Raising Capital: It’s a Ticking Time Bomb

Introduction:

This week, Shawn Busse, Liz Picarazzi, and Hans Schrei debate the merits and risks of taking outside capital. Clearly, it makes sense for some businesses. But what are the right circumstances? What are the alternatives? And what do you need to understand before going to the dance? For example, what are the dynamics of the entrepreneur-investor relationship? Are the entrepreneurs hoping the investors will bestow an opportunity upon them? Or is it actually the entrepreneurs who have an opportunity to offer? And who pays for the coffee? Plus: What do you do on those days when no one seems to be following your lead and the entrepreneurial loneliness sets in?

— Loren Feldman

Guests:

Shawn Busse is CEO of Kinesis.

Liz Picarazzi is CEO of Citibin.

Hans Schrei is co-founder of Wunderkeks.

Producer:

Jess Thoubboron is founder of Blank Word Productions.

Full Episode Transcript:

Loren Feldman:
Welcome, Shawn, Liz, and Hans, it’s great to have you all here. Liz, let’s start with you. What’s going on? Last we heard, you were winning a PR battle. What are you focused on these days?

Liz Picarazzi:
So partly as a result of that PR battle, we’ve been really focused on product. Part of the PR battle was that there were some criticisms of our bins in Times Square. They were dirty, they were bulging, they had some issues, all of which are because they are in Times Square. But some of the issues were addressable by us, so we really have gotten to work. We’ve made seven changes to the product in Time Square. We’re working very closely with the sanitation and the cleaning workers there to get their feedback.

And then we’re going to be turning around those changes into future releases across New York City. So it’s exciting for me, because I love new product development. I love customer research. I love getting that close, talking to people, taking videos of them talking about what they like, and what they don’t like. But the whole team has really been mobilized because some of the changes we made required very fast coordination with our factory, and they obliged. So you know, that’s been really fun to identify needs, come up with new prototypes, roll them out, get feedback, and then just keep iterating. And that’s one of the things I love about being an entrepreneur. And I’ve been able to do a lot of that lately.

Loren Feldman:
Has the publicity had any impact on your relationship with your client? I know you were concerned. You didn’t want to trash them, so to speak, for the upkeep of your bins. How is that relationship going?

Liz Picarazzi:
It’s going really well. We, together, came up with an action plan that, following the press, we’ve been working on together. They’ve made their workers fully available to us for research, essentially as guinea pigs, and we meet monthly with them, including with the president of Times Square himself, to talk about trash and rats in Times Square. So it’s an exciting thing we look forward to every month.

Loren Feldman:
I’m sure there’s plenty to talk about.

Liz Picarazzi:
There is! There’s a lot, and just generally the city and how Department of Transportation and Department of Sanitation and elected officials—this is a very high-profile, high-visibility sort of initiative. So there’s always a lot to talk about, besides the rats and the trash.

Loren Feldman:
When we emailed before the show, Liz, you also mentioned that you’re giving some thought these days to investment capital. What’s on your mind with that?

Liz Picarazzi:
So we’ve been very lucky to be approached by a couple of investors, a couple of potential strategic partners, really, since all of this publicity. And I’ve started conversations to see how they might support us, whether it be through capital, or through connections or subject matter expertise.

I have kind of been a bit up and down on my feelings about it. It’s very flattering to be approached by an investor—usually it’s the other way around. So my ego gets a little engaged in that, which is nice. But then, of course, I think, “Well, if I really were to want to get an investor, wouldn’t I go out and seek it? Would I be stupid to just work with one investor who happened to approach me at the very beginning?”

And I just think instead of spending so much time thinking about this—and the what-ifs are in my head a lot now—I have gotten to really look closely at what my business really needs, and where are the gaps? And do those gaps need to be filled by an investor, or some sort of strategic partner? Or could they be actually filled by existing team members pitching in with that, or hiring an additional employee or two or three, to cover the things? I even workshopped it yesterday with my EO group of the value that an investor could bring or the trouble that an investor could bring. And in my group of nine in my Entrepreneurs Organization forum, eight of them were very anti- me getting an investor.

Loren Feldman:
For the typical reasons that one discusses, of giving up control, or anything that surprised you?

