The Secret Science of Fundraising (Part 2 of 2)

In the second installment of this two-part podcast series, Levels co-founder Sam Corcos discusses the process of forming Levels with host Jason Yang. This episode was all about finances – how do you value your company properly? How can you pitch in a scalable way? And how can you work to fine-tune that pitch every time? Sam discussed why you should never wait until you need money to start raising it, and why regular, honest investor updates are an important tool for building trust and attracting future investors to your cause.

Show Links

• Check out Levels
• Follow Levels on LinkedIn or Twitter
• Connect with Sam Corcos on LinkedIn or Twitter
• Check out the Funded Podcast

Key Takeaways

02:28 – The strategy for putting a value on Levels

By layering safes and having a dilution goal for each increment, Sam was able to confidently estimate what a good valuation for Levels would look like. This meant he could confidently reject any term sheet that was below that valuation mark.

“One of the things that I had experienced in witnessing previous fundraises, and also just talking to other founder friends of mine, is that price is incredibly opaque. And there’s so much information asymmetry between founders and investors that I wanted to figure out a strategy for how to understand what price would be. We knew that we were going to do a larger raise at some point. But I guess you would go again to first principles. Like, what is price? Price is the willingness of somebody to pay for something. So it’s inherently arbitrary. There’s no basis for price. It’s like, what’s your EBITDA multiple. No, that’s not how this operates. It is the willingness of other people to pay for it. So we thought a lot about how do you do price discovery. One of the ideas was in layering safes and just having a dilution goal for each safe increment. We started at 10 million posts just on safes. Once we filled our allocation for that, we bumped it up. And once we filled that allocation, we went to 20 million, we went to 25 million and we wanted to get to the point where people started saying no. And that was a sign. Like we knew coming into our round that our valuation was going to be somewhere between $30 and $50 million, just because we knew empirically that people were willing to pay that.”

07:22 – Time doesn’t scale, content does

Sam realized he was educating investors on the same topics over and over. So he started creating content around those topics so he could touch the high level during meetings, and then send over the content pieces which would have the answers to all their questions.

“You might think that you’re a unique snowflake. The reality is you should not be afraid to fail. I probably did, I would say easily 500 plus pitches to investors. Possibly more than that. And some of those were actually meet pitching, but in every case, I really did tell them like, we’re going to be raising in September. So I’d have a call in February and say, we’re raising in September, but I’d love to tell you more about what we’re doing. And I would have notes in advance of the call of like, I’m going to test this pitch for this investor and just see how it goes. And oftentimes it would go very poorly and that’s okay. And it was like, okay. So it turns out that terminology does not resonate. And then I would try a different thing. You can see in my email history, I would do a pitch and something just really clicked with the other person. And I would email the team like, whoa guys, we really need to use more of this terminology in our language because it’s totally working. Like it’s the thing that gets people to understand it. So it was incredibly helpful. One of the other first principles is that my time does not scale. But content does. And so in these conversations, investors would ask questions, like, what are your union economics? And if I would get the same question two or three times, that was an indication that everyone’s going to ask this question. So I would spend a few hours writing up a long-form document that I could send in advance or after the call.”

11:19 – Share the idea and sell the execution

Sam doesn’t believe in hoarding ideas. He freely shares the ideas behind Levels with everyone who asks. When you’re not afraid of the competition and you keep your eyes on your own lane, there’s nothing to hide.

“I think part of it is just being able to show other people what you’re doing is really important and building that confidence. I think the other is that I think it is much harder to get people to care about what you’re doing than it is to keep information secret. Execution is hard and ideas are easy. So people have seen our data room and they’re like, oh man, your customer personas document is public. It’s like, yeah, sure. They’re like, oh man, your growth strategy is public. We say, guys, it’s not a secret that you can use influencers to grow. These things are not secret. It’s really just conveying that you’re thinking about this in a really principled way. Very little of strategy is really that secret. Part of it is we just have sufficient confidence in our own ability to execute. If other people see our idea, it’s like, yeah okay, good luck. Have fun trying to do that. It’s hard. So I send a list of all of our competitors. When people ask, I send a list of whatever, like I am sufficiently confident that we can execute. We don’t think about competition. We think about how we execute at the best possible level. So I think that’s the other thing, it really does build trust and confidence in other people as well. And they want to help you when you do that.”

16:44 – Raise money when you have momentum

Waiting to raise money until you need it means you could be forced to accept unfavorable term sheets. Raising money when you have momentum makes it easier to get favorable terms sheets.

“I would say in past experience there have definitely been problems like at Sightline we raised money after I actually left the company, but I was involved in the process. The biggest mistake that we made there was we timed our funding round around when we would run out of money. It’s totally logical. It’s like, well, we have cash for six months. So in a few months, we’ll start raising money and then we won’t run out. The reality is you give up all of your leverage and you put yourself in a really bad position. And when we ended up accepting terms that were not what we were hoping for. And what you learned after that, having been through it, is that you should raise money when you have momentum. That is the best time to raise money. When you have lots of cash, it’s actually very easy to raise money. And so every founder I know who has raised a lot of capital, they always say, I wish I raised less capital and took less dilution. And everybody who ran out of money, he says, man, I really wish we raised more capital. So nobody’s ever happy with their decision, but one of those is an existential failure and one of those is like a slightly less awesome outcome, but a pretty awesome outcome. That was definitely one big lesson.”

22:14 – The firm is nice, but the partner is key

Your partners in business are the most important thing, according to most late stage company founders. This is what helped Sam decide that Jeff was the person he wanted to partner with on Levels.

