all of a sudden one day the board member woke up and was like, whoa, this actually is huge. Right. This isn't just a five million dollar or ten million dollars opportunity. This is a billion dollar opportunity. And greed settles in and, and you know, and now the question is, you know, and I don't, I, I didn't have enough time to really get into all the details with this one founder. But, you know, the, you know, could the founder have done more research about this individual to see whether or not their corpse drilled behind him in his career? And you know, my, my gut is, you know, there probably are some bad stories back in the, in the history there because this isn't something, you know, that just all of a sudden materializes with a young board member. It's probably someone who's got some years behind them. And, you know, then you can get a whole conversation around, is this person ultimately a sociopath or a psychopath? Right. On your board? At the risk of stating the obvious, I would avoid putting sociopaths and psychopaths on your board, period of discussion.

Cole Abbott

[0:18:05]

It's a very wise point you just created.

Mark Abbott

[0:18:07]

Yeah.

Cole Abbott

[0:18:09]

So if you are in a situation where, you know, maybe you like the investor, like the investing firm, right. And the person they put on your board, right. You get the sense that they're a bit of a parasite, right. Affecting the system.

Mark Abbott

[0:18:24]

Yeah.

Cole Abbott

[0:18:25]

What do you do in that situation?

Mark Abbott

[0:18:27]

Right.

Cole Abbott

[0:18:27]

Because you don't want it to get out of hand where it's right. Infecting the rest of this, the rest of the board, and the company.

Mark Abbott

[0:18:33]

This is such a, like, very specific use case. And you'd really want to get into all the details, but, you know, sometimes, you know, maybe it's a junior person you can go talk to a senior partner and just say, hey, you know, can you help me figure out how to do a better job of managing my relationship with. With. With Joe? Right. And, you know, if you were going to go there and you didn't think Joe was a sociopath or a psychopath as an example, can you say, hey, Joe, you know, you got a issue here, right? Because do you tell Joe you want to have the conversation where you go over Joe's head? Right? You go over Joe's head, Joe's going to find out about it. Now you've hurt your relationship even further. Right? So there's a dance that needs to be played here. And, you know, I would advise, you know, someone who's in this particular situation to, you know, talk to someone who's pretty experienced about how to best navigate this, because there's a lot of facts that are going to play into what's the smartest thing to do in order to see if you can't make that relationship, you know, healthy again. It's unfortunate when you start to go down a path like that because for the most part, my experience has been that it's hard to reverse when a relationship sort of dips below a certain level. And, you know, it's just hard. You want to, once again, in the very beginning, make sure that, you know, you've. You've chosen a partnership, you know, partner a firm, know, a board member that, you know, plus or minus, there's a pretty darn good chance it's going to be a good partner, you know, for a long period of time. You may say, hey, I'm going to go into this back to the marriage in eight years. You know, I'm going to go into this, and it's three to four years, and then we're going to have an exit. Wow. I, you know, and I, we've talked about this in founders mode. If I would not play that game, right? Maybe you have a brilliant strategy that includes already understanding the exit and you know, exactly what you need to do to get from here to there. And you're highly confident you can get this done in three years. And I've seen this on numerous occasions where people, like, they have a very specific game they're playing and a very specific strategy, and. And they're just going to boom. Boom, boom, boom. And if they're boom, boom, boom and they're, and they're advancing in the way they thought they were going to advance, it's all going to be fine, right? And yeah, you know, it's a three year relationship and maybe, you know, you took a little bit of risk with that, with that particular firm, but, but the probability was very low that it was going to be in, you know, an eight year relationship. That's the outlier in my opinion, based upon everything I've experienced in my career. I think you need to be going into any of these things saying to yourself, what happens if this is a ten year relationship? Right. Am I confident that I can be with this group of people, with this group of investors or with this particular investor and this particular board member? What, what's my level of confidence that I, that that we can do this and, and, and have a decent relationship for the next 10 years? Because you know, the economic cycle historically has been plus or minus 10 years. And there's two years that are good to great to be doing a transaction. There are two years to be, that are horrible to be doing a transaction. I mean just, there's no market, there's no appetite for risk. And then you got, you know, four to six years that it's in the middle. And so, you know, sometimes you just can't control the things that are, you know, the marketplace, the economy, et cetera. And so sometimes, you know, you are sitting there for 10 years now the question is, is, you know, can you, is this a good relationship for plus or minus 10 years? Now, as you know, most funds are trying to, you know, the entail of the fund is 10 years. So most funds are trying to get in and get out within 10 years and on average they'd love to be in and out within three to five years. But given what everything that's going on in the capital markets these days, the IPO market's very, you know, sort of, it's not very healthy M and A markets, they tend to be not particularly attractive. And so a lot of times if you're forced to sell in a market like we have today, you're going to be selling at a not inconsequential discount. So once again, you know, I think you should go into these games thinking it's going to be a, you know, it could be up to 10 years.

