268: How to Align Founders and Investors (Before Things Go Wrong)

Most founders think securing investors will solve all their problems.

But fundraising often creates a new set of challenges—misaligned expectations, endless reporting requests, and pressure that pulls focus from building the business.

The truth is, raising capital isn’t just about money. 

It’s about relationships, trust, and knowing when to push back.

In this episode, you’ll learn from Jeffrey Fidelman, founder and managing director of Fidelman & Company, which is on Inc.’s list of America’s fastest-growing companies.

Jeffrey has worked at Morgan Stanley, been a partner at a venture fund, and now advises early and mid-stage companies on growth and fundraising strategy.

He shares what founders should realistically expect from investors, how to set boundaries without burning bridges, and why today’s tools—like AI and no-code—make it possible to show traction before raising a single dollar

In this episode, you will hear:

• Why some investors secretly derail startups — and how to spot them early
• The hidden risk of over-delivering for your investors (and how to say no)
• How no-code and AI tools can replace your first $250K in funding
• The newsletter strategy smart founders use to turn interest into investment

Resources from this Episode

Free class: Build a startup without learning to code https://www.techfornontechies.co/freeclass

Fidelman & Co https://fidelmanco.com/

Supercommunicators: How to Unlock the Secret Language of Connection https://amzn.to/3HPMHRG

Financial Times: Being an angel investor is tougher than it looks
https://on.ft.com/4oDoQFD

Growth Through Innovation

If your organisation wants to drive revenue through innovation, book a call with us here.

Our workshops and innovation strategies have helped Constellation Brands, the Royal Bank of Canada and Oxford University.

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TRANSCRIPT

0:00:00 - Jeffrey Fidelman

The earlier you are. If somebody is giving you money, you should take it, but at the same time, someone once told me that the moment you agree on a price is when the real negotiation starts, because the terms, the expectations that we're discussing, that really should be the main points of a negotiation and agreement. 

0:00:26 - Sophia Matveeva

Welcome to the Tech for Non-Techies podcast. I'm your host, tech entrepreneur, executive coach and Chicago Booth MBA, Sophia Matveeva. My aim here is to help you have a great career in the digital age. In a time when even your coffee shop has an app, you simply have to speak tech. On this podcast, I share core technology concepts, help you relate them to business outcomes and, most importantly, share practical advice on what you can do to become a digital leader today. If you want to have a great career in the digital age, this podcast is for you. Hello, smart people, how are you today? 

Today we have a lesson that is useful for both founders and investors, because we are going to hear from Jeffrey Fiddleman, founder and managing director of Fiddleman and Company, and that is an investment bank for early and mid-stage companies. It's actually one of Inc's list of America's fastest growing companies, so quite impressive. And Jeffrey himself has worked at big investment banks like Morgan Stanley and was also a partner at an early stage venture fund. And I don't want you to think that this is a typical fundraising tips for founders episode, because I hate those. I think much of the content on fundraising out there is really condescending and it feels like a person with money telling a person desperate for money what to do. I don't want to be part of that, because this leads to unhealthy dynamics for founders who are fundraising and then creates lots of weirdness when you actually do have investors. And in this episode, you will hear me sharing some of the mistakes that I made managing my relationships with investors, and you know it was actually pretty painful, so I don't want you to do the same thing, but it did give me some useful material for Forbes articles, so you know if something goes wrong after I digest it, I can actually create learning content which goes on this podcast or has gone into Forbes and so on, and you can find everything that I have written for Forbes if you just put Sophia Matveeva Forbes into Google. Anyway, in this episode, you're also going to learn what realistic expectations look like on both sides of the table so for founders and for investors and those expectations can be around financial reporting, around how you communicate with each other or progress updates. We'll also cover how you can use today's tools like AI and no code to show real traction before you ever raise a round. 

And one more thing before we get started I want to tell you about a free class that I'm teaching in September, so in just a few weeks. It's called Build a Startup Without Learning to Code. It is the perfect class for non-technical founders. So if you have an idea for an app or a tech venture but you're not a developer yourself an app or a tech venture but you're not a developer yourself, then this class is 100% for you, and I haven't taught a free class online for more than a year, so this is a rare treat, so make sure that you do not miss this. There'll only be one class. There won't be a repeat, so make sure that you register. You can register at techfininalntechiesco forward slash free class. That's techfinalntechiesco forward slash free class or join via the link in the show notes. And now let's learn from Jeffrey. Jeffrey, you said that the term investor has been diluted over the last decade. What do you mean by that? I think that the term investor has been diluted over the last decade. 