“I sent a survey out to 50 other founder friends of mine when we were in the late stages of deciding what firm you want to go with. And the thing that was most interesting to me, almost every founder, as in like a late-stage company, they say that the most important thing is the partner that you’re working with hands down. The firm is nice, but you have to really like the partner. You’re basically married to this person. And so we just felt really good, like the personal interests in what it is we were doing and the reputation that he had. Every person I know who has worked with Jeff says he is the best, and he’s an excellent person to work with. That’s after doing a lot of this user research, he was one of those calls and at a certain point, I think this was in August, we put the stake in the ground. All right, we are running our process this week in September. So anything you want to do beforehand, if you’re new, the partner meetings now or later, We are looking for term sheets for that week. So if you just say like, I wanted to get all the term sheets this week in September two and a half months from now, it gives everyone enough time to really do their diligence and understand what decision they’re making.”

25:19 – Honest updates are key to building trust

Sam recommends sending monthly investor updates not only to current investors but also to those you hope to work with in the future so they are aware of how you execute. Being honest in these updates helps build strong relationships and trust.

“I would highly recommend writing a monthly investor update and keeping yourself accountable to it. We send our investor updates every month on the 15th. And it has both of the good and the bad news, and the challenges that you’re facing. And you just be honest, everyone knows companies run into problems and that’s okay. If you have a challenge, you can talk about it. And if people see over time that you overcome these challenges and that you can execute, that is a really good way of building trust. And so when there are people that say you want them to potentially lead your funding round in several months or a year, them being able to see a year of steady progress is incredibly valuable. Like they know that you’re not a fly-by-night organization. They understand how you execute. Building that trust is incredibly important. So we send it on the 15th cause we get our books every month on the 10th. That’s when we get our financials. And so by the 15th, we’re able to ship it. I probably spend four hours a month writing it. Everyone on our team writes basically what their department does and we compile it. We write it, send it out, add people that you think you might want to be involved in a future process. Just add them to it, keep them on the distribution list. So they know what you’re up to. I would say that building that trust even very early on is important. I think we started shipping our investor update when we had like five people at the company. And we had very few investors, but the goal was to have that discipline to distribute that information and keep that mentality of constantly showing people how you’re executing over time.”

Jason Yang : [00:00:00] Hey everyone, quick note that this is part 2 of our 2-part conversation with Sam Corcos,  founder of Levels, so you should have caught part 1 for context. Also, because our end of episode debriefs have been so popular, I’m extra excited for you to hear this week’s, where we invite a special guest to weigh in.

Sam Corcos: [00:00:22] I probably did, easily, 500 plus pitches to investors and oftentimes it would go very poorly. And that’s okay.

Jason Yang : [00:00:36] This is Funded, a show where founders who raised millions in venture capital show the gritty side of what it actually took to get that money in the bank. I’m Jason Yeh, your host. Not too long ago I was trying to get my ideas funded, and back in the day, I was a VC listening to founders pitch me for money. Growing up, I was obsessed with basketball. I went to camps with intense coaches, ran drills in my spare time, and watched ESPN religiously to soak up everything I could about the game. I think it was that baseline that made a trip to see a rookie named Kobe Bryant play when I was in 8th grade, seem so incredible. I remember being shocked by one of his crazy moves, comparing what I knew about basketball to what I was seeing and thinking, “What was that?”, and “How is that possible?”.

Founder and CEO of Levels, the digital health product that tracks your metabolic health, has his own crazy moves in a space I thought I knew well, too. But instead of crossovers and fadeaways to score points, Sam is stacking investment notes and open sourcing internal strategy docs on his way to raising millions in venture capital. In this second part of our conversation, Sam walks me through more of the strategies that fly in the face of expert thought. Of course, that’s all really different from Kobe, but in similar ways had me thinking, how on earth did he do that?

You ended up adding something like 150 angels to your cap table. Can you tell me if coming out of that angel army strategy, did you know that you were going to go straight into a bigger fundraise? Or like, how did you think about staging and all of that?

Sam Corcos: [00:02:24] Yeah, so we took a fairly unusual strategy. One of the things that I had experienced is, in witnessing previous fundraises and also just talking to other founder friends of mine, is that price is incredibly opaque. And there’s so much information asymmetry between founders and investors that I wanted to figure out a strategy for how to understand what price would be. We knew that we were going to do a larger raise at some point, but I wanted to think about, I guess you would go again to first principles, like, what is price? Price is the willingness of somebody to pay for something. So it’s inherently arbitrary. There’s no basis of price. It’s like, well, what’s your EBITDA multiple? No, that’s not how this operates. It is the willingness of other people to pay for it. So we thought a lot about how do you do price discovery? One of the ideas was in layering safes and just having a dilution goal for each safe increment. So, we started at 10 million posts just on safes, once we filled our allocation for that, we bumped it up. And once we filled that allocation, we went to 20 million, we went to 25 million, and we would just see, we wanted to get to the point where people started saying no. And that was a sign. Like, we knew coming into our round that our valuation was going to be somewhere between 30 and 50 million, just because we knew empirically that people were willing to pay that.

And any term sheet that we got, that was less than that, we could fairly confidently say, “I actually know with certainty that the price is more than this.”. So I can confidently say no to a term sheet because we know that the price is better than what we’re being offered. So it was an incredibly helpful way of building confidence and how your company should be valued. So that was the core of the strategy.

Jason Yang : [00:04:32] You know, I’ll just say this, and you won’t take any offense to this because you executed it flawlessly and you raised from fantastic investors and I think you announced the round, right? You announced a $13 million round?

Sam Corcos: [00:04:48] $12 million.