Liz Picarazzi:
It was partly giving up equity without knowing what you’re getting for it. So for me, it’s actually a little bit less about the money at this point. And it’s more about, “Wow, can this investor help me scale my sales operation nationwide with the type of salespeople I want to take my product to the West Coast?” You know, an investor can come and say that they’re going to do that. And if I believe that, and I give them equity, what if I’m wrong and they’re wrong about that? And instead, I could have just hired someone to do that with my own money?

Someone who was coaching me on this said, “Do you realize that your lack of confidence in this area to expand and to scale through sales could lead you to take money that you might not need that’s a forever decision? Why don’t you just address your own confidence with this issue in the various ways you can, instead of taking on a long-term investor?”

And that was really confronting. But I needed to hear it. I sat in a room and really talked about this with eight other people. And it’s not to say I’m not going to take an investor, but I definitely have the approach of: I might know the answer. Or I know the gaps better than they do. And they’re going to say that they can fill those gaps, but if I believe that, and I’m wrong, that’s going to be miserable. For everybody.

So I’ve gotten a little gun-shy with the investors, and I’m really looking at: What will it take to help get me to the next level? And I’m seeing that it may be within me, within my team, or within my bank account to hire someone to do those things. Why go to an investor just because I feel weak in four areas right now?

Loren Feldman:
Hans, you’ve told us that you and your partner made the decision to pursue investment capital. Did you go through a similar thought process?

Hans Schrei:
Yeah, and for us, this has been an evolution of how we approach it, because when we first started, we said, “Okay, we need to get this much money, and that’s enough.” And then we started having a lot of conversations about what is it that we need? And the answer was kind of similar to Liz, in many ways, in that: What I need is not money right now. I do need money, but it’s not just money. And probably the worst mistake that you can do is, if I don’t need the money, it’s absolutely no good to give away the equity.

So actually, we were looking for $5 million. And we cut it down to $1.5m, and we’re in the process. But my perspective—and I’ve talked to an insane amount of people, because our industry’s very… Let’s just say, there’s a disconnect between what actually gets funded and the access. It’s very interesting, that dynamic, but…

Loren Feldman:
Hans, what do you mean by that?

Hans Schrei:
Oh, this is a whole other podcast episode, but there is a class bias to what gets funded in the early stages of food. So you get a lot of funding for adaptogenic beverages or alternative proteins. But the reality is that those are things that don’t have mass adoption. So I kind of understand the logic, but there’s a disconnect between what gets funded at the early stages. And it has a lot to do with a tunnel vision that the founders and the investors have about what’s scalable. There’s a lot of bias to their own prejudices and their own ideas of what the market needs.

But back to funding, what I’ve seen is: Take the meeting, and have the conversation, and keep them offering the sun, the moon and the stars. Don’t take it, if you don’t need it. But what I have found is: The money is the thing that needs to be good enough. If you’re willing to give equity for the money, great. If on top of that, you get a strategic investor, great. But my experience has been—and we had a very bad experience with this—is that: Of course they can help you. They are going to do this. They’re going to encourage you to do that. My network. No one worth their salt is gonna withhold their network from you until after they have invested. That has been my experience. And we have really built a lot on top of people who are like, “Not ready to invest, but I would love to help you with your network.”

Loren Feldman:
What were you referring to when you said you had a bad experience?

Hans Schrei:
I’ll hesitate because it became kind of a lawyer-y thing. But we had a bad experience with an investor. There were a lot of unfulfilled promises, because that’s as much as I can say so I don’t get myself into trouble. But yeah, if you think that the money is worth it more because it’s coming with all these other things, it is not. You cannot make decisions based on ifs, which is what—and I understand exactly what Liz is saying—a lot of them will tell you this, “Oh, yeah, but we come with this and this and that.” And the reality is that they can give you the introduction, or they can give you the meeting, but the one who’s gonna have to do the work and hire this person or go to the meeting and actually sell is still you. So unless we’re talking about kings and queens, you can get the network and do it yourself. So think about the money.

Loren Feldman:
So Liz, given that you’re thinking you’re leaning a little bit away from pursuing investment capital, what’s the biggest concern that that creates? What does that mean that you have to figure out an alternative solution to?