0:04:05 - Jeffrey Fidelman

What do you mean by that? 

I think that the term investor has been diluted over the past decade because, frankly speaking, when you're looking at institutional investors or professional investors in venture, more and more what we have been seeing is people that have not operated businesses, that have not personally invested in businesses and taking on their own risk, climb the ranks of venture capital firms and then are sitting in a seat of power of deploying that capital. 

And I say the term has been diluted because now we have many clients sitting in front of those investors, having those conversations and getting feedback from non-operating partners at venture capital funds who control, kind of the power of deployment of capital, providing feedback to founders who are desperate for that capital that isn't always constructive to them. 

So I think the term investor, when we talk about it, being diluted, I think maybe we should even create separate terms for the types of investors we're talking to, where, on one hand, you have operators, you have people who are GPs in control of capital and deployment of that capital, who have done and built businesses before, that they can actually act as a strategic investor versus an investor who's simply putting in money that is going to wait for that liquidity event coming out of a company. While both are, technically speaking, investors, I believe when we're talking to venture companies, venture backed companies, venture-backed companies or even founders looking for capital, they need to be acutely aware of the different types of investors that are out there Strategic, purposeful, focused, collaborative versus less strategic just money, just providing them with access for additional runway down the road. 

0:05:44 - Sophia Matveeva

But surely it matters what stage you're fundraising for, because if you're fundraising for the early stages, yes, I mean, I agree with you that somebody who's had real operational experience that's going to be a useful person. But if you are doing series B, series C, a bunch of financiers with MBAs, okay, they're annoying people, I love them all. They're annoying people. I love them all. They're my classmates. But still those people would be more appropriate, because then it becomes more like a private equity investment. What do you think of that assumption? 

0:06:17 - Jeffrey Fidelman

Yes, spot on. I do agree. I think the earlier the company is, the earlier the stage of a founder, or rather the company is in terms of their stage, the more important it is both for the founder as well as for the investor to build a relationship. The earlier stage a company is. When I'm deploying capital as an investor, I want to make sure that, yes, I believe in the idea, I believe in the traction, the progress and the vision of this company and where it's growing, but, at the same time, in every company, at whatever stage we're talking, whether it's Series A or Series K, that I just realized is an actual, is that a thing Instead of IPO? Oh my God, yeah. Well, databricks just raised a Series K, a billion dollar Series K and 100 billion valuation, and I was joking earlier with someone that I didn't even realize the letters go that far prior to a liquidity event happening. 

Well, I think that the belief there is earlier stage of company and in every company, what I was saying is that anything that can go wrong will go wrong. 

And in earlier stage company, the list of things that can go wrong is much, much longer. 

And what I would want to know as an investor, or what I would think that an investor would want to know prior to deploying the capital into that company is can I trust this founder, can I trust the management team that when things do go wrong they're not going to lose their head and they'll be able to adjust, they'll be able to pivot, because it's my capital at risk at the time that that happens? 

So I want to make sure that I have a relationship with that founder and I can be helpful to the extent possible so that I can have an inorganic input on the capital that I gave that founder. Inorganic meaning I provided capital to someone and I am helping them multiply the value of the capital I gave them versus later on, to your point, at a later stage of company or even private equity, or not even all private equity, but later on there's a lot less reliance on the specific founder or any one person within a company and much more reliance on the company and its traction and its progress. That is a lot less personalized to the person I'm investing in. 

0:08:23 - Sophia Matveeva

You know, when you were talking about these venture capitalists who haven't had any operational experience giving feedback, which is unwelcome to experienced founders, I've actually been in that situation. I remember with my first company, when I raised our first round, I was sitting across the table from, I think, a 25-year-old who had literally never had any experience apart from, well, basically, in you know, being a junior person in finance, and I had also been a junior person in finance. So I know that well, especially what I was doing and you know this was before the age of AI you're like coloring in spreadsheets and sleeping under your desk. You're not really doing intelligent work, you're not really adding value, but you could really see that. You know, there she was. She was like, oh, nobody's looking and I get to be powerful now, which is awful, because what, as a founder, you want to say is you know, can you bring the adults in the room so I can have a real conversation? But if you say that, nothing good's going to happen. 