Jason Yang : [00:04:49] $12 million dollar led by Andreessen Horowitz. So, it’s interesting, I’d be curious if other people could execute it as well as you. There is something about the perception of everything that happens within a fundraise that is incredibly important for an investor. Like, they’re just matching off of what they see. And what you described, is your personality. That is you. So when I think about, if I were running a fund, and you came to pitch me and I saw this happening, I think if another company where to try to do that to me, I would feel very, like almost offended. And I was discussing this with an investor friend of mine who’s looked at your rounds and seen it happen. And it’s like, there is this irrational feeling that investors get when someone says, “We just closed that round and here’s a higher valuation.” and you’re like, “Oh, I don’t want that then.”. But there is something about everything that goes into who you are and your process and your transparency and everything that goes into it that I think is very genuine. So, kudos to you That’s, super interesting. Now, how long did that whole thing take How long have you been fundraising? Actually or are you always fundraising Like, what would your answer there be?

Sam Corcos: [00:06:13] Kind of always fundraising. But I guess a lot less now now that the round is closed. But in the early days I think that one of the things that is often underappreciated Is using investors to learn from them I was talking to a friend who started an insurance company That’s actually doing pretty well now but he’d been thinking about it and working on the business plan by himself for like a year before he was confident enough to pitch And when he finally was like all right the deck’s ready I’ve got everything solved He did his first investor pitch to a guy who knew the industry super well And the guy was like yeah that’s cool But what’s your distribution strategy He’s like Oh I’ve got that handled it’s right here He’s like yeah this is completely wrong Look at these 4 companies They tried exactly this there’s a reason why this doesn’t work What you need to look for is this over here .”. And he’s taking notes he’s like “Man I really should have pitched earlier because that would have saved me a lot of time.”, because my sample size in health tech is 1, and these investors have visibility into 100s or 1000s of companies . And so, you might think that you’re this a unique snowflake, the reality is you should not be afraid to fail

I probably did, I would say easily 500 plus pitches to investors possibly more than that And some of those were actually me pitching but in every case I really did tell them We’re going to be raising in September So I’d have a call in February and say we’re raising in September but I’d love to tell you more about what we’re doing And I would have notes in advance of the call of like I’m going to test this pitch for this investor and just see how it goes And oftentimes it would go very poorly and that’s okay And you just like oh okay So it turns out that terminology does not resonate And then I would try a different thing And you can see in my email history I would do a pitch and something just really clicked with the other person And I would email the team Whoa guys We really need to use more of this terminology in our language because it’s totally working It is the thing that gets people to understand it So it was incredibly helpful One of the other things is another first principle thing is that my time does not scale But content does And so in these conversations investors would ask questions like what are your unit economics And if I would get the same question 2 or 3 times that was an indication that everyone’s going to ask this question So I would spend a few hours writing up a long form document that I could send in advance or after the call Or I’d say, during the investor pitch, “Yeah, I can totally give you the short version of unit economics but I’ll send you a longer form document after, where you can like really dig into it if you want .” And so, we ended up with a pretty solid data room of all of the most common questions that we got and all of the answers to those questions. So people felt confident that we were paying attention and had the answers to pretty much any question that they asked.

Jason Yang : [00:09:16] So it’s actually a great segue into a topic I wanted to discuss with you, which is your level of transparency, between you and the investor class if you will. It’s been a fun top of your conversation between me and other investors, to, from an arm’s length distance, observe Levels. And especially an early stage company, where you just don’t have that much data, right. Like, you’ve been alive for a little over a year, and maybe technically operational for less than a year. What I talk about a lot, is that when you raise these rounds of capital you are telling a story. There is a narrative that you work, trying to get investors to believe in, to believe in you, and data is so black and white. Words are so black and white when they are put on a piece of paper and let to be read without a talk track, without you representing exactly what’s going on. And it’s been interesting, I’ve even seen tweets where people have publicly lauded you, without naming names, about, like, throughout the process of raising money, opening up a data room for anyone to see.

Before I give you point and counterpoint or other ideas around that, I wanted to hear what your driving force was behind it. You already mentioned that content scales and your time doesn’t. Is that the primary thing that you were just like, that’s what I want to do and that’s what we’re going to do, or is there more to speak to?

Sam Corcos: [00:10:48] There’s definitely more. One of the things that we really indexd on were people who do the homework and one of the reasons why we really liked Jeff Jordan at Andreessen. Jeff and VJ ended up leading around, is there were a couple of our documents, were I saw in the edit history, that Jeff actually corrected typos, like in the middle of a 100 page document. He actually read it and was paying attention and understood what we were doing. I think part of it is just being able to show other people what you’re doing is really important and building that confidence. I think the other is that, I think it is much harder to get people to care about what you’re doing than it is to keep information secret. Execution is hard and ideas are easy. So people have seen our data room and they’re like, “Oh man, your customer’s personas document is public.” It’s like, “Yeah, sure.” It’s like, “Oh man, your growth strategy is public.” It’s like, guys, it’s not a secret that you can use influencers to grow. These things are not secret. It’s really just conveying that you’re thinking about this in a really principled way. So very little of strategy is really that secret. Part of it is we just have sufficient confidence in our own ability to execute. If other people see our idea, it’s like, “Yeah, okay, good luck. Have fun trying to do that.” It’s hard. So, I send a list of all of our competitors, when people ask, I send a list of whatever. I am sufficiently confident that we can execute. We don’t think about competition, we think about how do we execute at the best possible level. So I think that’s the other thing, it really does build trust and confidence in other people as well, and they want to help you when you do that.