Cole Abbott

[0:23:21]

Are there any clear red flags when looking for investors?

Mark Abbott

[0:23:26]

Number one, they don't agree with your strategy. Number two, they're, they're telling you how to Run your company before they've ever invested in it. Number three, personality wise, you just like, you don't like hanging with them. Every single one of us has people that we actually work really well with. And then there's people that, eh, we're okay, you know, and then there's some people that just like. It's like, I don't know, I just don't work well with them. And so if you think that you're not gonna just have a good, healthy working relationship with them for personality quirks or something else, then I would, you know, I try not to take the money.

Cole Abbott

[0:24:09]

Well, it's like getting in a relationship with somebody. You want it to be something where the conversation is effortless and you enjoy it because it's. Communication is the biggest thing and it's unguarded.

Mark Abbott

[0:24:18]

Yeah. Right. Relatively speaking. I mean, you don't say stupid things. Right. Just whatever pops through your head. But you hopefully you don't even do that with your spouse. Right? Yeah, hopefully. Every now and then we're all guilty of oops. Reminds me of a joke which I can't share here. But it's relatively unguarded, it's relatively comfortable. It's back to character, you know, competency and connection. You know, a simple word is. Is respect. You know, you, you respect them and you feel like they respect you and. And you have a sense for why. You know, are there other red flags.

Cole Abbott

[0:24:56]

Or is it mostly just come down to the respect thing? Which come.

Mark Abbott

[0:25:00]

Right.

Cole Abbott

[0:25:00]

That's forever agreements, a strategy. They're not telling you to run your business. Right. They respect what's yours and they want to help you do that. They want to advise you and. And so on.

Mark Abbott

[0:25:10]

Because it's funny, because it almost all falls onto respect.

Cole Abbott

[0:25:12]

I think there's respect, which is.

Mark Abbott

[0:25:15]

But there's a state. They respect you as a human.

Cole Abbott

[0:25:17]

Yeah. These are people that you respect and it can respect you, but you just don't get on with. Well, right.

Mark Abbott

[0:25:23]

That.

Cole Abbott

[0:25:23]

That can be a thing.

Mark Abbott

[0:25:24]

That can be.

Cole Abbott

[0:25:24]

So I think between those two.

Mark Abbott

[0:25:26]

Between those two. Yeah.

Cole Abbott

[0:25:27]

If there's respect on across. I mean if we wouldn't just make it really explicit. Respect across you as an individual.

Mark Abbott

[0:25:33]

Yes.

Cole Abbott

[0:25:33]

Your forever agreements for the company, your strategy.

Mark Abbott

[0:25:36]

And then. Right.

Cole Abbott

[0:25:37]

I think how you run the business, I think would fall under those three.

Mark Abbott

[0:25:40]

Right.

Cole Abbott

[0:25:40]

So those. And then the personal side of things that you get on with them. Well, yeah. And the conversation's easy and you trust and.

Mark Abbott

[0:25:47]

Right.

Cole Abbott

[0:25:47]

Goes back to respect.

Mark Abbott

[0:25:48]

Yeah.

Cole Abbott

[0:25:49]

But you're not guarded around them conversationally.

Mark Abbott

[0:25:52]

Right.

Cole Abbott

[0:25:52]

And that goes both ways. Right. You know that if they want to say something to you, it's like, okay, yeah, they'll say it. And you trust that they're being authentic and genuine and sincere with what they're saying.

Mark Abbott

[0:26:01]

Yeah.

Cole Abbott

[0:26:01]

And Right. That goes both ways.

Mark Abbott

[0:26:03]

Yep.

Cole Abbott

[0:26:04]

And as humans, we're mostly. Most of us are pretty good at having a good feel for the social side of things intuitively. And most. I mean, you could, obviously, we could do the research on this, but most founders, based on personality tendencies of founders, Myers Briggs wise.

Mark Abbott

[0:26:25]

Right.