So earlier on we were discussing an article in the Financial Times that I had sent you and we'll put that link in the show notes and the first white people who click on it. They can read that article for free, but essentially I'll tell you what it says. The article is written by a retired investment banker, ie rich person, who argues that investing in startups for investment bankers shouldn't be seen as a retirement hobby, because it's actually hard and you have to do some work, but he says that investment bankers really can add value. Now what do you think? I mean, did I miss anything in that article? What do you think of that article? What do you think of retired investment bankers getting into early stage investment? Is it a good idea? 

0:10:13 - Jeffrey Fidelman

Yeah Well, is it a good idea? 

I suppose that depends on the individual person and their financial standing and intellectual capacity and bandwidth, on whether or not they can add that inorganic value that I was speaking about before. 

And to tie both this question along with what we were just speaking about earlier, that is the main difference, at least from this perspective, around a venture investor and a private equity investor. Ultimately, venture capital or venture capital fund is a subset of private equity right. Venture capital is private equity technically speaking, by definition, and when you take those kind of definitions aside and you really take a look at the structure and how they're thinking about investing, venture capital is typically underwriting to a 40x return, meaning I put in $1, I expect to get $40 out and that's what I'm underwriting each business to. So the main difference between private equity and venture capital when looking at how the investor is deploying capital and how they're underwriting the underlying investment is that in venture capital they're typically looking for a 40x return, meaning I put in $1, I'm expecting $40 out. Now in private equity, the expectation is different I don't want to say less or more, just different where their expectation is 20%, 25% IRR, and the reality is IRR is. 

0:11:38 - Sophia Matveeva

could you tell the audience what IRR is? Most of our audience are founders. We do have investors, but most are founders, so I think it's relevant for them to know what IRR is. 

0:11:48 - Jeffrey Fidelman

So IRR is defined by internal rate of return, meaning for every year that goes on over the course of time, I'm looking for something that I can annualize to 20 or 25% return over the period of time that I'm holding it. So if an investment is held for five years and I invested a dollar, I'm looking that over the course of five years that I can show a 20% annual return on that dollar that I invested. Thank you, and what's important to understand is that on the venture capital side, when they're underwriting to 40x return, they're doing that because of the inherent risk of who they're investing in, or rather what they're investing in. 

Earlier stage companies carry a lot more risk. 

There's a lot more chances of a company failing altogether or maybe returning far, far less than their initial expectations were. So, between the failed companies, between the companies returning far less than the expectation, is that's why I consistently have to underwrite to a much higher return, so that the ones that do give me a high return, such as this recent Canva IPO that made up the entire portfolio of either losses or break-even investments that I've made, whereas private equity kind of alternatively, is typically investing in either later stage companies or more mature companies that have proven revenues, that have proven track record and proven progress, so that I know that I'm investing today and there's going to be this value add or growth add that happens over time and again. I'm generalizing. There's private equity firms that are investing in turnarounds and buyouts and are making a lot more money than 20% IRR and vice versa. On the venture capital side, there's plenty of funds that are underwriting to much less than 40x return, but their filters or criteria for the actual investment becomes much more narrow when they do that as well. 

0:13:40 - Sophia Matveeva

So, but they all say that they add value. So let's get back to our retired banker writing the Financial Times. He says if you do this, think of it as a job, not as this nice retirement hobby. So that's his, you know, one statement and the other statement was that but if you get involved, you can add lots of value. You can be really useful because of your experience as an investment banker. And the reason I want to bring this up is that I do know that we do have quite a few people who are working with quite senior corporates, or actually quite a large finance audience who is listening to this podcast because they want to learn about tech investing, and I want to know what is your opinion of the value that somebody who's only ever worked in finance but been very successful in finance? What value can they add to an early stage tech company? 