Jason Yang : [00:12:35] That’s fascinating hearing all those things. There are a few things that I wanted to pull out of there. The last thing you talked about, in terms of not caring about competition, I talk about this a lot. Mostly because in previous companies that I had been in leadership of, I was so concerned with the competition.  And now, reflecting on that, and I see it in other companies, I think it’s a sign of not really knowing why you specifically exist. Like, you have a very specific point of view and why you’re better. And yes, there are other people that are targeting something similar, but the chances of them being exactly the same is literally slim to none. So I really want founders to know why they shouldn’t care about competition. They love hearing that.

And then the other thing to bring out about all of this is that anytime I give someone advice or sit down to talk them through things, I go, “Look, in this game, in early stage startups and venture capital and fundraising, on almost every specific topic worth giving advice around, you can probably find 2 equally credible people that will give you 180 degree opposite advice. And the reason behind that, honestly, is the devil’s in the details,  context matters, and why you do these things. And you described a process which is exactly opposite from an investor I respect, Mark Schuster, who has a whole post on never sending data rooms. Never sending data rooms. And, you know, I would say that he and you probably actually see eye to eye on most things. It’s just the reason he says those things. So I’m glad you were able to unpack that. very very fascinating.

Sam Corcos: [00:14:23] And I would also say that I think the best investors also know that most of the time they’re wrong. And most of the time I’m wrong. Like, they’ll say, “I think you should do it this way. That’s probably not right. And what you’re doing right now is also probably not right. So, figure it out.”

Jason Yang : [00:14:41]

Are you a guy that’ll figure it out? That’s what we’re banking on.

Sam Corcos: [00:14:43] Exactly.

Jason Yang : [00:14:45] When we come back, Sam’s arguments for why mistakes are a good thing.

I spend.

most of my days one-on-one with founders, helping them understand strategies that make a difference in fundraising. One super important tip I always stress with founders is to make sure they send their decks and materials using a document sharing tool. And for that, I always recommend DocSend. DocSend lets you know what’s happening with your deck after you send it along with real-time analytics and notifications. Did the VCs actually open it? What slides did they spend the most time on? And if you think it got shared with the wrong people or maybe you made a mistake and sent it too quickly, DocSend lets you control access and make updates to content even after sending. Sign up for a free 2-week trial at docsend.com/funded. That’s D O C S E N D.com/funded Anyone who’s tried to raise money knows what it’s like to be rejected. For most of us it feels like an insult to your child and a punch to the stomach all at once. But Sam is,, and I’m going to sound like a broken record here, Sam is different.

Honestly it sounds like, from my vantage point, that you’ve executed a flawless process but I also know that everything you see on the outside is not everything that went into it. Do you have any horror stories? Do you have any cringe-worthy moments, anything as you were going to the fundraiser like, “That sucked.”.”, Anything like that?

Sam Corcos: [00:16:34] Not this time around. I’ve experienced it enough times and I was sufficiently methodical this time around that we didn’t have any horror stories. I would say, in past experience, there have definitely been problems. Like at Sightline, we raised money after I actually left the company, but I was involved in the process. The biggest mistake that we made there was – we timed our funding round around when we would run out of money. And  it’s totally logical, , like, well we have cash for 6 months, so in a few months we’ll start raising money, and then we won’t run out. The reality is you give up all of your leverage and you put yourself in a really, really bad position. And we ended up accepting terms that were not what we were hoping for. And what you learn after that, having been through it, it’s like, you should raise money when you have momentum. That is the best time to raise money. When you have lots of cash it’s actually very easy to raise money. And so, every founder I know who has raised a lot of capital, they always say, “I wish I raised less capital and took less dilution.” And everybody who ran out of money says, “Man, I really wish we raised more capital.” So nobody’s ever happy with their decision but one of those is an existential failure and one of those is like a slightly less awesome outcome, but still pretty awesome outcome. So that was definitely one big lesson.

Jason Yang : [00:18:01] Well, 2 reactions to that, and that last thing is, people try to get too cute with things. They’re like, “Well, yeah, but if we wait 3 more months our numbers are going to be 20% higher.” And then, you know, it actually doesn’t affect the valuation that much, right, 3 months.  But it does affect your ability to negotiate for sure. And then the other thing that is really amazing to hear and it’s a reflection on your maturation as a founder and a fundraiser, where I asked you, like, did you have any horror stories? And it was actually, I bet you a lot of those bad meetings would be perceived as horror stories by other founders, but going into the process knowing it’s not going to be for everyone. And not everyone’s going to say yes. And people are not going to like this. But every time we do run into a negative, it’ll be a learning process, is just a great way of reframing things, and a mindset that I think founders need when they’re going to fundraise, at least successfully. So  to flip that question, who’s the most interesting person you’ve met or had invest in this process? And this isn’t a question that I would ask most founders, but most founders don’t have 150 people on their cap table. There are some that you probably can’t share but any that make you light up, personal heroes of yours, anything like that would be cool to hear.

Sam Corcos: [00:19:21] Yeah, I’m happy to share all of it.

Jason Yang : [00:19:24] Of course.

Sam Corcos: [00:19:27] I have been surprised at just how incredibly active our angels have been. A friend, a couple of days ago, asked me to put together a list of who have been most your most active angel investors. And I went through the list, and it’s, I think we have 130-140, something like that, and I was only able to pair it down to like, 110, for our most active.

Jason Yang : [00:19:52] They’re all equally active.

Sam Corcos: [00:19:53] It’s like, “These are our most active.” Which was not much of a filter. I would say, the people who’ve recently been most helpful, Lenny Rachitsky has been super helpful, Julia Lipton has been super helpful. Matthew Dellavedova, from the Cleveland Cavaliers, has been really, really disproportionately helpful. He’s been able to make some of the most important connections to us that we would not have guessed that he had connections to.