Cole Abbott

[0:26:25]

They're gonna have a stronger intuition.

Mark Abbott

[0:26:27]

Right.

Cole Abbott

[0:26:27]

With that sort of thing.

Mark Abbott

[0:26:28]

Yeah.

Cole Abbott

[0:26:28]

For our audience. Right. It's like, trust your gut on that.

Mark Abbott

[0:26:31]

Right, right.

Cole Abbott

[0:26:31]

Trust your gut. Respect.

Mark Abbott

[0:26:33]

Yeah.

Cole Abbott

[0:26:33]

And you know, for starters, that's a good place.

Mark Abbott

[0:26:36]

Yeah. And, and, and then going back to. We love our, our assessments. Right. You go back to, you know, Ocean Big Five, and then that they respect the fact that you have a. You're a little bit disagreeable. Right. And you are going to fight for your positions and hopefully you respect them enough to listen, even though you disagree. Because you may find that strong opinions, weakly held or, you know, mildly held or whatever they are, that every now and then, you know, you'll change your mind because they brought a perspective that you frankly didn't have, whether it's from experience, whether it's just from an intuitive sense for something that, you know, that you just write. Hadn't.

Cole Abbott

[0:27:21]

Hadn't considered that complement your biases.

Mark Abbott

[0:27:24]

Well, exactly.

Cole Abbott

[0:27:25]

And I. You want to find those types of people, too. That's good for you.

Mark Abbott

[0:27:29]

Yeah.

Cole Abbott

[0:27:29]

You want to be challenged. You don't want to just be like, oh, this is great, here's 20 bucks. Obviously not $20, but, you know, whatever. When it comes to a good metaphor for. This would probably be like an online dating profile. So you, you don't. You want to put yourself out there as you are. You want to put your best foot forward, obviously.

Mark Abbott

[0:27:48]

Yeah.

Cole Abbott

[0:27:48]

But you want to put yourself out there as. As you are so that you attract the right person. And so when it comes to the investor side, how do you. What things should you not do when pitching investors?

Mark Abbott

[0:28:01]

Well, obviously, you shouldn't be bullshitting. There's temptations here for lots and lots of people. Right. But don't say something that's not true. Right. Don't even get it. Let it get kind of a little bit into the gray zone, in my opinion. But once again, I'm a harder person than I think the average bear on this one. Right. If you don't Know the answer to a question. Say you don't know the answer to a question. Right. You know, if you make a statement and you know it's not true. Right. Because that'll happen on occasion, right. Where you maybe you embellish it a little bit. What I. And I've been there. I don't do it very often. Right. But I'm like, you know, that's a bit of an embellishment. Let me, let me retract it. I hear it come out of my mouth. I'm like, that's, you know. You know, I think it could be perceived as more than I wanted it. My words weren't perfect. Right. And so you pull it back a little bit. But, you know, this gets back to trust. Right. Because, you know, if you say something and they know that, like, that was not true or an embellishment, and you just sort of were, you know, we're just trying to get. Get the win. And then later on, I mean, I always, you know, it's back to white transparency. Right. You know, just be transparent about all this stuff and say what, you know, say what? You don't know. If you, if you think something but you're not sure, say, hey, this is, this is what I think. I'm not sure, you know, this is my instincts on this stuff, but just don't get yourself into a position where they're gonna come back and say, what? What? Wait a second. Right? That's me. But I think it's pretty good advice.

Cole Abbott

[0:29:42]

Most of this advice applies beyond this stuff.

Mark Abbott

[0:29:45]

Yeah, yeah, yeah.

Cole Abbott

[0:29:46]

But, but that's a, that's useful because most people have experience in other things, and I don't think you're gonna have your first type of experience with this with investors. Right?

Mark Abbott

[0:29:55]

No.

Cole Abbott

[0:29:55]

So take what you've learned in those things.

Mark Abbott

[0:29:58]

Yeah. Whether you, whether you learn this through dating or you learn this through just.

Cole Abbott

[0:30:03]

Partnering with, in, in a company.

Mark Abbott

[0:30:05]

Right. Yeah.

Cole Abbott

[0:30:05]

Who you're partner with.

Mark Abbott

[0:30:06]

Or, or. Or. Yeah. In a. In the workplace or. Whether you learn this with your, with your friends in school. Right. You, you, you are learning these lessons.

Cole Abbott

[0:30:16]

Very early in life that any sort of voluntary relationship.