0:14:32 - Jeffrey Fidelman

So two questions, kind of I'm hearing you know angel investment and the difficulty in how one should approach something like that, as well as what value could somebody with a financial background add to the portfolio companies that they're looking at investing? Investing unless you're calling this a hobby, unless you have just some money stored away to gamble and quite literally gamble, meaning that money is earmarked for you to go to a casino or for you to just throw on to random companies. I would look at it that the same way. If your intent is to structurally invest with the mindset of this is work this is my business, I am in the business of investing then that very much is, and should be, treated like a job. When you look at all these different funds, when you look at professional investors, professional angel investors, they're treating that as work. I have capital, my money just sitting under my mattress is not making me any money, so I'm going to need to actively deploy that capital and even if it is strategic deployment or if it is, you know, I want to put money in and sit on my hands and wait for that to accumulate. You still need to treat that as an investment where you have diligence, you have review. You have underwriting, where you understand fundamentally who and what you're investing in, and that will just drive the likelihood of success for you as an investor much, much higher, because you've done your diligence, you know what you're talking about and where you're putting your money in. You can intelligently speak with your friends at the bar, your friends at dinner, your friends over coffee about, hey, I just invested in XYZ company and actually have something to say about it. About, hey, I just invested in XYZ company and actually have something to say about it outside of oh, it's a really cool widget or gadget or this new AI thing that's going to take off without fundamentally understanding it. 

So, from an angel investor's perspective, if you are looking to start investing, treat it no differently than you would starting your own business, and it's really that important to do it. In that sense, no one is at least no one I know, and I hate using absolutes. No one that I know or no one that I've ever heard of, was just kind of found dumb luck by throwing a bunch of darts at a dartboard and hitting a bullseye. Does it happen sometimes? Sure, but that probably has more to do with network effect, which I'll parlay into. Well, how to finance professionals add value. 

I think that there's two core elements and there probably are many more beside this, but two core elements that somebody with a financial background can add value to a portfolio company of theirs or an angel investment or really any entrepreneur that they're familiar with, that they're familiar with. The first is network. Network is multiplicative the more people you have in investing in a company, and there are a few articles out there I'm not sure who is the publisher, but there's a few articles out there that when you look at the early stage investment rounds of early stage companies, usually the smallest check will lead to the most amount of investment because that $5,000 check will add their entire community. If they've done their diligence and research and homework on who you are and what their investment is, they start talking about their investment to all their other investment friends and that brings capital in. So, especially being in finance, your network is a lot more structured around investment than if your background was in marketing or in creative or in CPG or really anything else. So network bringing your network into it and, aside from hey, the finance guy or gal has a bunch of money behind them and that's why we want them in. There's also the intellectual capital that you can provide. 

Many, many founders are really really good at what they do. 

Maybe it's engineering, maybe it's marketing, maybe it's design, building a product, going out and selling that product or service. 

But oftentimes they lack financial knowledge about how to build a model, how to think about valuation, how to structure their next round of financing. 

So, being able to just be that sounding board to a founder or to a management team having a financial background I can speak to that personally where oftentimes we're brought on, we're hired and engaged as a firm and then I'm separately engaged as some sort of CXO, cso, cfo, coo I'm collecting acronyms at this point, but kind of the main common denominator there is I have this financial knowledge. I've seen and been through so many transactions at this point that I can more easily tell our clients or other founders hey, I've seen this, it works, or hey, I've seen somebody else do that and it didn't work out for them, and here's the reasons why. So how can financial professionals or people with finance backgrounds investment, banking or otherwise how do they add value? Two kind of core elements that I mentioned the network that they can bring and the multiplier effect, as well as just the intellectual capital that they have about finance in general and structuring and how to raise. 

0:19:33 - Sophia Matveeva

Actually for the audience, if you want to hear what a CFO does in a growing tech company. We had the former CFO of Netflix, david Wells, on this show and he talked extensively about what he was doing and I mean it's Netflix, so it's a really, really cool episode. We'll link that in the show notes. But you know, jeff, I've also had this experience where I have had investment bankers either wanting to invest in my company or actually having invested, and their expectations were really. Their expectations of financial reporting were really misaligned with the reality of, you know, a 10 people startup and most of those people you know they were developers. They were the reality of you know a 10 people startup and most of those people you know they were developers. They were the marketing team, investor relations, financial analysis. Everything else was done by yours truly. 

