Intro:

Exclusive interviews with the world’s most influential market leaders and rising entrepreneurs. This is the Rocco Forino Show on The Business Connection Network. Today, on the Rocco Forino Show.

Teresa Esser:

Your café model, hey, Thursday night we’re going to have class. We’re going to have networking. We’re going to have office hours. We’re going to have free beer. There are ways that a community can be self-policing.

Rocco Forino:

So I’m so happy to be here with Teresa Esser. She’s an author, speaker, angel investor, and we’re going to talk about all that today. So Teresa, tell us about yourself and Silicon Pastures.

Teresa Esser:

Okay. Silicon Pastures is an angel investment network based in Milwaukee, Wisconsin. It was started in 2000. I took over running the group in 2005. We have made more than 60 angel investments and the reason why I say more than 60 is because each individual angel investor gets to choose whether or not they want to invest in any particular deal. What I promise angels is there will be eight meetings per year, and we will see two or three companies at every meeting.

Rocco Forino:

Of the 60 have any exited so far?

Teresa Esser:

Oh, yes. We’ve had a number of exits. Some of the exits were investments that happened before I got there. BUYCOSTUMES, BUYSEASONS is one famous example. Investors made up to 15 times their money, some of them made 11 times their money on that deal depending on when they invested and when they re-upped. Another company called Prodesse was another big exit. Personally, I started off with BioSystem Development, Clearent, Lucigen, Red Anvil, Forte Research Systems, Genii. These are some ones I’m remembering off the top of my head.

Rocco Forino:

Are they all Midwest specifically?

Teresa Esser:

Yeah. A lot of them are Milwaukee, Wisconsin, Illinois. We’ve been focusing on the Midwest, focusing on especially Milwaukee. That’s where we’re based.

Rocco Forino:

Right. So tell us about your trade mission and what you hope to accomplish with the trade mission.

Teresa Esser:

Okay. So we brought a group of Korean entrepreneurs to Milwaukee and then on to Boston. The trip was sponsored by the Korea Institute for Design Promotion, or KIDP, and we wanted to help figure out how Koreans could enter the United States, how could they land here and setup businesses here? What would be the best place for them to land? Our argument to them was what about if you landed in the center of the world’s largest market? What about if you came straight to Milwaukee? Then they said, how would we do that? What would it be like? So we put on this week of meetings. We had a lunch and we invited lots of people to come forward to say I would like to figure out how to work with some Korean entrepreneurs. I have an idea.

We even had an idea contest. We rented a venue. We invited people to lunch. Seventy-eight people registered I think and we got 30 submissions for how can I work with a Korean company.Then you can setup a partnership. These were startups so a lot of the people who came were also startups. I asked them to submit the ideas on pieces of paper because sometimes when English is your second language it’s easier to read the proposal as opposed to verbalizing it. So we picked a winner, a company called Platform and a company called Dodles were the winning combination. But there were lots of other ideas and we’re continuing to follow-up.

There were four different educational companies that came to talk about their educational curriculum that could be commercialized or used in schools. I wanted your listeners to know about a bigger contest, which is happening, it’s called the K Startup Grand Challenge or K-StartupGC.org. It’s a much bigger contest, and they have the opportunity to strike up partnerships with large Korean companies. That’s an amazing opportunity, much bigger than the small trade mission we did a couple weeks ago.

Rocco Forino:

So do you know who puts that on and do you know the timelines for that particular…for the K Startup?

Teresa Esser:

You need to go online and fill out an application before I think June 15 or June 14. Definitely get started. You’ve got a little over nine days or something like that. Who it’s being put on by. You could say it’s put on by the Korean government. Which government ministry I don’t remember. I know they’re going to judge during July and I mean once you get designed in, once you get such a huge entity behind you there’s really no limit to what you can do, so I would definitely look at the website and check it out, make sure it’s not something that you want. Then I would say if it is something you want and you don’t happen to win this particular contest, by all means, try to find out what’s plan B. If you say, hey, I really want to go to Korea, there’s just lots of programs you could take advantage of whether or not it’s part of this contest.

 

 

 

Rocco Forino:

That sounds like a great opportunity. I would definitely recommend any of the listeners interested to definitely get on there. Are you looking for business proposals or something more tangible, something already together?

Teresa Esser:

A business that wants to get on a plane and fly to Korea and live there for a while and figure out how to do business. I’m highly motivated. I think we all need to reimagine ourselves, and I think that’s something that you touch on with your work with opportunity zones. There are parts of the United States, there are parts of cities where if somebody came in with a fresh perspective they would say, wow, what an opportunity. Just by being foreign, by being new, by being…if you shake everything up and you say this is an amazing opportunity to build something, and you don’t have all the baggage and you don’t have everything that’s holding you back. It’s just a totally new blank slate opportunity for you where somebody else who might have grown up there, they’ve got their whole life of limitations and past memories. Just start over. Start over somewhere else. Spend three months or bring in new blood. Bring 10 new Korean entrepreneurs to Milwaukee and say, well, what could you do here?