Mark Abbott

[0:30:19]

Yeah.

Cole Abbott

[0:30:20]

Right.

Mark Abbott

[0:30:20]

Yeah.

Cole Abbott

[0:30:20]

Family is a different thing.

Mark Abbott

[0:30:22]

Right.

Cole Abbott

[0:30:23]

It's not as the same dynamic.

Mark Abbott

[0:30:26]

Yeah.

Cole Abbott

[0:30:26]

But you want it to set the expectations early. Right. Being transparent so the relationship stays healthy over time. What are the things that you want to keep in, to be aware of during the relationship? So you're in there to help. It's healthy. You trust everybody. Respect. But just like any relationship, you still have to Put things in. Right. You still have to put effort in.

Mark Abbott

[0:30:52]

Yeah.

Cole Abbott

[0:30:52]

And, you know, it's like the marriage. So you're like, you never stop dating kind of a thing.

Mark Abbott

[0:30:56]

Right.

Cole Abbott

[0:30:56]

Always putting that in. What are the things that you need to be aware of, look out for during the relationship?

Mark Abbott

[0:31:02]

Well, one of the adages that's, you know, been around forever. Right. Is the old expression of good news travels slow, bad news travels fast. Right. So as soon as something happens that, you know is bad news for you, the company, and by definition, then the investor, you want to, you want to get in front of them and just say, hey, this just happened. And you may not have all the answers yet. You may say, hey, this just happened. I don't know what's going to go, what the next step is, or the next step, or the next step is, or. We're still trying to figure this out. We're not sure, you know, what happened or why, and we're still digging, et cetera. I'm always. And I, and this has come from years and years of experience, but I've found, I've found it so much healthier to communicate relatively swiftly within 24 hours, typically. Right. You know, if, if you wait a week or two weeks to talk to someone about something that's happened, that's, That's a red flag, you know, sometimes I will, I'll let them know, like that day. But almost always within 24 hours, if there's, you know, some. Something that I think they, they should be aware of is taking place or has taken place. You know, it's a, it's, it's, it's a, it's either a text or it's an email, and it's. If you want to chat, let's get on. And then, you know, whether it's a 7:00am or a 7:00pm or a 10:00pm conversation, you know, as a, as, as a founder, as a leader, you. You need to make the time for that conversation. You owe it to them, is my perspective.

Cole Abbott

[0:32:40]

And what happens if you don't do that?

Mark Abbott

[0:32:42]

It harms the fabric of the relationship. Right. Worse is, even worse is if they find out about it from someone else. Right. And then it starts to, you know, you're like. They're like, well, you know, you know, wtf, right?

Cole Abbott

[0:33:00]

There's trust. And then you also lose control isn't the right word, but you lose control over the narrative.

Mark Abbott

[0:33:05]

Yeah.

Cole Abbott

[0:33:06]

Right. So they're gonna create a story in their head as to what happened.

Mark Abbott

[0:33:09]

And, and sometimes, you know, and I'm sure some Much smarter person than I am can explain all this, but it's like neuroplasticity. Right. That negative thing happens and it's in their brain and it's, it gets wired in there a little bit. Right. And they don't forget it. Right. They will not forget that feeling. And, you know, it's a little, it's, it's like a little thing that's out there forever, you know, or for a long time.

Cole Abbott

[0:33:43]

There's a little bit of a half life thing to it, probably.

Mark Abbott

[0:33:45]

Yeah.

Cole Abbott

[0:33:46]

I mean, it's one of the. It will take way, way more effort to undo the thing.

Mark Abbott

[0:33:52]

Yeah.

Cole Abbott

[0:33:53]

Than it takes to just communicate.

Mark Abbott

[0:33:55]

Yeah.

Cole Abbott

[0:33:56]

Effectively. Yeah. Right. And sometimes it's. You don't know what's happening and it's like, that's still not a good thing. Right. You want to lean into those challenges, not try to run away from it and hope it resolves. Because if it's bad news like that, it's probably not going to happen.

Mark Abbott

[0:34:10]

Yeah. Right.

Cole Abbott

[0:34:11]

It's just only going to get worse until you lean in, deal with it.

Mark Abbott

[0:34:15]

Yeah. And sometimes this is a window for the, for the investor. Once again, it depends on how sophisticated investor it is. Right. But sometimes these, these, these negative moments are a window into the sort of the soul of the founder.