Jason Yang : [00:20:22] Well, I think you just helped him get a bunch more amazing deal flow.

Sam Corcos: [00:20:27] Oh, good. I could just list names for days. We have every, almost every person we have involved has been just incredibly helpful.

Jason Yang : [00:20:34] That’s very cool. And then, you know, a question I like asking every founder – do you remember when Jeff Jordan called you and said he wanted to lead the round?

Sam Corcos: [00:20:44] Yeah, I called him. He signed up on our wait list, and I was receiving emails for every person who signed up on our wait list, and I saw that he had signed up and wanted to be in the beta program. So I did a lot of user research myself, I think I interviewed personally, maybe 600 people by phone, from the waitlist, just to deeply understand who your customers are. And what do they want and what does success look like for them? What is the job to be done? Where do they get their information from? How do we, basically using that user research to build what our marketing strategy would be. And Jeff was one of those people. He signed up for the waitlist ,we got him on the program. And I told him that we we weren’t looking to raise yet, I think that was in June or July, when I talked to him, and he ended up coming on as an angel investor, because he’s personally really interested in this. His daughter’s a diabetic, his wife is involved in almost every major diabetes nonprofit, he really, really cares about personal health.

And so, it just seemed like a great fit as an angel investor. And he was incredibly active. And like, in a very disproportionate way. He was super helpful with all of our asks, I could tell that he really cared about what we were doing. And that was a huge factor, coming into our fundraise, Andreessen was our top choice, specifically because of our interactions with Jeff. I sent a survey out to 50 other founder friends of mine, when we were in the late stages, of how do you decide what firm you want to go with. And the thing that was most interesting to me, almost every founder who has, in like a late stage company, they say that the most important thing is the partner that you’re working with, hands down. The firm is nice but you have to really like the partner. You’re basically married to this person. And so we just felt really good with the personal interest in what it is we were doing and the reputation that he had. Every person I know, who has worked with Jeff, say he is with the best and he’s an excellent person to work with. So yeah, after doing a lot of this user research, he was one of those calls.

And at a certain point, I think this was in August, we put the stake in the ground, of like, “All right, we are running our process on this week in September.”, so anything you want to do beforehand, if you do the partner meetings now or later, we are looking for term sheets to that week. So if you just say, like, “I want to get all the term sheets this week in September, 2 1/2 months from now .”, it gives everyone enough time to really do their diligence and understand what decision they’re making.

Jason Yang : [00:23:33] Well, look, a very atypical answer for a very atypical process, but like we’ve mentioned a couple of times in this conversation, executed very well. I think the thing that is very universally applicable, I’m trying to pull out things that are worth and actually able to be executed by other people, is that I think the dynamic between you and Jeff Jordan, which made it such a great process, is that you really built a relationship. And early on, I think investors want to invest in known quantities, founders that they believe in. You know, understanding the way they think about people, and so, I would say, especially how the market has been. There’s been so much investing that has done like, very rapid fire. But I think you do see the best outcomes, and the best investors matching up with great founders, when there has been an ability for them to meet ahead of time. To meet them outside of the normal fundraising environment, having an early conversation, at least. Obviously you took that to another level, ha, another level at Levels.

Sam Corcos: [00:24:45] Ha, talking with puns.

Jason Yang : [00:24:46] Yeah, I was waiting to drop that. And then the phase of conversation that I like talking about is just, are there a couple of things that you’ve been very happy with? Or lessons that you’ve learned that you would tell a younger version of Sam? Or maybe that you like sharing with other founders as they think about, particularly fundraising processes?

Sam Corcos: [00:25:08] Yeah, I think the biggest ones, and we can reference Mark’s Suster again, he wrote a famous post on investing in lines rather than dots. I would highly recommend writing a monthly investor update and keeping yourself accountable to it. We send our investor update every month on the 15th. And it has the both the good and the bad. And like, challenges that you’re facing, and you just be honest. Everyone knows that companies run into problems, and that’s okay. If you have a challenge, you can talk about it. And if people see over time that you overcome these challenges and that you can execute, that is a really good way of building trust. And so, when there are people that, say you want them to potentially lead your funding round in several months or a year, them being able to see a year of steady progress is incredibly valuable. They know that you’re not a fly by night organization. They understand how you execute. Building that trust is incredibly important. So, we send it on the 15th cause we get our books every month on the 10th, that’s when we get our financials, and so by the 15th we’re able to ship it.

I probably spend four hours a month writing it, everyone on our team writes basically what their department does and we compile it, we write it, send it out. Add people that you think you might want to be involved in a future process, just add them to it, keep them on the distribution list so they know what you’re up to. I would say that building that trust, even very early on, I think we started shipping our investor update when we had 5 people at the company, and we had very few investors. But the goal was to have that discipline, to distribute that information and keep that mentality of constantly showing people how you’re executing over time.

Jason Yang : [00:27:03] Everyone that I know, that is involved in Levels from an investor point of view, raves about the team, you in particular, ability to execute. So, not shocked at, you know, shocked at some of the answers, honestly in this conversation, but at a certain level not shocked. I think I was expecting something like this.

That was my interview with Sam Corcos, founder and CEO of Levels. But don’t leave just yet because we found someone to give us another perspective.

Jason Yang: [00:27:34] Hey, hopefully this lighting works.

Jason Yang : [00:27:36] After this message an early investor joins our debrief to tell us how she knew betting on Sam would pay off.