Rocco Forino:

Yeah. That’s a great idea. I like it. I hope it really takes off for you, too. I think reaching out globally is a great idea. It just gives people better perspective of the world. I mean look at Steve Jobs. He went to India before he started Apple.

Teresa Esser:

Wow. I didn’t know that. That’s interesting.

Rocco Forino:

Yeah. And that’s kind of where he got his Zenness for very clean design, not everything being overly designed and too busy. After that trip to India, he really was focused and pretty much changed his trajectory of Apple at that point. Same thing with Howard from Starbucks.

Teresa Esser:

Oh, really?

Rocco Forino:

Yeah. He went to Italy and he was like I really like the concept where people get together and drink coffee. So when he went to Italy, that was his fresh perspective. So you’re right, when you step out of your comfort zone or wherever you live and really get a feel for global culture you could come back to the United States and create billion and trillion dollar companies.

Teresa Esser:

Exactly. At lower risk because it’s already been tested somewhere else and you’re just essentially applying what works. You’re solving an arbitrage problem. You’re saying this worked really, really well over there. What if it just comes and takes off over here? I think that’s another interesting thing about these whole opportunity zones is what if we just do something that we know is going to work and we just put it here where the rent is lower and we get clear tax benefits for doing it here. These are all interesting.

Rocco Forino:

So I heard you speak at the Family Office event in March, and you were probably one of the few speakers that really got the audience cheering and clapping. So I actually got it on video, too, so if you want it I’ll send it to you. You said the Midwest has a trade surplus. I want the United States to manufacture more, sell more. My mission is to help the United States export more. I was like, wow, this is someone I’d really like to do deals with because it really spoke to the crowd because everybody who has money clearly wants the United States to be the leader in the world for the next 100 years. It just seems like if people don’t say things like this or they’re not motivated it just doesn’t get done. So that kind of motivated me. I liked your presence and what you had to say, so it was really cool.

Not a lot of people are saying it at these conferences. Most of them all they talk about is real estate. I don’t think people understand that entrepreneurship creates jobs, jobs creates income, which allows you to afford eventually real estate, rent, stuff like that. I mean this country has to lead with entrepreneurship and business. So that’s where I kind of had a link with you. I was like, wow, she’s great.

Teresa Esser:

Well, thank you. You can use big data to figure out how to lower the risk when you’re trying to learn how to export. I’m a big fan of using the resources that we all paid for when we pay our taxes. I’m in favor of using the United States Department of Commerce. There’s a program called Export Tech, which every time you send a package outside the United States you have to fill out a customs form. You have to say the dollar amount and the place where it’s going,and the SIC code, SIC code or NAICS, that’s the category like is it a book? Is it a chair? Is it a table? Everything has a SIC code.

So all of that goes into this database. So if you show up at export check and you say I’m a manufacturer. I’d like to figure out how to export they’ll say have you thought about…they’ll run it through this program. The big data will look at trends and they’ll say, have you thought about Brazil? You say, no, I was thinking of trying Denmark first and they say products in your SIC code are doing really, really well in Brazil right now. Have you thought about trying to export to Brazil? What about a trade mission? Then you could say that would never have occurred to me.

That’s where I think in the world we have to let go of our ego and just let the data tell us what we should be doing. Let the big data say what about if you did it this way? What about if you turned all your assumptions upside down? What about if instead of saying I’m scared of that neighborhood just say, you know what, that’s an opportunity zone. I should figure out how to manufacture here and export.

Rocco Forino:

So that’s cool. That’s a real functionality of a government website now? It gives recommendations?

Teresa Esser:

Yeah. Export Tech. Anyone can go to Export Tech. It’s really one of the most underutilized things that I know about. We had a lieutenant governor just left and their entire mission was have you thought about exporting? What about Export Tech? Would you like to go through Export Tech? Wisconsin does not have a lot of state support for entrepreneurship but they do have grants for learning how to export. Go through this program. There are scholarships you can get from the City of Milwaukee. Scholarships to help pay for the cost of showing up, going to school, learning. Once you go through you can get a grant to learn how to export. It’s a very high probability of winning the grant unless you owe back taxes. I mean seriously. Learn to export. Do it. All the data says we should be doing this and it’s also common sense, in my opinion.

I think the only thing that’s holding us back is fear. Fear of the unknown, which is why I want to bring those Koreans here and say look at them, they’re just like us. You don’t have to be afraid.

Rocco Forino:

Wow. That’s crazy. I never thought that…I remember when I got out of college one of the things, because I studied international business and finance. They showed us how to use all the websites but they weren’t recommending anything. It was just, like you said, SIC codes, NAC codes, so there was just actually so much information about what you could possibly export. Trying to figure out where was probably a lot harder, so that’s great that that’s an option now.

Teresa Esser:

Yeah.

