3 Reasons $100k checks are better than any other check size

Two weeks ago, my son Asher came in 2nd at the State Hockey Tournament… and I was %!#$#& about it.

Not because they lost …

… But because of the complete lack of sportsmanship and respect for the game showed by the other team. I had to stand by and watch as my kid gets triple-teamed and used as a punching bag.

After 6 years of hockey (started when he was 3) I realized, something has to change.

I had a decision to make.

1. Complain to the Refs: Sure, I could have made a fuss, yelled at the refs, and otherwise been that asshole hockey dad everyone talks about. But that’s more likely to lead to my kid getting kicked out of our hockey league than it is to do anything useful (don’t ask me how I know).
   

2. Level the Kid Up and Learn to Battle Hard: I have to accept that Asher isn’t going to be an 9-year old playing in local “friendly” leagues anymore. He’s going to move up, the competition is going to hit harder, and he needs to learn how to defend himself.

I talked to Asher’s coach, and he agreed that if the refs aren’t going to call anything – our kids need to know how to give it back.

Was this the End of innocence or Birth of the Fighting Soul?

24 hours after we touched down at LAX, I had my son in “Battle Camp” getting ready for the next season.

Because in the Klaff family, we put up with a lot of stuff, but we don’t back down from bullies. Not in sports, not in business, and not in life.

It’s something I learned early on in my life from my father.

As a professor, he was regularly asked to “give” a passing-grade to a student-athelete.

His answer was always the same: Happy to give the student a “B”…. if he earns it.

Again, we don’t back down from bullies.

Because what’s the point of taking that paycheck if you lose control of what matters most?

Here’s the deal…

As you advance in your own career … Executive, Entrepreneur & CEO, you will inevitably move beyond your local “friendly” community.

Once you do, things get harder.

You meet people who want to win, and because they have no personal connection to you or your feelings, they’ll do whatever it takes.

In hockey, that means 9-year olds high sticking, slashing, and cross-checking.

In business, it’s knocking off your product and stealing your customers.

In finance, it’s changing the deal terms at the last minute so you can get a lower price and insert control terms.

How do you protect yourself from bullies? And if you’re raising capital, how do you keep them off your Board, off your Cap Table and out of your life?

Answer: $100k checkwriters.

Let’s dive in.

-Oren

3 Reasons $100k checks are better than $1m+ ones

Let’s take a look at last week’s poll.

As expected, a lot of people are having some challenges getting their first check… and some people are crushing $1m+ no problem.

But if you focus on this $100k check category, these are the CEOs who have the most control over their company and their lives.

Look. The story that every $1m+ check writer wants you to believe is that their money is somehow “more valuable” than someone else’s (The “Myth of Magic Money”)

It’s not. Bigger checks are just more expensive and come with worse terms. And I promise that having a big investment name on your Cap Table is NOT going to crown you “King” of your industry.

Don’t get me wrong. I love closing huge deals and cashing big checks. They’re great stories for my all my books. But my career was built on $150 - $250k checks.

Here’s 3 reasons why the $100k checkwriter is the “sweet spot” for your deal.

• Short Sales Cycle: 45 minutes, start to finish, from pitch to close.
  

• You Stay in Control: $1m+ checkwriters almost always ask for control provisions like preferred shares, voting rights, liquidation preferences, and maybe board seats. On the other hand, $100k investors don’t want – and don’t get – any of that.
  

• Deepest Audience: As you expand into smaller checkwriters, there are simply more people who can write them outside of an institutional setting. Depending on what stage your at - even if you’re a large business - It often takes less time to raise ten $100k checks than one $1m check.

Once you get good at raising this check size – and get comfortable with the rather minimal reporting requirements – you’ll get some much-needed practice before going after bigger investors.

Bonus, if any single investor turns out to be a pain and really sucks, you can exercise your “Bad Boy” clause and kick them out of the deal. $100k is a lot easier to refund/replace than a $1m+

Setting Meetings with $100k Check Writers

“Okay Oren. I believe you. Get me into that $100k checkwriter market. Where do I go to get them?”

I’ll answer this question, but first, let’s take a step back and think about the critical question…

Question: Why would someone want to be a minority, non-controlling, non-voting shareholder of your little company?

Chances are, this $100k checkwriter is a business owner who is further ahead in their career than you. This means they already own a cashflowing business that provides their family with stable income.

…. so why would they take money out of that compounding return stream and put it into your risky company?

Answer: it has the potential to generate a higher rate of return with non-correlated risk to their primary asset.

In other words, they’re not taking risk inside THEIR business because that’s what feeds their family. But they’ve got some risk capital they’re looking to put to work inside more speculative plays with higher upside potential - aka Your Company.

So how do you convince this successful business owner to give you $100k?

• First, you need to present yourself like an actual CEO of an operating business and not some tech or early-growth stage founder: so know your finance metrics.

• Second, you need to do is explain how your risk profile is DIFFERENT from the risk profile of his business… and how you offer higher potential returns.

• Third, recognize that most $100K checkwriters want a possibility of an exit in 3 years, even if it’s in the form of a recap. A 5-year exit cycle is what large investment FUNDS want to get involved with, but that’s a long time for smaller check writers.

What do 1, 2 & 3 above have in common?

Think of it like this … don’t act like a “founder” in front of investors.

Be a CEO.

Because if you start talking and acting like a capital markets CEO now, you’ll have a lot more fun – and a lot more success – as you learn to play the game of money the right way.

What’s next? If you want to keep getting these insights, make sure to buy a copy of Pitch Anything for a friend, and share this newsletter.

Rgds,

Oren
[email protected]