Liz Picarazzi:
I think maybe the best way to explain it for me is that I need to become comfortable with spending my own money on the things I know I need, particularly in sales and a bit in product development, and in legal—those are my three big categories—instead of thinking that I’m gonna use, as we call it, OPM (other people’s money). So my comfort level needs to be adjusted, and I’m starting that process now. But looking at the bank account, we have some money still from the EIDL loan, and saying, “I didn’t feel comfortable using that money, because I wanted to have that as like a rainy day fund, just in case,” and instead saying, “Actually, I know these are the three gaps in my business that I need to invest in. And I am going to use my own money to do that.”

And so that’s something that Frank and I have been talking a lot about. He’s more conservative with money, but he still does understand that if the alternative is giving away equity to fill those three gaps, that that is a really big risk. And anytime you take that investment, it’s a risk. And also, let’s say if we had a really large order, which I could see coming, and how are we going to finance that order? I actually do feel if we had a large order, we would be able to get more of a line of credit, whether it be from a bank—probably unlikely—or from a source like an investor that does see that we just need to finance a big inventory purchase. That’s an easier conversation to have when it becomes that big.

Hans Schrei:
Can I ask you, what is the risk that you see if you bring in an investor?

Liz Picarazzi:
I give away control that isn’t worth it, or if they make my life miserable. One of the potential investors I spoke with had such an irritable temperament that I thought—

Hans Schrei:
Oh, you’re gonna get a lot of that.

Liz Picarazzi:
Would I want to deal with this once a day, once a week, once a month? No, I wouldn’t even want to deal with that once a year. It’s not like a quarterly meeting of tolerating something like that. It’s like, you’re going to bed with these people.

Hans Schrei:
If you don’t like the guy, that’s reason enough to say no, because you are really having to deal with this person. You’re getting in bed with them, for better and for worse. A lot of the time, I have met wonderful people. I have actually made friends who passed on our investment, but they have become very good friends. So it’s been wonderful for us. We have met a ton of assholes as well, but this is our big learning: You’re giving them the opportunity, not the other way around.

Liz Picarazzi:
Yes.

Hans Schrei:
What you’re doing is so scalable. The fact that you are in Times Square—which is probably the most visible street in the whole country—doing this, this is so scalable. This is something that you can bring to every single city in the U.S. And a good investor will see that and say, “I want to get on that train.” If they don’t see it, then move to the next one. But I would say, keep that conversation in your back pocket, because it sounds like you don’t need the investment right now.

Loren Feldman:
Shawn, I’ve let you listen to this, and I want to know: Are you feeling FOMO? Or is this conversation making your skin crawl? Where are you?

Shawn Busse:
Oh, man. Well, actually, I think Hans brings up a really good point, which is that, for the vast majority of my business career, the concept of outside investment has meant a diminution of control, and essentially a battle between the folks making the investment and the founder. And in that paradigm, founders always lose. Always. And Liz, where I think part of your motivation of getting out of corporate America was to have control of your destiny, I mean, I know you a little bit—not a lot—but my sense is like you really enjoy control. You really enjoy creativity, you really enjoy being the master of your domain. And in the old paradigm, or the majority paradigm, once you start taking money, you lose that. And that sets up a really contentious relationship that ends up you being the loser, which is, I think, why a lot of your EO colleagues were like, “No way, no how. Don’t take an investment.”

What Hans is talking about is sort of a more modern iteration of the investment framework that you see in the tech sector, where founders take investments, but they’re still the kings of their castle. And so you look at Facebook, for example. Mark Zuckerberg is in control of that thing entirely. There’s a board, but it doesn’t matter. They have no control.

So yeah, I think what Hans is saying is: If you could get that situation where you could get money but yet you are still in control… maybe, maybe. But I mean, in 23 years of watching businesses and working with small businesses, I have only seen an outside investment situation go happily maybe once. And that one time was when a small business was bought by somebody who had owned another small business. It was like an entrepreneur buying another entrepreneur’s business, and they actually made it better. I think the founders of the original business wanted out.

That’s another thing. Like if you just want out, then there’s a whole set of things to do. Like don’t rely on an earn out, for example. Or if you have an earn out, don’t count on that as part of the money that you need. There are just so many unhappy stories that I am so negative on outside capital. It’s just where I’m at on it. And I just don’t see it end happily, especially for people who love their business. If you don’t love your business, yeah, take an investment and make a bunch of money off of it. But generally, it just doesn’t go well, in terms of the happiness for the founder and for the employees. I’ve seen that over and over.