Sometimes, when I’m a huge fan of a product, I go crazy person and network my brains out to try to chat with the founder. I did that with Mike Adams, the founder of this amazing Zoom enhancement tool called Grain, to find out who his other users are. And I was a little surprised at one of the really relevant use cases.

Jason Yang: [00:28:08] We pulled all of our users, we had three segments that popped to the top, where there were like 80% pms score. Meaning like 80% of the people in these buckets were like, I’d be very disappointed if you took and hand away. So one of those ways researchers, one of those was marketers ,and then one of those was founders. Founders were like, “I need this.”, because they end up kind of being everything. Founders are like, they’re the researcher, they’re the marketer, they’re the fundraiser. And so in the context of fundraising, I use Grain to improve my performance. It’s like Gainsville.

Jason Yang : [00:28:46] If you ever take notes on calls or wish you could save magical Zoom moments, you’ve got to try out Grain. To get started for free go to Grain.co/funded. That’s Grain, as in whole grain oats. Okay, back to the show.

Remember Sam shout out to an investor named Julia Lipton?

Sam Corcos: [00:29:12] Julia, this is Olivia. Olivia, my good friend, Julia.

Jason Yang : [00:29:17] We got Julia to hop on a call with me and my producer, Olivia.

Olivia this is cool, we don’t usually get a chance to speak twice about 1 interview.  And for listeners, the reason we’re doing this is because we pulled some strings and we were able to get Julia Lipton, founder of Awesome People Ventures, and one of the investors that Sam Corcos name drops in the episode. So, welcome to our debrief Julia .

Vadim Revzin: [00:29:44] Thanks Jason.

Olivia: [00:29:45] Yeah, welcome.

Vadim Revzin: [00:29:46] Thanks Olivia. Happy to be here.

Jason Yang : [00:29:47] You know, usually when we do this, we have a debrief and Olivia just kind of reacts to what she heard. And we talk about it from a different point of view and I try to break it down and easier terms. What I kind of want to do this time is, I’ve been waiting, honestly I’ve been waiting to talk to another investor so that I can get all these questions out. Like, is this really crazy just to me, or was it crazy other people? So I have all these questions to ask you, Julia, and then, Olivia, I’m sure some of this stuff is going to inspire some other things. So please chime in wherever.

Vadim Revzin: [00:30:23] Okay

Jason Yang : [00:30:24] But Julia, so you didn’t get a chance to hear the whole episode, but Sam breaks down a fairly unique process. And one of those things that he talks about, is just the way he ran a, essentially a pricing discovery exercise, with a ton of stack notes. And I want to know, where did you fit into this equation? Like, when did you meet him and where along in the process?

Vadim Revzin: [00:30:50] Yeah, so I met him in September of 2019.

Jason Yang : [00:30:54] Oh, no way, early.

Vadim Revzin: [00:30:55] And so I met him pretty early on through a mutual friend. And my friend wanted me to take a look at it because he knew that I had led growth in revenue at Rise, which was a nutrition coaching startup. So he thought that I might be interested in Levels. So I met him quite early on but it took me 6,7 months until I invested.

No way. And now I’m realizing that I’ve already used a bunch of insider language, inside baseball language, so when I said “stack notes” for everyone…

Olivia: [00:31:23] Yeah, what was that?

Jason Yang : [00:31:24] Yeah, I was like, “Oh yeah, Olivia totally picked up all of this from…”

Olivia: [00:31:28] No, no, no.

Jason Yang : [00:31:30] Okay, stack notes. So a note is the vehicle that many early stage companies raise money on, so the investment vehicle, the thing that people use to take in money.

Olivia: [00:31:43] Wait, I’m so sorry, I’m not even sure I understand that concept. What’s a vehicle in this context?

Jason Yang : [00:31:50] So it’s essentially the legal entity that an investor will put money in into, in order to gain that upside in the company. And shorthand for it, they’ll call it a note.

Olivia: [00:32:02] Okay, okay.

One version of it is called a note. And generally speaking, the reason I threw out this term “stack notes” is that it’s unique. I mean, it’s not a lot of people do this. When they raise money it’s usually 1 note and they take in that note and they take the money that they need to get to the next milestone, and then they go raise again. Sam did something a little bit different, when I think Julia had a front row seat, because she met him actually at the very beginning. And so, when we talk about stacking notes, it means he raised 1 note and then immediately after raised another note on different terms. And so that’s what he was talking about, in terms of stacking notes and increasing valuations. So, I didn’t know that about, when Julia, you met Sam, which means I get to ask – when did you first consider and  where along the ride did you actually get on board?

Vadim Revzin: [00:33:01] So, I don’t remember, to be honest, what the valuation was when I met him, I think it was an 8. And when I first met him, I’ll never forget because our first meeting was a phone call, and most founders, their first meeting is a Zoom. And he was pretty adamant about a phone call. And now I understand that’s because Sam walks 10 miles a day while taking all of these phone calls. But at the time I didn’t know it And I was like, “Okay, you want to take a phone call, I’m going to go for a hike in Sausalito. So I remember this call so viscerally, and at the time they were basically just distributing Abbott devices to people, through their doctor prescription network. And I was like, You guys haven’t done anything. You’ve built a doctor prescription network. That isn’t a product, that isn’t a brand, that isn’t anything. But what was so interesting about Sam, whenever he says he’s going to do something, he does it. And then he follows up with you to tell you that he’s done it. And so I had all these questions and concerns and we had this ongoing back and forth, that quite literally, lasted six months. And a few meetings in between, and dozens of emails. So, I met him, I think it was an 8, I did it at a 10, then I was going to do another SPV at an 18. Because I just really believe and I still believe. And I missed that 18 window but we got in at the 25, which was before a 16Z, their most recent round.