I actually remember having a conversation with somebody who said you know, I know exactly what we need to do to, you know, get this next round of investors and they sent me basically an IPO filing from, I think, snapchat, I don't remember but from a tech company that had, you know, basically their S1, which is a big long legal document that is submitted to the stock exchange before a company registers for an IPO and they said well, you know, this is really the kind of thing that you should be doing. 

And I just thought absolutely not, are you crazy? And this is where I think I really want the people who are interested in investing to understand what's realistic and what isn't. Because what I don't want early stage investors to get into is that they think, well, I'm being fooled, or the founders don't want to do the work, or, you know, this is not what I'd been promised. And this is really what I want to dive into. Is that, as an angel investor, how do you know, how do you align your expectations, especially if you've worked in a corporate where there are departments and everything is organized and there are processes, and then you're speaking to a five, 10 people startup where that's just not going to happen? 

0:21:46 - Jeffrey Fidelman

Right, it's a really good point. I think this brings up an even broader point of expectations in general. I would say that a core tenant of ours at the firm and we try to pass that to clients, investors, everyone we speak to is to set proper expectations. If you're setting proper expectations on day one, it alleviates so many problems later down the line. So, as an investor, if you're coming into a company and you'd like to invest in them and you have a certain expectation of financial reporting, reporting, of communication, of whatever your expectation is, throw it out the window as an expectation and at least ask. At least ask and set the expectation with the founder or with the management team or with your potential investment opportunity that you're looking at or the target that you're looking at. If you are expecting financial reporting, don't assume that just because you expect it and no one has ever spoken about it that you're going to get those things. I think it's as much a fault of the investor in using you as kind of the anecdotal evidence. It's as much a fault of that investor to have had those expectations, never brought them up to you and then became frustrated when the expectations that were never voiced are not being met Now. 

On the other hand, yes, you're absolutely right the earlier stage of company usually the less sophisticated the reporting is, and as you grow, you start having reviewed financial, You'll eventually start having audited financial. You eventually have a full-time CFO who's not focused on fundraising but more focused on cash management and financial reporting. So it's important to set the expectation also to the investor if you feel that they're expecting something that hasn't been discussed, for you to actually voice that proactively. I've seen so many term sheets actually that start outlining we're going to be expecting a financial report from you every single month. We're going to be expecting these reports from you every single month or every quarter or every year or whatever the case may be. So it's important to outline those not only in conversation with your investor or from an investor with the potential target investment company, but it's also important to outline those in some sort of term sheet or legal documentation where it's not to handcuff them, it's not to put them into default, but to clearly articulate and outline exactly what the expectations are. 

0:24:12 - Sophia Matveeva

And you know, I think to this point, I want to say to the founders, and also to the investors listening to this, that it is okay to say no to the investor because it's a conversation. The investor is not the boss. You know if, if the you are already, you know if the money's already invested. You are in some sort of partnership, but the investor, not the boss. And when I first, you know, got investors in my first company, I remember being so utterly grateful because, you know, I couldn't push back enough on things that you know these people, it wasn't their fault, they didn't. They didn't really know what to expect and whilst I thought that what they were asking for wasn't reasonable of an early stage company, instead of saying, look, just look at the team, look at what we're doing, this is what we can realistically do, but what you're asking is beyond that. 

Right now, instead of having that conversation, I attempted to basically completely just stop sleeping and do everything, which you know was not a good idea, because that's only possible for the founder, for the person who is, you know, managing the strategy, if you actually stop focusing on the things that matter far more. You know, like the product, like the customers, like getting revenue, and this is why I think, understanding that it is not a relationship where the person with the money is in charge and you are sort of, you know, the slave carrying it out, I think that's really important. I think that's more important for the people who are doing it for the first time, because once you've done it a few times, you know now I'm at a different stage, I would behave very, very differently and also for investors not to be freaked out when the founder says no, have you seen that founder saying you know, I would love to help, but this is not going to happen right now? 