Loren Feldman:
Hans, any thoughts about that? [Laughter]

Hans Schrei:
I was waiting to see if anyone had something else, but I think the question in that case is: What is it that you want out of the business? Because that is absolutely true, if what you want to do is you are really passionate about your business, and your intent is to scale it to a point where you still control it, still manage it, and long-term, your vision is that you are going to be operating your business. Then, absolutely. Because in that case, you are getting literally married to whoever invested in you. And so this is probably the first question that I wish more founders—I wish myself—had asked, when we were starting having the questions about investors: What is it that you want out of the business? And what is the expectation?

Forget about the size of the business. Your business plays a role in your life that is different from a job and different from a passive investment. So if you are an operator, and this is your intent: “I want to have this. I want my kids to one day operate it,” which is perfectly valid. Then, yes, because at the end of the day, what you’re gonna be looking at is returns and you’re gonna be looking at, “I need to cut them a check every year.” So that’s definitely a different situation than, for instance, what we’re doing, where our business doesn’t really make sense if we keep it in the realm of our own possibility. A mainstream cookie brand only makes sense if we are able to take it national. Otherwise, yes, it can be successful, but it’s a very different picture. So in that case, we do need a lot of capital.

I would say that the first question you need to ask yourself is: What is it that you want? Because if what you want is an exit in the next 10 years, and you want to grow, to bring it national, to have all of these things, get the money and get out in the next 10 years. You’re gonna still operate. You’re gonna still be in control.

Shawn Busse:
Well, yeah, and actually, she’ll be exited in five years. Because if what happens happens, in terms of what the investors want to happen, it’ll scale super fast. Whether Liz is great at running it or not, they will say, “You know, this business has just reached a new level where we need to bring in a professional CEO.” And they will kick her out. I mean, I just see it over and over again. And they’ll bring in a quote-unquote professional CEO, who they know will get it to that next echelon. And essentially, it’ll become a very different organization. So that’s another thing, too.

Loren Feldman:
Liz, thoughts about that?

Liz Picarazzi:
Okay, so you’re gonna be a little surprised by that. But I would not be against someone kicking me out of my role and putting someone better in place. Seriously, in terms of a CEO role, if I got bumped over to be chief creative officer, I would be really happy with that.

Shawn Busse:
They’d bump you out of that job, too.

Liz Picarazzi:
So as long as I could have the CCO role, I would be okay with it. But not otherwise.

Shawn Busse:
No, they don’t want you in there. To private equity, the founder becomes an anchor, and getting the founder out of the organization is their prerogative. It’s really rare that they keep them in there.

Loren Feldman:
There are places that specialize in doing that. I mean, it does happen. And I have spoken to people who have successfully taken private equity money, or at least that’s what they tell the world.

Hans Schrei:
It’s a ticking time bomb. Realistically, if you are taking private equity money, you’re setting up the clock to get out. You need to be very aware of it. And I understand what you’re saying, because you may want this other role, and I’m getting that you’re getting a ton of visibility. So you may want a role like the lady from Glossier. I don’t know if you saw, she built Glossier into a DTC darling, billion-dollar company. It was insane growth. And she just stepped down as CEO, and now she’s chairman of the board, and I think she’s involved in something else creatively. And in this case, she’s very visible.

So I do think that you need to be strategic. Because yes, you don’t want the board to have the prerogative. And one of the things that we have in place and is going to be very purposeful—and actually saved our necks once and probably will do it again at some point—is that Luis and I are so visible, such an entrenched part. So we jump at speaking engagements. We love them, because we are very public. We want to be the face of the company, because if we’re the face of the company, we get control, because the brand doesn’t exist without us. And if it came to that, and we have a mess of a private equity situation down the road, the last thing that private equity wants is for us to go to The New York Times to tell them, “Hey, they did this to us.” Maybe some of it is self-aggrandizing, but that’s the position you need to be in.