Rocco Forino:

So you wrote the book The Venture Café. I have to say, it was probably one of the best books I’ve ever written on entrepreneurship. You really dive into some really emotional and timeless topics that most entrepreneurship books hardly ever cover. This is a book I wish I read when I started my first business in 1999 after I graduated college, so I could have avoided quite a few mistakes. What inspired you to write the book and did you write it during your and your husband’s startup NBX or right after? At what point did you begin writing it?

Teresa Esser:

So I was 100 percent focused on writing a book and being an author from childhood. Then I studied writing in college. I got a job working in book publishing so I could learn how to publish a book. I was an editor. I was like I’m going to take the job. I’m going to be the one that controls whether or not that I thought it was impossible. I thought I would figure out how to do it. So I was taught to follow the money, and the money was going into venture capital in 1998, so I said I’m going to write a book, how do venture capitalists make the decision about who they’re going to invest in. How do they decide that? I’m going to find out. So I interviewed them. I didn’t know any answers. I said people will spend an hour with me over a cup of coffee and I can interview everybody and I can learn everything, and I won’t be bothering people more than an hour but some of them might have some good stories. So that was the point.

I was also inspired by a couple of things. One, the Cheers television show. You want to go where everybody knows your name. And then a book by Joseph Mitchell called Joe Gould’s Secrets where Joe Gould was going around trying to create an oral history of our time in the ’30s in New York. I said that’s brilliant. An oral history of our time, who doesn’t want to contribute to an oral history of our time? But the time was 1999, 2000, 2001. People were very, very candid until the market crashed but they were very candid in 1999, 2000. So I just did a lot of interviews then.

Rocco Forino:

Yeah. It was really well done. For the listeners out there, if you’re ever thinking about starting a business, this book covers all the topics that really hit some deep emotional points. So I broke down your book by a few chapters that I want to cover because part of the podcast is to delve into the brains of entrepreneurs and what they need to do and then see how we could connect them with venture capitalists and they don’t know how. A lot of people don’t know how to make the connection.

Before I talk about the first few questions in the chapter, have you ever seen the Silicon Valley show?

Teresa Esser:

I have, yes.

Rocco Forino:

Do you think they ripped off any of your content because a lot of what you talk about, it’s like every episode is like something out of your book except they make it funny even though it’s like getting sued for a trademark infringement that’s a disaster or someone steals your code or they’ve got so many topics that kind of follow the chapters of your book.

Teresa Esser:

I think it’s just universal among all entrepreneurs. I don’t know…maybe they just came up with the same ideas on their own. I don’t know.

Rocco Forino:

Yeah. Yours is pretty much emotional. It tells the raw truth of failure, people waiting things out until foreclosure and stuff like that. That’s what entrepreneurship is. You believe in this idea and in yourself for things to just happen and sometimes they just don’t. Do you think it’s funny, that show, or what is your take on it just out of curiosity?

Teresa Esser:

So I just have to be completely honest. I’m female here and the world of venture capital is approximately 94 percent male. So that is the thing that jumps out at me when I watch that show. When I watch that show I say I need to do a really, really good job at what I do so that I can ignore that show because I just need to focus on my own work and I don’t want to think about everything they’re implying because they’re implying that it’s just impossible for women. If you just look at that show it’ll just make you so mad and so I just block it out.

Rocco Forino:

Exactly. I think I emailed you about Prashant Doshi. He’s also an MIT grad, and he also spoke at a recent conference and he was talking about how he’s looking to exclusively invest in women entrepreneurs. That’s actually great because there’s so many female entrepreneurs out there, but I just don’t see…even in my email I’ll get reminders from Forbes of the latest funding to a specific startup. Not a lot are female and not a lot is happening in that sector of the world over there, so you’re right. That’s got to change.

Teresa Esser:

Well, there are strong women and there are women who can be trained and there are women who can get apprenticeships. So that’s part of what I do. I put on an education class for angel investors. You just say, look, you could be an angel investor if you learned these things. This is the journey that everybody else has gone through and you could also think about being an angel investor. Everybody is scared at the beginning. I have been so fortunate because I have attended meetings of the Angel Capital Association. I went to their summit. They have a summit every year. They have regional meetings. They train you. People come up and they say, hey, I learned about angel investing. These are the mistakes that I made. Yes, I made a mistake. Yes, I lost money on this company and I made money on this company and this is why and these are my strategies, and it’s really, really collaborative and empowering.

So that is how we get over the initial resistance by just encouraging people to look at it like a lot of people, they don’t have any problem writing a check to a politician who says he’s going to create jobs, but they have a hard time writing a check to an entrepreneur who’s standing in front of them saying I’m going to create jobs. This is the weird psychological thing. When you make a donation to a philanthropic cause, you’re 100 percent guaranteed to never get a penny back. When you invest in an early-stage entrepreneur you might make 10 times your money or you might not make your money back. Why is it harder? Why is that harder? It’s because there’s risk. We’re trained to avoid risk, but people don’t have a problem making a philanthropic gift.

There’s this new trend called program-based investing where program-based investing is have your foundation write a check with the explicit goal of trying to make the world a better place, educate people about entrepreneurship, try to create jobs, and if you win you’ll have a bigger foundation and if you don’t you’ll have achieved your mission of making philanthropic gifts out of your foundation.