0:26:09 - Jeffrey Fidelman

Usually founders saying you know, we'd love to help, but this is not going to happen right now. Usually serial entrepreneurs or people have gone through it to your point several times over, starting kind of at a high level. I know that there are many advisors and others that will say be careful who you take money from and don't take money from everyone. I think that's a little bit of an extreme statement. I think, in general, the earlier you are, if somebody is giving you money, you should take it. But at the same time, someone once told me that the moment you agree on a price is when the real negotiation starts, because the terms, the expectations that we're discussing, that really should be the main points of a negotiation and agreement, not necessarily valuation. If a valuation is astronomical, yes, I've seen investors walk away from that. But if it's a little bit too high, then investors won't restrict them from wanting to invest in your business. They'll just voice that, hey, this valuation is too high. And along those same lines, any requirements that an investor is putting on the founder or on the company should never be restrictive. So to your point hey, yes, these are all the expectations, financial reporting, what you are doing and how much time and effort it was taking of you was, without question, was taking away from what you should have actually been doing, which is growing the business. And if your financial reporting or if your requirements to an investor seem like they are going to be restrictive, then it's absolutely OK to come back to the investor and try to create some sort of compromise on what that reporting looks like. It's important to understand that they too are investors, and we were just talking about the business of investing. They need to understand how to manage their portfolio from a risk perspective, from a deployment perspective, from a variety of different means. Maybe they have a fund and they need to report to their investors of what their investment is doing and how it's acting. 

So I think that every founder, regardless of stage, should always have one, maybe two versions of a newsletter, where the first one is going and I'll call it a newsletter, it could be an update, could be called whatever, but one that goes to active investors in your, in your business, to give them kind of a behind the scenes look at what's going on trajectory, maybe financials, whatever you've agreed with them on, and then that second newsletter is more broad, broad strokes. I think Y Combinator uses a similar outline of here's a few bullet points on what we did last month. Here's what we're working on this month. Here's what we're planning to do next month. So I think communication is incredibly important throughout the course of building a business raising capital for a business, maintaining relationship with investors so that they feel connected to their investment and it's not just like a zombie investment or a ghost investment that, hey, I put a few dollars into this business and I haven't heard from them in three years. Communication is really, really important. 

0:28:57 - Sophia Matveeva

So I actually used to do these two newsletters for my first business when I had investors, and I learned that from when I worked in a private equity firm. So the CEO of the private equity firm literally used to do exactly this. So he would draft a really long letter, you know, with lots and lots of detail, to the investors in the fund and then essentially, we would remove the sensitive details. But there will be market commentary. There would be trends, you know there'll be. It was still interesting, but it just didn't have. Okay, this is the valuation of what, like this is what's actually happening to our money right now. Right, and I remember it was really popular with the investors and I didn't know if other funds were doing it, but we had some really impressive investors, like the Harvard Endowment Fund, and you know they would write. They were like, yes, this is so great. And I remember thinking, oh, I'm going to do that. And so I literally copied exactly the same format and it actually helped me raise money because I think people, because you know, at the early stage it's so much about feeling, so people feel informed, people feel part of your story. And then when you say, okay, well, we had these milestones. You know we used this investment to hit these milestones. Now we're raising another round to raise these other milestones. 

People have already known about this and so nobody is surprised. So I really, I really love that strategy. Actually, it's a strategy that we teach as part of our tech funnel technical standards course. But let's go back to investor expectations, which is what we were discussing before. Now that there are no-code tools, there are AI tools that essentially, you can create a product as a non-technical person and get relatively far. You know much further than a PowerPoint. What is it that early stage investors should expect to see beyond a presentation? Or can you still get away with a 10 page PowerPoint? 

0:31:01 - Jeffrey Fidelman

Generally speaking. No, I say generally speaking because you'll have, you know, you have the woman who left OpenAI raised a billion or two billion dollars, basically, with no product, no revenue. 