So I think that the problem is not whether private equity is good or bad, or VC or whatever. And this is the distinction that even investors are not really clear on what their expectations are. Because if you’re thinking this is a business that makes a ton of sense for private equity, it’s a very different conversation than if you’re thinking of VC. What we need to do is not demonize investors or private equity, but you do need to understand the game. And you need to be aware, because, yes, what they want down the line is control. If private equity puts a single dollar in you, they want control. And be that a five-year or a 10-year horizon, that is going to happen. And you need to be okay with that. But if you’re comfortable with that, with giving up control and cashing out, because say it’s a successful company, and we’re five years down the line. You’re looking at a $100 million valuation, and you have 30 percent of the business, and they want you out. They want you out, but they’re gonna take you out with $30 million in your pocket. So you’ll be fine.

Shawn Busse:
You can go start another business doing chief creative officer for $30 million. You can build a pretty good business with that.

Hans Schrei:
You can do whatever you want. The reality is this: Yes, the second you take money from an investor, the investor is, in a way, sitting at the other side of the table. They will tell you, and they have beautiful websites with all of their theses, and it sounds amazing. They are lifting up underrepresented talent. Yeah, of course they are.

Shawn Busse:
They’re salespeople. I mean, that’s the thing to remember. They are really, really good salespeople. And so to your point, Liz, they are feeding your ego because they’re like, “Ah, this is what she likes.” And whatever it is, some people they’re going to feed, “You’re going to get rich.” Others, they’re going to feed their ego. Others, they’re going to feed a vision of, “Well, we can consolidate the market and build this thing and save the world,” right? Whatever it is, they’re going to feed that. And that’s okay, but you’ve gotta be really clear-eyed about it and what’s going to happen to you.

Hans Schrei:
You just hit on something super important: They are salespeople. They are the ones selling, because their million dollars is exactly the same as the million dollars from the next guy. So the mistake I think a lot of founders make is that they think that they are doing the selling. That is true. Realistically, you have an opportunity for them. And at the end of the day, if we see private equity, an investor, their job is to source deals. They are looking for you. You are even doing them a favor. And everyone is like, “Oh, I got a meeting. It’s so exciting.” No, they are the ones who get to be excited.

Like I got a VC, we became very good friends. And she told me, “You don’t pay for a single drink or a single cup of coffee. They pay for that. They are courting you, not the other way around.” No, I know it sounds funny. And we were like, “Oh, can I get you coffee? Oh, we brought you cookies.” And like, no. No. But here’s the thing: they are selling. Because at the end of the day, you are a unique proposition. Your business is unique. Whether it’s better than the next one, that’s another discussion, but yours is unique. And their million dollars is identical and has just as many zeros as a million dollars from the guy next door.

Shawn Busse:
And also, Liz, there are echelons. You probably know this, but if you’re under $5 million, you have very little power, very little ability to kind of negotiate that deal. You hit $5 million, things change. You hit $10 million, it changes dramatically. You get above $10 million, now it’s like what Hans is saying. Now you can set terms like, “Hey, you have no voting rights.” Those kinds of things, right?

Hans Schrei:
I saw someone make this horrible mistake, and their company went under, because they gave away 55 percent of the company at the early stages. So they were uninvestable. No one wants that. At the seed level, they want you to be so invested in the company that you are going to stay there for a while. In five years, they may want you out. That is absolutely true. But right now, they want you to live and die by this business.

The thing is that you don’t necessarily have to give away control. And as Shawn was saying, in the more modern version of investing, they don’t have the time, realistically, because their proposition is: Out of 10 companies, nine are gonna die and one’s gonna kill. And I think that even that is changing right now in the current environment.

In tech, it’s either sink or swim. You kill it, and you become a unicorn, or you’re nothing, because distribution and adoption are so important. In consumer products, for instance, the return curve is more normalized. You can have unicorns, and you can have a ton of good returns—decent, profitable companies that you can spin off into private equity. And you’re gonna have zeros, but you don’t expect nine to be zeros and one to be a winner. So it’s a different set of expectations. And I’m guessing in industrial settings, such as yours, Liz, it’s probably going to be something similar.

Loren Feldman:
I have a question for Liz, but let’s take a quick break to hear from our sponsor.