Cole Abbott

[0:34:31]

Definitely is. Right. It's a test and you could see what happens. And yeah. If you handle it well. Right. Okay. Bad thing happened. But you win in the eyes of the investor.

Mark Abbott

[0:34:40]

Right.

Cole Abbott

[0:34:41]

Yeah.

Mark Abbott

[0:34:41]

Because you were, you were calm. Cool collective. You did the best you could with the moment that you were in. You communicated really well. I know I've mentioned this in one of the past podcasts, but, you know, we had a relationship with a, with a private equity sponsor. They were out of San Francisco, I remember very well. And we had, you know, lent to several of their companies and invested alongside of them at least three, maybe five companies. And so we, we'd had a relationship for at least five years, plus or minus. And, you know, I was meeting with them and asking them how our relationship is, and he's like, you know, I think it's good, but we don't really know. And I'm like, what do you mean, we don't really know? It's never been tested. And, you know, part of me was like, dude, right? That's like, we don't get any credit for all the work we've done. But, I mean, I understand where he was coming from.

Cole Abbott

[0:35:30]

It's easy when things are stable.

Mark Abbott

[0:35:32]

Yeah.

Cole Abbott

[0:35:32]

And things are, you know, good days.

Mark Abbott

[0:35:33]

But yeah.

Cole Abbott

[0:35:34]

It's not, that's not what makes the relationship.

Mark Abbott

[0:35:37]

Right.

Cole Abbott

[0:35:37]

It's like how you handle the bad ones.

Mark Abbott

[0:35:38]

Yeah. Back to the, you know, the very beginning of this conversation, to the extent we've laid out the things that matter and we've behaved consistently and we've all honored and respected the things that matter and something happens that was not, you know, has nothing to do with this. It's just life is full of, you know, it's inevitable. Yeah, it's inevitable. So, so, so now. Okay, so now show me what you got.

Cole Abbott

[0:36:03]

You're gonna have face those things beforehand. And so. Right. It applies to everything else in business. Right. If you're a founder, co founder, something that happens, like. Oh, communicate that there.

Mark Abbott

[0:36:12]

Yeah. Right.

Cole Abbott

[0:36:13]

And get into good habit of when stuff goes wrong.

Mark Abbott

[0:36:16]

Yeah.

Cole Abbott

[0:36:16]

You know how to at least how you react to that and how to conduct yourself.

Mark Abbott

[0:36:20]

Yeah. And, you know, this is one of those moments in the discussion like this where you say, and you, you mentioned this earlier, what we're talking about doesn't.

Cole Abbott

[0:36:29]

Just apply to founders, it applies to anybody.

Mark Abbott

[0:36:31]

It applies to anybody.

Cole Abbott

[0:36:32]

Right. It's a universal idea framed as founders to investors.

Mark Abbott

[0:36:37]

If you're watching this and you've just graduated from college or you've just started your first job. Right. All this stuff is highly. Is just as applicable. Yeah.

Cole Abbott

[0:36:47]

It just depends what stage you. You're in.

Mark Abbott

[0:36:49]

Yeah.

Cole Abbott

[0:36:50]

Are you trying? Because you could do this all the way down to you want to have a healthy relationship with yourself. There's a lot of people that don't have.

Mark Abbott

[0:36:57]

Yeah. That one of our seven types of relationships got.

Cole Abbott

[0:36:59]

Yeah, it's right there.

Mark Abbott

[0:37:00]

Yeah.

Cole Abbott

[0:37:01]

So you say you're going to do something, you go, you do the thing.

Mark Abbott

[0:37:04]

Right.

Cole Abbott

[0:37:04]

You earn that trust with yourself. You keep your things in order.

Mark Abbott

[0:37:07]

Right.

Cole Abbott

[0:37:08]

Within your own personal domain. And then. Right. That extends to your. Probably your friends and then your colleagues. Right. And, and then the company. And then.

Mark Abbott

[0:37:19]

Right.

Cole Abbott

[0:37:19]

You're just mastering higher levels of social complexity.

Mark Abbott

[0:37:23]

Yeah.

Cole Abbott

[0:37:23]

Right. And that's the development there. But it's the same idea. It's just how many people are involved, who's involved and so on.

Mark Abbott

[0:37:32]

Right.

Cole Abbott

[0:37:33]

And then this is just a little bit different because. But, but like a marriage, right. There's legal implications here.

Mark Abbott

[0:37:39]

Yes.

Cole Abbott

[0:37:39]

And then beyond a marriage, it's legal implications for a large group of people.