But she was the CTO of OpenAI, so you know, that's an exception, there are those outliers, and I think media usually portrays outliers either like the moonshots and how home runs or the absolute dumpster fires, which are outliers right, the majority of businesses that end up raising money or have high valuations don't really get covered by the media because it's not a sexy story in that sense. So I think that as you're growing, or rather as you're building a business I've said it multiple times that now, with the whole advent of vibe coding, with platforms like lovable, it has never been easier to build a business than it is today, specifically for non technical people building a technical product. And I'll say that where, 10 years ago plus or minus, I was part of co founders lab and you'd go to these meetups to basically find co founders for business ideas and there'd be like 10 business people, 20 business people, one or two engineers, and the moment that we all went around in a circle saying what do we do and what are we here, the moment an engineer said that they were an engineer, you'd have people flocking at them basically and saying like I need a CTO, I need a co-founder. And now with a lot of these, they're called vibe coding tools, but between perplexity and lovable I've used many times over, You're able now to build a product at a very low cost with, yes, an investment of your time and using myself as an anecdote. We were building an internal CRM database workflow type of system. We went out to several development firms and the best quote not the cheapest, but the best quote we got for the most trusted source was around $250,000 and nine months of work and prior to engaging with them, we went out and I was doing my own research. 

I stumbled upon Lovable. At the time this is months ago, prior to all their media publications and 100 million ARR I stumbled on Lovable and granted a few hundred dollars of subscription and maybe two or 300 hours a month and a half later, I was able to build effectively an MVP, and I really want to stress that I have absolutely no technical background. I work with a lot of tech companies, but you asked me to code something way above my head. But what was really interesting is that, as I was putting that together, there was such an incredible learning process that I was able to absorb in terms of what the architecture needs to look like, how everything needs to move around, so that by the time I was done with this we'll call MVP. 

No, I was not able to complete it into a commercial form just because of authentications and APIs and database setting up. But I was able to effectively take what I built within a month or two for, let's say, $300 of lovable subscription and pass it off to a developer, a development team, and say, hey, just commercialize this, Build this and commercialize it for me, and that ended up reducing my cost 10x. I mean we're maybe 10, 12kize it for me, and that ended up reducing my cost 10x. I mean we're maybe 10, 12k into it all in and we have a product that we're using internally right now. 

0:34:16 - Sophia Matveeva

And by commercialize you mean connecting it to the tool that you need, so connecting it by APIs, not commercializing. Okay, here's my thing and go sell it. 

0:34:26 - Jeffrey Fidelman

Correct, right, right, right. So saying like, sign in with Google, sign in with Microsoft, those are authentications, building out the actual database schema and loading the content in there. That's something that I knew enough of what we needed, but not enough to kind of sit and do it myself. And this is all, by the way, within the past 30 to 60 days. I have no doubt in my mind that you give it another year, and if I had been doing this from a year from now, I probably could have gotten 99% of it done through a vibe coding platform. 

So all of that's to say, and I spoke with a founder yesterday who wanted to engage our services and asked us if he's too early, and I ended up saying yes, he's too early because he had everything set up, he had contracts, he had IP agreements done, it was for like an AI companion type of company, and all of his ducks were in a row. And he's like Jeff, I just need to raise money to build an MVP. And I gave him a very candid response that that is no longer acceptable in today's market, unless you're working in biotech, unless you're working in deep tech, unless you're working in an industry or on a business that requires a ton of capital just to get an MVP set up. If you're building anything outside of that, which is most other things, there's no reason why you cannot finance and build at the very least an MVP instead of a vibe coding platform on your own, prior to going to raise capital. 

0:35:58 - Sophia Matveeva

Well, you know, we've actually started implementing that into our program. So some of our programs are government funded programs and essentially, if a government invest in people taking a program, they want to see results. They basically ask us okay well, who graduated? And so we needed to create a kind of marking system of, okay, what does graduation look like? And in a lot of other similar government programs, essentially they want a pitch presentation. 

But I said that's not what the market is now. We could have maybe done that earlier. That's not what the market is now. We could have, you know, maybe done that earlier, although it's a course on making products, so that's not so relevant. So essentially, what we said instead was that we need to see some sort of test product. 

It can be a prototype, it can be an MVP, it doesn't matter if it holds data, because you know that can be hard depending on what you're doing, but it needs to be an actual thing where you know if it's an app, you should have some screens where you can swipe and there's a little bit of interaction, because it's not really that difficult to do. And, as far as I could see, we were the first government funded kind of accelerator program that was asking for this, while everybody else was still asking for presentations, and I was seeing that investors have really, really moved on. And also, what's good news, I think, for founders is that I'm seeing fewer investors saying you don't have a CTO, come back to me when you found one, because that used to be a huge, huge barrier. Is that what you were seeing in the market as well? 