Jason Yang : [00:34:28] So a lot of things that she just threw out, I want to, I’m seeing Olivia’s face, and she doesn’t even have to chime in. Like, I know this is a good moment. So, first of all, Julia invested first at an 8 and then wanted to raise another SPV.

Vadim Revzin: [00:34:41] No, at a 10.

Jason Yang : [00:34:42] No yeah, at a 10, you missed the 8, of course.

Vadim Revzin: [00:34:46] I missed the 8.

Jason Yang : [00:34:46] Everyone I’ve talked to missed something with Sam and then finally got on. Raised at10 and then wanted to raise an SPV, a special purpose vehicle, so raising money for the sole purpose of investing in this opportunity, and then wanted to do even more. And so, before I even go on, Julia, you kind of talked about that like, “Oh yeah, not a big deal.” Personally, I’ve never seen that happen, and I’ve seen a lot of deals. I’ve never seen somebody come and continue to raise  valuation on investors and continually successfully do it.Julia, can you talk a little bit about that? Was that normal to you? Have you seen that before?

Vadim Revzin: [00:35:32] It isn’t normal to me, I’d never seen this before, but the thing that I’ve come to understand about Sam, is nothing that he does is normal. And over time, I’ve now known him for over a year, I’ve just come to trust him. And the best founders do things their own way, so when he says he’s going to do something, he’s going to do it. So while to me, the stacking note feels very risky, and I remember asking him about it. Being like, “Hey Sam, like, what’s the plan here, this dilution? It’s going to get kind of messy.” And he shared me a doc where they had it all mapped out and assured me that it was going to be okay. And in fact he pulled it off.

Olivia: [00:36:09] I’m wondering if you can explain why is it risky.

Jason Yang : [00:36:12] Julia, I’d love to hear your thoughts on that.

Vadim Revzin: [00:36:14] Well, what happens is founders will end up taking on too much money and taking on too much dilution, such that when they go out to raise their next round there isn’t enough space for the funds to come in and/or the founders end up over diluting themselves. And so they can’t bring on investors that they want to bring on because those investors don’t have enough space to be able to write the check size they need to write to be able to get into the round, and/or founders can’t raise at the valuation they need to, to be able to keep a reasonable dilution target.

Olivia: [00:36:48] Wait, so, okay, tell me if I’m understanding this correctly. So basically the problem is not in the first round, it’s in the second.

Vadim Revzin: [00:36:58] Your first institutional round. Jason feel free to jump in.

Jason Yang : [00:37:02] Yes. So, Olivia, you have that right. So essentially, if I had to break it down in different words, is you start setting expectations for an another round, the next round that you raise, that if you don’t meet them it can create a situation that actually makes it hard for institutions to get excited enough to put enough money behind it and actually back you at that stage.

Olivia: [00:37:28] Okay, so it it sounds like you need a lot of confidence that you’ll be able to meet your thresholds or whatever.

Vadim Revzin: [00:37:35] Yes.

Jason Yang : [00:37:35] And Olivia, I’m so glad you used that word because this is a 100% the theme for breaking down Sam, and Sam’s process, and Sam’s unique strategy. Which, I think we talk about in the conversation and we’ve talked about in our debriefs and he executed it flawlessly and it’s honestly amazing to watch. But I would say that if anyone’s trying to draw from this, the analogy that I give is that, if we did a conversation about golf with Tiger Woods and Tiger Woods was like, You know, this is how I would improve my shot-making and how I would shoot a 62 the next time I went out. On these types of holes I would carve the ball, just ever so slightly and land it 2 feet below the hole, so that I could make the putt.” And if amateurs were listening to this it would be like, “Oh, so should I go do that the next time I play golf? Should I be trying to like, shape the ball and hit it perfectly there?”  Ideally, yeah, that’s what you do, but it requires so much confidence and so much skill in order to do what Sam did, that I couldn’t really recommend just everyone doing this. Julia, are you on the same page here?

Vadim Revzin: [00:38:53] Yeah.

Jason Yang : [00:38:54] Okay. And the other thing I was going to say is, when it’s a little bit related to this Olivia, is you asked, what are the risks? Julia definitely talked about 1. One for me, is that I think the first time I heard what was happening, without even meeting Sam, I was really turned off. About even just hearing what was happening. And it felt like someone was being a little bit too cute and trying something tricky. And I’m like , ” In that case, I’m not interested.”, I don’t need to be gamed around any of this stuff. And so, if you’re not doing this for the reasons, and with the confidence that Sam did in executing this, the risk is that you go try to run this process and you’re like, Yep. This note’s closed, here’s the next note at a higher valuation. Oh sorry, you missed that one, here’s another one at a higher valuation.” People, if they don’t believe that you are as execution focused and as incredible of an operator as Sam is, you might get everyone to turn away. So that was one of the big risks that I came over with.

Vadim Revzin: [00:39:57] Yeah.

Jason Yang : [00:39:58] Similar, Julia?

Vadim Revzin: [00:40:00] Yeah, I think that’s very real. But the other piece of this component, is for every investor along the way, there’s these notes that are getting higher and higher and more expensive and more expensive. And they’re closing and they’re closing and they’re closing. And as an investor it’s like, you’ve gotta get on the train, you missed the train, you’ve gotta get on the train, you missed it. And in parallel to watching the price go up you’re also seeing the company updates. So you’re watching them hit milestone, hit milestone, hit milestone, and you’re building more and more conviction. And he’s excellent with email follow-ups and sending docs. He has this process so dialed, I’m not sure if he shared, but he is one of the top users of Superhuman because he is a machine. And so, as an investor you have these 2 things happening in parallel, you’re seeing the price go up, what feels like in real time, which doesn’t usually happen in private companies. And you’re building more and more conviction and gaining more and more company insights. And this only works if you know that every time there’s a touch-point, every week, every month, you’re going to be nailing it and nailing it and nailing it. And if you are that good you can do creative things. But very, very, very few companies can execute this.

