Technology Trailblazers Club
Technology Trailblazers Club

Episode 26 · 1 year ago

Steve Ardire: Why AI Startups Fail To Get Funded and What To do About It

ABOUT THIS EPISODE

Steve Ardire has consulted more than 65 startups over the past 25 years. As an AI specialist, he consults them on how to overcome common startup challenges such as getting funded. In this interview, he provides insights on why great startups are often overlooked, and gives you an example of one that shouldn't be. 

Welcome to the Technology Trailblazers podcast, where we explore new ways to unlock business potential with unprecedented technological innovation. Hi there, I'm your host, Derek little, and this is the podcast for companies of all sizes wanting to digitally transform their business with the latest technology. In this episode, I was honored to speak with AI consultant Steve Urdarri. Steve Describes himself as a forced multiplier who shapes serendipity by connecting and illuminating the dots that matter and leveraging deep relationship capital with recognized personal brand. In military science, forced multiplier refers to one or more factors that enable accelerated results. This could be team moral training or the latest technology. Over the last eight years, Steve has been the secret weapon of twenty eight AI startups by consulting them on how to deal with common startup challenges, such as getting funded. In this interview, He provides insights on why great startups are often overlooked and provides an example of one that shouldn't be. Here's what Steve had to say. Most startups, not just an AI but most startups in general, are in these buckets of being and underdog, under missed, you know, underestimated, appreciated start up. The reason why is most oaks are not in the club. What does that mean? meaning that many of these are first time you know, founders, CEOS. It's a new experience. They there's a lot of hurdles, you know that that needs to be addressed and overcome. And this is really the real, the reality of what it is in this world of, you know, of being an entrepreneur, and that's why the metric of nine out of ten startups fail, because it's really really rigorous work. So you know, if you're just reading, you know tech crunch and you know venture beat and so forth. They they focus on the ones that are, you know, connected in the club, that are have an easier time getting a free pass on getting precede and seed funding. What do I mean by that? Well, if you have the right credentials, you know, PhD from Stamford or an Mike or x facebook, Google, by default DC's are going to be not as rigorous in terms of really sussing out your you know, Your Business Model, making ...

...sure you have you know, the right team, you have the right you know, product market fit to attract you know enough early doctors, but L in in with these type of companies that are not underdog startups. You you, like I said, you get some free passes along the way, meaning that you don't even have to have a real product deployed, because you're really going on past reputation of what you did at either you know successful startup that you've done or you have a credential from being a fit. You know x, facebook and Google. That's what I mean by the situation that I just conveyed. So is this a conclusion that you came to? I know you've worked with a lot of startups. So is this something that's conclusion you just come to? Overtime, you know, like whatso why do you believe that's how many startups have you have you advised? So over my twenty six years the number is sixty five to seventy and in the last eight years close to thirty AI startups. And the after the matter is that metric that I gave you earlier, Derek, of nine out of ten startups do fail, has not changed. In fact, with the intensity of doing start up is even getting harder and the bars being raised in terms of the criteria you need in order you know, in order to close enough funding. So it all starts with you know, I had a pre start up that you disinterviewed for a podcast called a Pica. I was, you know, for a few months working with them to help close seed funding. Seed funding is typically from one to, you know, three to four million, which is really seed plus. And OPEKA only started deploying their product into the market of the beginning of this year and just was getting some budding traction with customers but wasn't really moving the needle in terms of the criteria of getting to a monthly recurring revenue where DC's, name VC's, would be interested. So that so as I floated, as we floated or I floated pitches to some of these VC's, they all pretty much said, well, this looks interesting, but come back when you have higher monthly recurring revenue, more customer traction. So the good news with Opeka is that they had a good local interest in Sacramento. They're outside...