Rocco Forino:

I mean the one thing about philanthropic gifts is that once the check leaves there’s really no…you can’t really track how it’s doing. When you invest you can track the progress of that investment and that makes sense because philanthropy is great but when you’re just giving money out and there’s no way to track the progress or the success of what it’s doing, investing in entrepreneurs even at the angel and seed level, you could monitor it, you could see what’s going on. You could watch it grow if it’s doing well. You’re right.

Teresa Esser:

You can serve on the board. If you’re on the board you can ask for financial…if you can get the financial statements. You can tour. You can have the board meetings at the company. You can look around. Let’s see the inventory you have. Let’s see the new equipment that you got. How are you doing with sales? Do you need help? A lot of people you have to show up and say do you need help. What can I do for you? A lot of people have a lot of expertise. People are retiring and they still have a lot of years of activity ahead of them so angel investing is great for people who don’t want to be retired. They want to be partly active but they also want to have the ability to go on vacation.

Rocco Forino:

Right. Cool. So I wanted to cover a couple topics in your book. The first chapter was The Entrepreneurial Mind. What type of mentality or what type of mental preparation or experiences would you recommend to would-be entrepreneurs before they venture into starting a startup?

Teresa Esser:

Well, I think that you really have to do a real serious accounting with yourself and your spouse and say this is a dream that I’ve had. Compare it to the dream that some people have of climbing Mount Everest. This is a dream that I have and I have some resources that are available for me to use to pursue my dream. Okay. I am going to be in charge and I’m going to be responsible and it’s going to be me being responsible. I need everybody around me to buy in and support me with this dream. Then I’m going to do it. There’s going to be limits. I’m not going to try this forever. I’m going to take initial risks and I’m going to see how the market responds.

So I am a big fan of saying test it before you go. Don’t just jump off a cliff. When people talk about jumping off a cliff, you can sort of take a little leap down a mountain. Maybe you jump five feet, jump five feet, jump five feet. Do the customers want to buy this thing? There are great programs to help you test that. There are so many accelerators these days. Spend three months testing whether anybody actually wants this. Will anybody actually buy this? What does the customer say? What do you need to have? If the customer gives you something concrete like a signed purchase order that says if you manufacture X quantity of units that meet this specification then I will buy this many for this price. That’s the best thing you can do. Then it’s low risk. Someone could finance that signed purchase order. That’s what people want.

Rocco Forino:

Now, do you think there’s a high failure rate of entrepreneurs who are maybe insecure or care way too much about what others think about them and their failures or if they fail?

Teresa Esser:

Yeah. That’s something that you should be able to fix if you kind of blast through it if you’re really honest about your psychology. You say, look, I need everybody to support me and I’m either getting the support, yes, or not getting the support, no. Why am I getting support? Why am I not getting support? Then you’re clear and you say I can’t do this unless I have the support or I will do this and I need you to support me. You’re just being explicit. That’s good communication. Then people can blast on through and they can say I was worried. I’m worried. What if we spend all our money on this and we lose our house and then we become homeless? What then? What’s the true fear?

Then the person says, well, then I’ll get another job. What if you don’t get another job? Okay, after what period of time do we go to plan B? What’s our plan B? What’s our parachute? What do we do? Well, there are cases where the entrepreneur moves in to the wife’s parents’ basement because they bet it all on red and they didn’t raise the money that they needed, and they were highly motivated to go out and close their next sale.

Rocco Forino:

So that brings us to chapter two. Making the decision to go for it. I found myself in Jeff Osborne’s position a few times where you have a limited financial runway and you’re just waiting for something to just break. So my question is what is it with entrepreneurs just clinging on to an event happening and not really seeing the writing on the walls? At what point should they be like I need to either pivot or do something else that has a positive financial response? Sometimes people cling on to an idea. They think they’re going to make money tomorrow, tomorrow, tomorrow, and it’s sometimes…sometimes its got rely on sales because that leads everything.

Teresa Esser:

Right. So it’s really good if you start the business after you’ve figured out how to get some sales. So there are people who just want to do R&D. They really would like to just do R&D and they want to do R&D on a project that they want. That’s why it’s good to kind of hand over your ego to the data. Whether you’re handing over your ego to the big data of Export Tech that’s saying not Denmark but Brazil or we don’t really need you to do any more R&D on that topic. What about if you actually did the thing that the customer wanted. I have examples along those lines.

Sometimes, you should start out not by making a product but doing a services business because it’s lower risk to just get started. You can do your products later. What if you get to start out by consulting? Whatever the market wants from you, you have to listen and it’s hard to listen.

Rocco Forino:

Correct. Here’s a question that’s kind of relevant to opportunity zones. What about entrepreneurs in high-poverty cities or opportunity zones with no access to capital and they may have a really short cash runway to test out an idea and really have no path to recovery if they fail? What should they do?