Mark Abbott

[0:37:44]

Yeah. Right.

Cole Abbott

[0:37:45]

The, the divorce is, it's not as simple.

Mark Abbott

[0:37:49]

At the risk of dealing with two different sort of fact sets. You know, maybe in a divorce you lose half and you screw this up with your company. And your company fails, you lose it all.

Cole Abbott

[0:38:06]

And everybody else in the company.

Mark Abbott

[0:38:07]

Right. And investors and, and, and you don't just lose money, but maybe you lose your reputation.

Cole Abbott

[0:38:14]

But you could argue.

Mark Abbott

[0:38:15]

Yeah.

Cole Abbott

[0:38:15]

You're always the same thing with a divorce, too. But if that falls apart.

Mark Abbott

[0:38:20]

Yeah.

Cole Abbott

[0:38:20]

Both scenarios, Both scenarios could get very nasty.

Mark Abbott

[0:38:25]

Exactly.

Cole Abbott

[0:38:25]

But it's just right, you have a responsibility to all of your ideal stakeholders in the professional world. Right. If this goes wrong.

Mark Abbott

[0:38:33]

Yeah.

Cole Abbott

[0:38:33]

And there's a huge risk that you assume as a founder.

Mark Abbott

[0:38:37]

Yeah.

Cole Abbott

[0:38:37]

As everyone knows, that's why there's a potential reward there. But the investors know that too.

Mark Abbott

[0:38:42]

And. Right.

Cole Abbott

[0:38:43]

They're hopefully going into this trying to steer you in the right direction because. Right. That maximizes your experience here as well as theirs. And there's a return on investment there and then so on. But right. At the end of the day, it's like we're trying to help each other. This is supposed to be a mutually beneficial relationship.

Mark Abbott

[0:38:59]

And you would like going back to the very beginning here. Right. You would like to have. I would like. I can only speak for me. I would like to have board members who I can be completely unguarded with. And if I have some insecurities that are playing at a certain moment in time. Right. Could be insecurities about what I can't see. It could be insecurities about the level of experience needed for this one particular thing. Right. Whatever it is, that instead of not talking about it, instead of hiding, instead of pretending it doesn't exist to be. And, and sometimes maybe, you know, maybe you need a coach instead of, to talk about this with a coach first instead of a board member. Right. But you need someone to sort of talk about this with so that you can think out loud and, and, and have. Yeah, that makes sense. No, you're being, you know, you're being silly. It's not a big deal. But just have that outside perspective because as we've said numerous times. Right. You cannot read the label from inside the jar. And when you move into one of these moments, you are in the jar.

Cole Abbott

[0:40:06]

And you want somebody who sees that as like, oh, I'm glad you brought that up. Let's address that.

Mark Abbott

[0:40:10]

Yeah.

Cole Abbott

[0:40:11]

And not like, oh, you're being weak. I'm going to take advantage of that.

Mark Abbott

[0:40:13]

Exactly. I'm, I'm not. You're not only in the jar, but I'm going to put the lid on it. Right. I'm going to screw it really tight. I'm going to put you on the table here and I'M just going to watch you run out of air and.

Cole Abbott

[0:40:23]

Turn the lights off and just let you.

Mark Abbott

[0:40:25]

Yeah.

Cole Abbott

[0:40:26]

Die in the dark. Pleasant thoughts.

Mark Abbott

[0:40:32]

No, but I, hopefully that makes the point in here. Right, which is. Yeah, you know, it's important that when you entering these relationships that you do your best to go find relationships that you believe will be good relationships for you for a very long period of time, and that there's a foundation to that relationship that's genuine. Right. And, and, and that foundation is respect and competencies and some of the things we've already talked about.

Cole Abbott

[0:40:59]

So how do you know that if you're in the right stage of your business to enter into this specific relationship? Right, because there's times where it's like, oh, do I just want a partner in this? Should I need a coach? Am I ready for investors? What do you need to feel confident in that you're ready to seek investors?

Mark Abbott

[0:41:18]

There's no right answer.

Cole Abbott

[0:41:19]

Obviously.