[Message from our sponsor, Work Better Now]

Loren Feldman:
And we’re back. Liz, this may or may not be relevant to the conversation we’re having. But in the emails we exchanged before this session, you made a reference to feeling a sense of something I think we’re all familiar with: Sort of the loneliness of entrepreneurship. And yet you also just told us today that you had this EO session where you discussed your current situation with—I think you said—nine EO members, and got what sounds like really helpful, engaged feedback. Can you explain that to me? What were you referring to in the email and how are you feeling about that?

Liz Picarazzi:
So I mean, it’s a day after this wonderful EO meeting, so I’m feeling really good, which is what always happens when I sit in a room of entrepreneurs. Same thing when I tape with you guys. There’s a feeling of connectedness that you just don’t have with your team or your friends or your family. We understand each other’s challenges and passions, and you just connect on that level. It’s a precious time. But maybe I just don’t have enough of it. Maybe in between our monthly meetings, I need to go to more events, or have lunch with more entrepreneurs—all of which are available to me. I mean, I live in Brooklyn, New York. There’s a ton of entrepreneurs, very creative people.

But if I don’t make that effort to spend time with my entrepreneur peers, I can very quickly become lonely. And that also is something that can kind of come out with Frank and I, because he’s married to an entrepreneur. He knows how quirky I am. And when I want to talk to him about new ideas, new strategies, new potential partnerships that he never would have thought of, he might just be like, “Oh, there she goes again.” He may not say it, but I have my team working on a lot of stuff that keeps them busy. So when I go off to some new la la land, or I’m chasing the next bright, shiny object, if I don’t have people excited in the way I am, which is virtually impossible, I can get discouraged, and I can get lonely.

Next week, I’m actually going to Virginia Beach for three and a half days for the EO summit, the nationwide summit. And there are a ton of great speakers, and I’ll be meeting a lot of people from many, many chapters. And so for me, I know that’s going to be a great experience for me. It’s going to be one of the highlights of my year. And I really look forward to it.

And so for me, I need to have those events. Sometimes when I meet entrepreneurs who don’t engage with other entrepreneurs, I think, “Oh my God, how miserable you must be.” Because it can be lonely, and it’s something that most entrepreneurs will say. So I guess the answer to it is, Loren, when I wrote to you a couple of weeks ago, I was feeling lonely, but now I’m not.

Loren Feldman:
Well, I’m glad to hear that. Do you ever find yourself kind of having to choose between, “I’ve got this list of things to do that are important to build the company, and I also know that I need to reach out and spend more time with the kinds of people who keep me feeling grounded and excited and energized.” Is that choice part of the issue for you?

Liz Picarazzi:
A little bit, yeah, because I will have my running list of things that are not getting done. And maybe leading up to an event or a meeting, I’ll think, “Oh my God, I shouldn’t be doing this. I have 17 things on my list.” But then after I do the event, and I spend the time, I realize, well, this was so valuable.

But then again, if I get into situations where I have been in other entrepreneur groups where it hasn’t been worth my time, I learn that very quickly, and then I won’t go back to that group again. So without saying any names of groups, there are entrepreneur groups that pop up all the time, and I’ve tried a lot of them. And if it turns out to be a group of people where someone just wants to become an entrepreneur, and the rest of us have to give them advice. I’m sorry, but that isn’t a good use of my time, at this point in my career. I can’t afford to spend time being a coach in a situation where I think I’m going to connect with peers. And that’s another learning I’ve gotten along the way with that sort of networking.

Shawn Busse:
Yeah, that’s a big thing: Getting in the right forum—whether it’s through an organization like EO, or Vistage, or whatever it is—it’s more about the forum than the entity itself: Who’s with you, and their level of acumen. I feel you, Liz. I’m in a forum right now—not through EO, it’s through a different group—that I’m the biggest business in the company, by a lot, and I’m not a very big business. So it’s tough, because the things that get talked about a lot are things that I was challenged by five or 10 years ago. And I want to give, and that’s why I’m in it, but over time, it’s tough, because there are just so many other things that need to be focused on.

Loren Feldman:
Hans, could you relate to what Liz said about the loneliness of entrepreneurship? You and Luis both made moves from working in corporate America to being entrepreneurs on your own? How does that hit you?