Teresa Esser:

Yeah. Well, I can tell you I’m sitting here in a suburb of Milwaukee, Wisconsin and I have spent three-and-a-half years inside Century City Tower inside the industrial corridor, which if you know what I’m talking about then you know what I’m talking about. But Northwest Side Economic Development Corporation is an anchor of that region. So I’m working with Rotary Club of Milwaukee to ask basic questions like how do these entrepreneurs get started, where do they go for support? The true answer is church basements are even more inclusive than Starbucks.

Yes, everybody says entrepreneurs get started at Starbucks writing things down on a napkin. No, for some people it’s a church basement. There’s entities called…like in Milwaukee we have WWBIC, Women’s Business Initiative…WWBIC. There’s BIZ STARTS. There are city-funded entities. There’re accelerators. There are accelerators where you just have to sign up. There are entities where you can go through mentoring and get support from mentors and then what you can’t really see is that behind these organizations, behind these city-supported entities and state-supported entities there are a lot of bankers and there are a lot of investors who are watching to see who comes through. You can’t really see it but they’re waiting and they’re watching and they’re saying whose revenues are going up?

For the first person if they say what I really want to do is I want to start a bakery, I want to do a catering business. Well, here are the fundamentals, the tools. Do you need a loan? Can you get a loan of 50 thousand dollars or less? Well, among those people who have all these interesting products some of them are going to pull ahead and some of them are going to be a little bit more fundable for scaling up. So there’s people that are watching if you start with these programs that are available for anyone who wants to rent a truck and do a food truck business or buy a truck and do a food truck business. There are things you can grow from that. Did you do a good job on that food truck business? Do you want to buy a second truck? Do you want to start catering?

Anybody anywhere can start and I think there’s a lot of support and I know about it because I provide some of that.

Rocco Forino:

So in your chapter three, it’s title Setting Up Shop. What are your thoughts on incubators and what kind of entrepreneurs should pursue an incubator and would you recommend OZ communities to set them up?

Teresa Esser:

Yeah. That’s a good point. So the book’s title The Venture Café. If you go online Venturecafe.com. There are these Thursday gatherings that are setup and a lot of them are setup in opportunity zones including some setup in St. Louis and in parts of Boston that have been traditionally struggling and they just move these Thursday night gatherings into difficult parts of cities so that everybody…lots of people with money will show up on Thursday nights just to learn and share their wisdom. I think that opportunity zones have a great opportunity to just…the reason why I keep on saying Thursday night is because Thursday night between 3 p.m. and 8 p.m. is a time when people should be able to get off of work and go somewhere different and meet new people if they want to do something interesting with their career. That’s really all anybody’s asking for, but the rest of the week a place can be as downs as heal as it wants to be or as it is but you can kind of make it…people can come together for a set period of time to learn and to network and to share a beverage.

Rocco Forino:

Yeah. I think that has to be replicated nationally. Opportunity zone communities should start encouraging it, setting it up because someone has to lead it because a lot of these communities have to take responsibility for their own success. Hopefully they don’t think very wealthy investors are just going to come in and wave a magic cash wand, but I think this is something that they have to initiate on their own. So that’s a good idea.

Teresa Esser:

I think you basically have to start out with somebody who basically knows how to start businesses and has a history of making money and has a plan. That helps kind of direct them to putting down roots in a new place. I don’t know. For a person who’s in an opportunity zone they might have to kind of get up and get somewhere else like just relaunch. People go off to college or go off to an empowering…they might have to leave and come back.

Rocco Forino:

Right. Because you need that fresh perspective because you only know what you’re only experiencing. When I was growing up, Waterbury, Connecticut where I grew up, it’s also a city but it’s not a huge city. It’s a tertiary city so you’re not looking at tall buildings and envisioning I want to be something in these buildings. It’s old ’60s and ’70s buildings. The architects look like they went from there to building prisons. When you go to a city like New York City or Boston you kind of get that energy. You see other things going on, and you get inspired by that. I mean you see things that you’ve never seen before and from me it’s two hours to Boston or an hour-and-a-half south to New York City. I’ve learned a lot from actually working in both cities. You’re right. Sometimes you have to literally get out, make new connections and if you think you need to come back, come back. That’s a good point.

Your fourth chapter, Protecting Your IP. This was an important chapter to me because I wish I had this book when I started in 1999. I had no idea how to locate a specialized patent attorney and one that dealt with the specific topics that we were dealing with. This guy was definitely not in my best interest, literally charging me by the minute. Solike I said, if I had this book back then it probably would have saved me lots of time and energy. What do you have for advice for entrepreneurs who need to find a quality IP attorney who the entrepreneurs might be from a rural or high poverty community where these specialized attorneys don’t often exist? Where would they start?

Teresa Esser:

Go to the library and check out the book Patent It Yourself. If they don’t have it your rural library ask if you can get it on interlibrary loan. Then you should always work up the courage to talk to somebody you know who seems like they have it together. Someone in your town will know of a good patent lawyer. Someone in your community will have heard of a good patent lawyer and think about contests. First of all, try to patent it yourself. Network your way to a patent attorney. I’m thinking about a very small town that I know of. People who are on the library board should be able to help you.