0:37:32 - Jeffrey Fidelman

It's been less of an ask. I haven't heard that as a pushback from investors. What I will say, though, based on what you had just said earlier, is forward progress. Forward progress has been, incredibly, both more prevalent and important for investors prior to them making a decision to deploy capital into your company or to make an investment. And what's really important to understand is that forward progress is not a measurement of a point in time, but rather of over points in time. So, from a fundraising perspective and an investing perspective, it's never too early to start raising capital. You always want to be out there introducing yourself, introducing your concept, your idea to investors, maybe not necessarily raising at the time that you're reaching out, but building a relationship. And what investors will want to see is forward progress over the time that they've met you, if eventually you do want to raise money from them, the time that they've met you, if eventually you do want to raise money from them. And forward progress and why I bring this up is that going to them with saying, hey, all I need is money to build an MVP. That's not forward progress, because that just means you're stuck. And if no one gives you money, then you're not going to build an MVP and if that's the mindset that you're in, that's never going to be conducive to a successful business. 

A business needs to constantly be iterating and moving forward in some way, shape or form, and most products by the way, many products, I don't want to say both many products or services can be effectuated in a manual fashion. You don't need tech for every single project that you're building. Sometimes it's okay to think of a marketplace and just have two spreadsheets and just start the business, because over time you'll see what works, what doesn't work and you'll be better informed about the type of product you want to build rather than, you know, building a tech product for a market that doesn't really need that solution or that solution isn't applicable. So, thinking about kind of going back to my point around forward progress and even further back to when we were talking about the newsletters and you mentioned that helping you raise capital, sales 101 is that you need to have about seven touch points with someone before you make a sale. 

Investment is not any different. So your first outreach to them, you schedule a call, you have the call, you send them two, three months of newsletters and all of a sudden you're on six or seven as a touchpoint and that's when you're going to end up closing that investment. So going out to someone on a first call and trying to close them on that capital, maybe it worked in 2020, 2021, maybe it worked prior to that in certain edge cases or outlier cases. But if you're looking at the average, you're looking at best practices, edge cases or outlier cases, but if you're looking at the average, you're looking at best practices. Best practices will indicate you have to show them forward progress over time so that they're investing in forward progress as opposed to I'm investing so you can hit go. 

0:40:20 - Sophia Matveeva

Well. So thank you so much for these insights, because I think the people who have learned from this are the people who are interested in investing, people who want to raise money, people who are trying to raise money, and also, I think, people who have sat across as an investor and you know what they should really be asking for and that actually it's sometimes okay for founders to push back, and you know sometimes that is the reality. So where could people learn more from you? 

0:40:52 - Jeffrey Fidelman

Well on this podcast, for example. It'd be a great place to start. Our website is fiddlemancocom. My email happy to share with anyone, anyone having any questions. I'm always up for a cup of coffee, for the most part based on bandwidth, but always happy to speak with people about investment philosophy or thesis or just about building businesses and where they can go. My email address is Jeffrey at fiddlemancocom. Um, I'm based in in Connecticut but travel down to New York quite often for conferences and events and things of that networking events and speeches so I'm happy to connect with the community in any way. 

0:41:30 - Sophia Matveeva

Awesome, and I've got one last question for you. So do you have recommendations for books or podcasts or resources that you think that are really, really good on this topic? 

0:41:44 - Jeffrey Fidelman

So for people who are thinking about becoming angel investors or people who are pitching to angel investors, yes, I was recently recommended a book I actually have it up in my Amazon cart now called Super Communicators by Charles Duhigg. 

0:42:03 - Sophia Matveeva

Amazon keeps on telling me to get it too. 

0:42:07 - Jeffrey Fidelman

I was part of a CEO networking group I believe it was on this week earlier, or maybe it was at the end of last week and three of the seven CEOs on that call recommended this book. I have not read it yet, so full disclosure I don't know what the contents are, so if it offends anyone, I'm sorry, but I don't think it goes down that hole. It's something that I have on my list. I'll be reading it next week. Super communicators. 

0:42:31 - Sophia Matveeva

Awesome. Well, thank you so much. We'll put that in the show notes. Well, thank you very much, jeffrey. I will let you go to enjoy Connecticut and thank you, audience, for being with us today. Thank you again for having me.