Mark Abbott

[0:41:20]

We're all uniquely different. Every single one of these situations is, is, is unique in and of itself. But, you know, it's risk, reward, as we've talked about. And, and, and, and there's market risk and there's product risk. Right, Meaning technology as well. There's execution risk. And so, you know, at what point have you evolved the business to the place where you are comfortable knowing everything you know about yourself, that you're ready to talk to people about the company, you understand where the company is, you understand where it's going. You can articulate the levels of risk that are associated with the market with, you know, with execution risk, technology risk, if that exists. Right. Product evolution risk, et cetera, et cetera. And, and you're going to have to make a gut call, part of the reason why, you know, you probably have a lot of founders who are intuitive. You're going to have to make a gut call as to when you are comfortable going to the market, talking about these things. And, and, and that you're confident that if you do take the money, there's a better than not chance, right, that you're going to be able to succeed. Now, if, you know, you could say to people, hey, by the way, this is Lucky Palmer. Supposedly this is what he said, you know, to his initial investors, hey, there's a good chance we can lose all this money, right? There's a really good chance we can lose all this money. But on the other hand, right, I think we could potentially create something extraordinary. And, you know, here are the reasons why we could lose all this money. That's A really super healthy way of approaching it and going into it and then saying, okay, and by the way, here's what I know and here's what I'm really good at, and here's what are. I need help, and here's how I need your help in helping me address the areas where I need help, whether it's hiring people or whether it's strategic issues or access issues or whatever it is. And, you know, just plus or minus feeling like you're going into this game with a decent chance of winning.

Cole Abbott

[0:43:33]

And Lucky had an interesting experience with his early investors.

Mark Abbott

[0:43:37]

Yeah, yeah. Which, yeah, that's.

Cole Abbott

[0:43:39]

That's fuel for him now.

Mark Abbott

[0:43:41]

But, yeah, yeah, it's. It's a great story. Yeah.

Cole Abbott

[0:43:44]

Before we wrap up.

Mark Abbott

[0:43:45]

Yep.

Cole Abbott

[0:43:45]

Are there any other key things you'd like to touch on?

Mark Abbott

[0:43:49]

You know, I think there's a chicken in the egg with this whole game in that we're talking about, you know, we're talking about one of seven ideal stakeholders. The reality is, is that to attract and retain all seven types, you do need to start getting your act together and having conviction around what you're doing, where you're going, how you're going to get from here to there. And there is no perfect answer as to, you know, which set of ideal stakeholders you start to work on. And the reality is you will be working on several of them. You'll probably be working on hiring employees. You know, you may have friends and family who come in as investors early on. Right. You're obviously working on acquiring, you know, employees to help you or partners to help you with this whole thing. And to do that, I think you need to have your act together across a bunch of different dimensions, including, obviously, the forever agreements, and not just the forever agreements, but where you think the world's going to be in five to 10 years and why you think you're, you know, either uniquely or extraordinarily well positioned to be creating something that's best in class, that's. And that's fundamentally what strategy is all about. Right. Strategy is about we're the best at doing something. Right. It could be we're the best at serving, you know, your local H vac market. Right. Because you figured out how to create a really good system for marketing, for customer service, for hiring and developing technicians, et cetera. And so, you know, the game is to become one of the best, if not the best, in whatever field of business you're pursuing. And the reality is, is that ultimately you will win through vision, you'll win through competency. You'll win through perseverance, you'll win through anti fragility, you'll win through constantly learning and, and so getting your act together and finding something that's willing, you're willing and you know, you're passionate about pursuing, finding something that you want to do, generally speaking, for five to 10 years that you're willing to be highly committed to, and then finding the partners that'll help you get the people you need, the ideal stakeholders you need for that particular stage of development. There's no right answer in terms of how the dominoes fall, but ultimately, whether it's employees, whether it's customers, whether it's your investors, you know, you need to have conviction, it's backed with a certain degree of competence. And so a lot of this is not just about investors, it's about all of your ideal stakeholders.

Cole Abbott

[0:47:04]

Yeah, you gotta earn your confidence. And then that's a Tom Cruise quote. Don't be careful, be confident.

Mark Abbott

[0:47:13]

Because especially in the game of risk, reward and innovation, right, you're gonna, you're gonna slip and fall. So.

Cole Abbott

[0:47:22]

And when you do slip and fall, you want to make sure you have the right people along with you on that journey and then, and then people.

Mark Abbott

[0:47:27]

Who can not only help you get back up, but learn from it, take the next step forward.

Cole Abbott

[0:47:32]

But that relationship improves because of it.

Mark Abbott

[0:47:35]

Yeah, because we've both now had a little moment and we saw how each other behaves in that little moment and the respect's deepened.