Rocco Forino:

I don’t think a lot of people rely on library resources as much anymore. They think Google has it all but librarians have a pretty deep wealth of information.

Teresa Esser:

Yeah.

Rocco Forino:

That’s a good idea. Back then, 1999, I probably didn’t know of Google so I wasn’t using Google to find an attorney. Some people recommended a few to me and not only did they not specialize I just think they’re more about billing by the 15 minute increment. So that’s something that a lot of people have to be careful of.

Teresa Esser:

I mean if somebody is that obsessed with being…if they’re really not trying to be a good person they’re just not going to volunteer to serve on the board of a library.

Rocco Forino:

Right. That answers that question. Let’s talk about VCs. So in chapter six, what did VCs look for in evaluating new proposals. You mentioned one VC gets about 100 emails and calls a day. How do entrepreneurs with no connections to angels or VCs find a trusted referral? Where do they start to build this bridge to investors? You know, that’s going to be a major hurdle for maybe businesses starting in opportunity zones, for example. There’s not really a lot of investors around because if there was they wouldn’t be called an opportunity zone.

Teresa Esser:

Here’s the short answer. I am in Milwaukee so I know Milwaukee. Let’s try to apply it to your city. So look up Northwest Side Community Development Corporation, Howard Snyder. This is a community development corporation. There are many community development corporations across the United States. Then there’s WWBIC. If you were in Milwaukee and you had no money at all and you showed up this would be the place to start from zero. Okay. But wherever you are look up your local community development corporation and if you have to go to a library and ask a librarian, where is my community development corporation then do that because behind them there are lots of donors and some of those donors are banks. So bankers have to put aside some money for community development. I don’t know the exact phrases or how it’s…there’s some money associated for community development. There are people who are looking for investment opportunity.

So starting from zero with no network at all. If you were in Milwaukee, I would definitely say go to Bizstartmilwaukee.com, go to WWBIC, go to Community Development Corporation. Those people all know who the other ones are and they know who they are in your community. Behind them there are the donors and the sponsors and the volunteers. Those people have money. They are looking for good business. Maybe they’ll have a class of 100 different businesses. Maybe you can join that class. Within that class, if you are investable, fundable, if you’re looking to build the business where you want to bring in some investments and you want to take care of somebody else’s money and you’re not just doing it for yourself they’ll figure that out.

You can talk to them. You can tell people what you want to do. Now, there are businesses where really you should just keep it for yourself and that’s fine. These community development corporations they can help you decide what category you’re in.

Rocco Forino:

That’s great information. I wish I knew that, too, coming out of college but this is great advice for anybody starting up now, whether you’re in an opportunity zone or not. That’s great. In your book, you wrote about the Muddy Charles and I love the concept about it. I think most communities who really adapted this type of connection point to bringing entrepreneurs and VCs and angels together. What should you recommend communities do, including opportunity zones, non opportunities zones, cities, what do you think they should do to build this type of ecosystem? It’s not that hard but what would you recommend them to do?

Teresa Esser:

So I tried to figure out how to make it just as broad as possible and it’s two words that really resonate. Free beer. So free beer. Who doesn’t want a chance to think about free beer even if you don’t drink? Free beer, free coffee. So that’s what this venture café concept is. So who wants to pay for the free beer? A person who wants to take credit for economic development, whether they’re a bank. Whether they’re an attorney, a law firm, whether they’re an economic development corporation. If they want to say we sponsor the best entrepreneurial networking support organization in our city because we’re great and because they have their ways to get money and they have their ways to get philanthropic dollars out of their wealthy clients. So if they were just to follow this venture café model. Thursday night we’re going to have class. We’re going to have networking. We’re going to have office hours. We’re going to have free beer. There are ways that a community can be self-policing. Everybody the first time you get a one, the second time you get a two. Your name, one. Your name, two. The 300^th time you get 300.

So how many times have you been there? How well have you donewith the community? If someone is bad, cut them off. The people who really want to try and be part of networking and part of mentoring and part of building the community let them come back. So I think that’s what works. It’s a good model, and I think it’s helped a lot of people build their careers and build successful businesses.

Rocco Forino:

Whoever initiated it is pretty much genius but the Muddy Charles is what? Is it a bar or on the MIT campus?

Teresa Esser:

It’s a bar on the MIT campus. It’s graduate students. It’s inexpensive. It’s the cheapest beer around. It’s not free but it’s super cheap. We’re talking a dollar a cup. I don’t know who pays for it. Probably Graduate Students Association. It’s just a bar with a really good vibe where you can talk about your project and was the one who invited people to his Muddy Mondays. He would try to encourage them to go talk to somebody. So the whole concept of bridging the connection, lowering the risk, lowering how difficult is it to talk to somebody without anything implied. The concept of the Muddy was women can talk to men, men can talk to women. Nobody has to be afraid of anybody hitting on anybody. Let’s take that static away. We’re all here to build businesses. This is for profit. You’ve got some skills. I need some skills. I need somebody to do operations, somebody to do human resources, somebody to write some code, somebody to do sales. Somebody to do all these things that I need to do. Who can I find? Who likes my idea? Who’s going to be good? Which patent attorneys aren’t going to steal my stuff? It’s all free advice, free mentoring within the confines of this bar, within the confines of this time period of 3 p.m. to 8 p.m.