Hans Schrei:
Oh, yeah, I mean, on top of everything, we decided to move to another country. That didn’t help. And then the pandemic came. So yeah, it’s been an evolution. And this is what we’ve learned. We were just talking with Luis the other day about how this has been the roughest year in our lives, but also the most rewarding, because we were coming out of that loneliness. And for us it really settled in, because you’re doing this thing, and you move to another country, and this is what you want. And that’s okay, but because of the pandemic, it was very hard to make friends, to get to know people. So you layer that with there is not much in the way of a support system, really.

And then you’re doing this thing, where, okay, we’re fundraising. And we’re talking to these people. And at the end of the day, you’re layering on top of the loneliness, on top of difficulties, on top of rejection. And at first, we’re thinking of it like that, like, “Oh, this is just rejection. We’re not worth it.” And it hit us really hard.

I remember that when we got our first significant, “No,” I cried. It took me a long time to get over it. But then we started learning, well, everyone is kind of on the same boat to begin with. And we started learning that those conversations need not be transactional. And that, “No,” doesn’t really have anything to do with you as a person, or even as a business. Sometimes it’s like, “This is just not a good fit.”

And then we started having those conversations not in the spirit of a transaction, of, “Oh, I’m talking to this person, because I want money or because I want them to invest. But I want to share what I’m doing with them. And hopefully it will be of interest to them.” And once we started making that switch, a lot of that loneliness went away, because it felt like instead of being salespeople getting rejected, we were business people sharing what each other was building. So that little switch that we flipped allowed us to just say, “Hey, is this a person who we are interested in talking to? Yes. What do we want to get out of them? Nothing. We just want to listen to what they have to say. Or we want for them to listen to what we have to say and tell us how they feel and what value they see here.”

Shawn Busse:
This is, I think, why you have such high rates of depression among entrepreneurs. There are two factors. One is, it’s lonely and isolating. Two is that our society really wants to ascribe your personal worth as a human being to the business’ success. And if you look at it, it’s everywhere, right? You have these competitions that are like, “40 under 40,” “fastest-growing business,” and when they have the award ceremony, it isn’t the whole team that goes up on stage. It’s the founder.

So the founder goes up on stage. That feels great. “Oh my gosh, look how accomplished they are.” And then all the other businesses look at them and go, “Gosh, I want to be like that.” But it’s a fool’s errand, because, essentially, you’re gonna fall down. You’re gonna fail as a leader at some point, the business is going to stumble, and because you’ve tied your identity and worth to that business, now you start to feel depressed, anxious, sad. And then you’re isolated and lonely, which is even worse. It’s just a really tough row to hoe.

And I really try to encourage owner-operators to really separate their sense of worth from the business’ success. If they can do that, then they’re just a lot more mentally healthy. And then, like Hans is saying, get a network of support and learn how to be vulnerable. That’s the other trap. We always have to say, when asked the question, “How are you doing?” “Oh, great.” Right? That’s the reflexive answer, and that’s rarely true that you’re that great all the time.

Loren Feldman:
So in this conversation, we’ve established that taking investment capital is taking on a ticking time bomb. And we’ve established that there are high rates of depression among entrepreneurs because it’s such a lonely endeavor. Who’s got a positive thought for us to close on?

Shawn Busse:
We’re talking about this stuff, right? Prior generations—you think about, like Jay’s business, for example—never even got to talk about this stuff, never even got to say, “Hey, I’m not feeling like I’m winning here.” And especially in a public environment. And so I think the really great thing about being in business today is, there is support. There is help. It’s okay to say, “I’m going to go see a therapist.” That didn’t used to be acceptable. You were seen as weak, if you talked about that kind of stuff.

And I think organizations like EO, even forums like this podcast—which you’ve done such great work on, Loren—is to expose what’s actually happening. And Paul Downs, his book Boss Life, it just lays it out and says, “Hey, it isn’t all puppies and rainbows.” But that’s part of being more authentic and real, which I think leads to much higher levels of happiness. So I don’t know, that’s me. That’s my take on it.

Loren Feldman:
Well said, Shawn. All right, we’ve gotta go. My thanks to Shawn Busse, Liz Picarazzi, and Hans Schrei. As always, thanks for sharing guys. And also, thanks to our sponsor, Work Better Now. We’ll see you next week.