Jason Yang : [00:41:16] So, I wanted ask you, now that I know Julia, when you joined. I think he probably raised 3 or 4 more notes after you and then the full equity round from Andreessen Horowitz. Tell me a little bit about what you observed or what you saw, maybe what you heard directly from Sam as he was going into formally raise the, I guess, $10-$12 million round, that ended up being led by Andreessen Horowitz. Was he telling investors that this was happening or you just kind of watching with with popcorn?

Vadim Revzin: [00:41:52] Yep, he was like, “I am going close the round at this date. We are going to go out on this date and we’re going to close the round at this date.”

Jason Yang : [00:41:59] Okay, so you’re laughing a little bit and shaking  your head,  and I’m just narrating what I’m seeing here. Tell me a little bit more about why that was crazy. From what your experience, having done many, many rounds of investment and seeing it happen, what was so crazy about that?

Vadim Revzin: [00:42:16] One, the timeframe that he was planning for it was very short. So it can take founders 3, 6, 9 months to raise. The current market is a little bit different but traditionally, it can take founders quite some time to raise. So one, I was like, “Okay, let’s see.”, and then 2, how specific he was on what he was going to do what and why. And again, it just comes down to this plan. Like, he knows that he’s milestone, milestone, milestone, and because they’re so consistent they can plan very effectively.

Jason Yang : [00:42:50] That’s amazing. Well look, here’s my question – We’ve said that a lot of what was covered in the interview with Sam is kind of like showing what Tiger Woods would do and then maybe creating the false perception that a new golfer should do that. Maybe you can talk a little bit about things that you saw Sam do that you’re like, “I want more founders to do this .” You know,  something that is a little bit more accessible, if you will.

Vadim Revzin: [00:43:17] Yeah. So one, he’s incredible at sharing company updates. In every investor update he says, “Our goal is still not growth. Our goal is product technology and execution.” He’s committing to delivering on the things he knows he can win at. Now, it just happens that the growth for that company is out of control, but he set himself up to be able to deliver month, after month, after month.

Jason Yang : [00:43:42] Great. Julia, last thing, it just popped in my mind – what is the most unique thing about Sam that you’ve seen, not fundraising or startup related?

Vadim Revzin: [00:43:53] He doesn’t use To Do lists. So everything is on his calendar and his calendar drives his life. Which means he has almost no mental energy spent on worrying about things to do, because if there’s something he needs to do, he just puts a block on his calendar and at that point he assumes it’s going to get done because he’s so disciplined about following his calendar. And so, what’s interesting to me is most people have this gap between thinking, anxiety, wondering, and then doing. He doesn’t have that, he just has a thought and he puts time on the calendar to deal with it.

Jason Yang : [00:44:29] That’s cool. I’m glad you shared that.

Vadim Revzin: [00:44:31] It’s pretty admirable. I’ve been working on the same strategy myself, not executing quite as well but, one can dream.

Jason Yang : [00:44:38] Yeah, I can only imagine what your calendar looks like, not a lot of room for these little tasks.

Vadim Revzin: [00:44:43] Oh my gosh!

Jason Yang : [00:44:45] Anyways, Julia, thanks for finding some time for this. This is going to be an amazing counterpoint for people to hear from, and illuminating, given how interesting the conversation with Sam was. Thanks so much, I appreciate it.

Vadim Revzin: [00:44:57] For sure. Thanks for having me.

Jason Yang : [00:45:03] So that was our debrief with special guest, Julia Lipton of Awesome People Ventures. By the way, much love to Julia who held off a bonafide investing legend to give our audience the scoop on Sam.

Vadim Revzin: [00:45:14] Oh shit. Oh fuck! I forgot that Mike Maples rescheduled our meeting to now.

Jason Yang : [00:45:19] For those who don’t know who Mike Maples is, he’s the founder of the VC firm Floodgate and first investor in a few tiny companies you might’ve heard of, like Twitter, Lyft, and Twitch. So yeah, “Oh fuck.” is right. Thanks as always for listening. If you have any questions about today’s show, or maybe you’re raising money yourself and want some help thinking through it, if so shoot me an email at [email protected]. I’d love to hear from you. Follow us on social where we share awesome insights into fundraising and life as an entrepreneur. The show is at Fundedpod and I’m at JayYeh. That’s J A Y Y E H. And one more exciting announcement, we’ve gotten lots of great emails after other episodes, but nothing like the questions that have come in about Sam. Everyone wants more details and if I had to guess, this episode probably made it worse. Because of that, he and I are hosting a live after show Q&A on Clubhouse with some really special guests. Check us out on Twitter for more info and let us know if you need any invites to Clubhouse.

This episode was produced by Olivia Rheingold.

Olivia: [00:46:29] Yo Yo Yo

Jason Yang : [00:46:31] Thanks also to Jordan Pascassio from Adamant Ventures.

Jason Yang: [00:46:34] Hey guys.

Jason Yang : [00:46:35] And thanks, one more time, to both Sam Corcos and Julia Lipton, two people I would like to invest in around, I’m raising in June of 2023, I’ll be sending you regular updates and think I’ll be able to convince you. Once I figure out what the company does. And one last thanks to our awesome sponsor, DocSend – the most trusted document sharing platform.