Everybody understands this is where we…call it marketing, call it networking, business development, but within this no one’s charging you anything. No one’s charging your for the beer. No one’s charging you for the advice. No one’s charging you for anything. It’s just all safe. Then you can do the rest of your life outside of it.

Rocco Forino:

So it’s that easy. I mean there’s really no infrastructure. It’s just you meet somewhere and then potentially millions or billions of dollars could be produced eventually out of this very simple connection point.

Teresa Esser:

Sure.

 

 

Rocco Forino:

Surprisingly, a lot of these communities don’t have this simple structure setup and that’s probably why we have 8,762 opportunity zones. If we broadcast this everywhere, wherever there’s people listening that are opportunity zone leaders they could take this information and start building on it right away. I mean it doesn’t sound like there’s much needed. You don’t have to build buildings. All you need is a place to connect people.

Teresa Esser:

Right. You need sort of a designated place to tell people to go and certain times so that when they show up someone else will be there to welcome them at the door and to tell that person whos the number one they’re afraid because they’ve never done this before and that that’s okay. We’re glad you came. That’s the concept of the Cheers bar. You want to go where everybody knows your name. You want to go where everybody’s glad you came.

Rocco Forino:

I like it. When I read that I was like that is another thing I wish my…so when I started my business it wasn’t designated an opportunity zone back then. It was called an information technology zone. So it was put on by the community development and we moved our business there and as soon as we moved our business downtown, lights out. No one talked about ITZ anymore. No one talked about funding entrepreneurs. My partners, who were both Harvard grads at the time they were like, dude, we’ve got to go to Silicon Valley where the money is. I was kind of adamant…they’re putting on an information technology so maybe we can make something happen here. Unfortunately, it didn’t work out but this is all information that people could learn from and prevent from happening with this new wave of potential investments.

Now we educate the future.

Teresa Esser:

Yes. Learn from past, move forward.

Rocco Forino:

Quick question, what do you look for when you invest in entrepreneursand startups? What’s the one characteristic that says this person has what you’re looking for?

Teresa Esser:

Well, there’s two things. The first one is grit. The ability to stay motivated and keep going and acknowledged difficulties but continue to stay motivated and continue to keep going. The second one is something to sell, ability to sell. There’s got to be a salesperson. I’ve heard it said the CEOs middle name has to be sales. So you’ve got to look for a team and somebody on the team has to be able to sell and they’ve got to be able to sell something. We need to be able to understand why the customer bought the thing, what it does for the customer, why it makes sense. Those are two things.

Rocco Forino:

Girt. That’s like I think people really need to know what that is. When you’re going through difficult times you’ve just got to keep plowing through. If you just throw your hands up in the air at the first hurdle then you’re just never going to make it in any type of startup. So grit is like getting your brain under control to be able to handle every single hurdle that’s coming at you.

Teresa Esser:

The shorthand for grit is, is this a person who knows how to make phone calls, who knows how to reach out, who knows how to approach people they don’t know at a networking event. Because there are a lot of people in the world today who don’t know how to make phone calls and they’re afraid. It’s like just blast through that. So make that phone call, have it not get answered, leave a voicemail, follow up with an email, send that text message, show up at the networking event, reach out on LinkedIn, exchange that business card, and follow up again and repeat and repeat and repeat and don’t worry if someone didn’t want to hear from you because they’re afraid of the phone ringing and they’re afraid that maybe you’re a scam artist but you’re not. So then you follow up again and they judge you on the sound of your voice and they judge you on whether or not you were reliable and followed up like you said you were going to. That’s a way to measure grit.

If the answer is I am not the right person for you, you are not at the stage that I am looking for then acknowledge that and say thank you, who is? Well, this is an organization which is explicitly setup to help you go through zero to one. Great. We support that because everybody has only a certain amount of time to perform philanthropy.

Rocco Forino:

Well that leads us to your chapter seven on perseverance, which definitely has grit built into it. You wrote about Barry Star. Could you brief us on his perseverance because for most people in his experiences probably would have had a string of panic attacks and many would have probably quit after their first hurdle or deal break down. This guy was so driven and not willing to give up. How didn’t these VCs recognize this super important characteristic?

Teresa Esser:

So I’ll leave it to Barry to tell the story in his own words in the book but you’re exactly right. A lot of venture capitalists miss out on the entrepreneurs who are most deserving and have the most grit, and it’s up to you to decide how much grit you want to have and how much time you want to spend doing this business. Things change. Things can go up and down. A new competitor can enter your field and make it more difficult for you. In the banking world there are lots of banks that exist already. There are lots of innovative, new ways of doing financial transactions.

I don’t know. We all have to pivot and we all have to decide how much time we want to spend on any idea.

Rocco Forino:

That was a pretty interesting story. It was like one hurdle then another. I was like I don’t know because in your beginning chapter you wrote about another person who had this similar issue but it wound up failing but in the long run he did very well but then Barry Star finally hit the most absolute bottom base structure you could probably touch and then just skyrocketed from that point. That was a very interesting story.

Teresa Esser:

Yeah. It’s like where is your lost item located? In the last place you look. Well, you’ve got to keep looking until you find it.

Rocco Forino:

Now your chapter 11, The Dark Corner. Could you give us a standout story or two that you think people should know about in this chapter? Because there’s quite a few reality checks.

Teresa Esser:

Yeah. The Dark Corner, we didn’t use their names so sort of somebody speaking in the dark. Their identity is disguised on purpose just because sometimes there’s abuse that happened. These are stories that I found abusive. You always need to maintain your own residence. Don’t live on somebody else’s couch. I think a person should be able to figure out how to be able to figure out how to be able to pay rent, to have a roof over their head throughout the period of the business and they should be able to…I think that’s necessary. These are some stories about a person who didn’t have enough resources set aside, didn’t maintain his own personal residence, wound up essentially being a slave to another person, and had to go home to their parents feeling embarrassed but at least they had parents to go home to.

So that’s why you need to maintain your personal integrity and decide I’m going to do this. This is the opportunity that I’m going to have. I need to have a certain amount of support from my community. This is the amount of risk I’m going to take. When I reach this point either the customers are going to buy and they’re going to have a track record of buying. I’m going to go out to my community development corporation. I’m going to get training. I’m going to get education. I might get a loan. I’m going to start that but if the answer is just no, no, no, no one wants to buy this thing then I’m going to stop and I’m going to sell my resume for a while, get a job, earn up some more money, and figure out what does the world want from me? Because there are things you can sell that the world wants to buy but the question is, what is it?

Rocco Forino:

Exactly. So a few more questions and then we’ll wrap up. What do you look for in an investment and how do you like to be approached?

Teresa Esser:

Email is always good. Starting with email with an executive summary, nonconfidential. We don’t like confidentiality agreements because we’re just a network of people who like to talk. We’re a network of people who likes to share due diligence on deals, so send a nonconfidential executive summary. There’s a problem in the world, I’ve got a solution. The world wants to pay me to make this problem go away. This is my product. I like it when people are bold enough to think that they can expand globally. I like it when people say they’re interested in learning more about the K-Startup Grand Challenge. I think there’s somebody at the Korea Design Institute for Design Promotion who would like to hear about my business. I would like to figure out how to make an international partnership. I am not afraid. I want to take myself out of my existing community. I want to make friends and grow.

I like to hear that you’re taking advantage of the support that exists like did you go to a venture café. Did you go to a networking event? Then can you sell? What can you sell? Okay, I want to invest in people who can sell the best but of all the people I heard of, where can I add value? Can I add value by helping you expand into Korea? Okay, what are you manufacturing in the United States? What have you figured out how to sell? I want you to use those community development corporations and business plans, competitions, and incubators and accelerators to test your thing and com to me when you’ve said we figured it out. We figured out this is what we can sell and we’re good at it and I want money to scale.

Rocco Forino:

Now, are you seeking to invest in opportunity zone businesses or funds or are you sticking to what you traditionally do?

Teresa Esser:

We’re open to everything. We’re open minded and we’re just…let the entrepreneur tell me what their idea is. Let the market talk.

Rocco Forino:

So if you had to give advice to an entrepreneur or an opportunity zone fund seeking investments from your firm, what would you recommend?

Teresa Esser:

Lead with revenue. Open the conversation by saying we have found a way to sell product. This is our product. These are our customers. This is the type of customer. I don’t need their name. Our revenue is trending upward. We figured it out. We want to work with you because you have expertise and we value the expertise that you have. Your particular expertise, particular kinds of companies that you’ve worked with in the past. That’s how I would kind of lead with it.

Rocco Forino:

That’s great information. I mean your whole book really gets in the mind of both the entrepreneur and the investor and it fits our channel because we’re looking to connect the two somehow but provide the audio experience that allows an entrepreneur to figure out what they need to do and then learn how to connect with VCs or angels if they never have. Your book really lays it out in a very nice way. Even though it was published in 2002 it’s definitely timeless.

Teresa Esser:

Thank you.

Rocco Forino:

Again, Teresa Esser, thank you so much. I’m a big fan of you, your passion, and your mission. If you haven’t picked up her book, The Venture Café, you can go get it on Amazon today. The book is a must-read for any entrepreneur starting out. Thank you so much for coming on the podcast. It was a pleasure.

Teresa Esser:

Thank you.

Special thanks to Teresa Esser for coming on the show.

Edited by: Jadon Grier

Music by: Andrew Andraos