...of Sacramento and folsom where there was a local DC and angel investors that would this were clamoring to come in on the investment. So the original investment was like the original thinking was a one million seed round and ended up being two million dollars that they closed the two million seed and the work that I did in terms of pushing this to more name VC's is that they had the ability to bump a two low valuation to a higher valuation. So in the end it came out good for Opeka to, you know, closing the two million at a higher valuation than with some of the original term sheets were. But the point is it was just local money. I mean good, you know, good smart Angel Investors, but not sort of like the name Marquis vests that could be entering the fray next year. Winnell peak on wants to come out with a small series a. So it was a good lesson learn on. They were a great case of being a underestimated, under appreciated start up and by doing, by the dynamic of me coming into the fray, did help them out in terms of getting the money closed, but at a higher valuation. So so if, like you're saying, nine out of ten startups fail, and that I guess that includes the underestimated ones and the ones that the VC's are working with, there's no real, yes, difference, right. How does someone listening to what you're saying here take action on this. How would they be able to differentiate between then appreciated start up and one that just has a good resume? Right exactly. So that brings me to the discussion on precede funding. OPEKA, what I failed to mention already at close a five hundredzero dollars on a convertible note. So they have their precede underneath them, which was giving them the wherewithal to, you know, to develop the product get it to the market. If you peel back to precede, precede is really up to like a million dollar us. So it's where it's the toughest space to close funding. It's like being in purgatory. It's really that difficult. And and the criteria has gotten more intense in terms of what you really need. So I'll just break it down for you. So it always comes back to the fundamental so you really got to have, you know,...

...the right team with the strong, you know, advisors who provide real value. So the team makeup is about seventy, seventy five percent of the of the waiting criteria and you're really going to be scrutinized. You know, you're always scrutinized, but in the precede and seed stages that's huge. If you don't have that right, you can't pass to these next steps here. So after the team side with advisors, do you really have the right product market fit, which really is going to be the the key criteria, to where when you deploy your MVP or or Beta product and then commercial product early doctors, can you really get that initial traction to start to move your monthly recurring revenue and and when you're closing precede funding? Okay, this up to like, you know, a million dollars, so it's usually five hundred k two a million. You need to show that you can hit fiftyzero monthly recurring revenue and then being able to have a nice growth curve on that. And and once you have those criteria, bet then you're off. Then it's a then it really kind of turns to really smart tactical execution. Are you really focusing on the right verticals, the right you know, the right outreach? Do you have your marketing really in gear, both both marketing and product marketing, to really drive sales and and and that's the formula you need. And once you have that, then then you can go to the next round, which is closing. It was seed round or bigger or small series a, and then you're off to the races. So it sounds to me like what you're saying is one of the biggest pitfalls is having created this product or MVP and not being able to close the gap, to be able to reach out two prospects and get them interested in so it's kind of a marketing outreach, relationship building challenge, like kind of where the rubber hits the road, user product. Someone's got a really want it and use it. Yeah, and why? In the AI which is, you know what I, you know, do one hundred percent for the past eight years, there is a there's too many ai startups that are enamored of their AI ability and they don't have the marketing pnash. They don't have they don't have a compelling enough pitch. I mean I I do pitch construction and review for all my engagements, you know, in addition to providing you know, business strategy, you know helping...

...to ascertain the product market fit, but the pitch guidance is huge and in so many startups just really fail to get that right. So Steve can you give you an example of a startup that you've been working with? Them meets all the criteria that you just mentioned. Yes, and that startup, Derek, is evermore. It's evr MRE e dot IO. So the CEO, founder, I be Michelle, has really done it in a really good fashion by first going into a couple of cohorts on when she was doing us on our own, before she had a team around her, and continuing to iterate and refine her diligence in terms of the dressing, when I just had mentioned, as far as the steps needed, is really impeccable. Can you give me a quick overview of their product and the problems solving? Their solution, so so evermore, is a social plus mentor mind tech tool that's powered by voice and emotion ai that helps Gen z, the fifteen to twenty five demographic euro demographic bill, transform transferable core skills, navigate key moments in life, Bill personal mastery and turn adversary into resilience. And you know, it's really interesting. I'm a baby boomer, but ideal with a lot of millennials and now even you know Gen z's and it's really when a lot of what is really overlooked out. There is old school networks that are chat but driven. You know, the younger people are exhausted by the you know, going through long text chats and it really doesn't really give them to the empowerment. So this we can an APP that a gen Z person would put on their phone and it correct and it tracts what they're saying, what they're doing and gives ye. So they yeah. So the approach is is it gives you the ability because it's voice, because voice is the best modality. It's so rich in terms of being at you know, your tone, tonality, you know, other types of triggers to where you can kind of like talk things out. It's so convoluent today and so much of this is superficial. You know, it seems like it's giving an an avenue to where you can build that confidence and through your own discovery, you can see the pattern. Can you give me an example of the kind of problem Jen zero would have? This...

...apple help themselves. So here's a great, you know, example here it's a day in a life of a college student. You know, everybody has bad days and they don't always want to talk to someone because that right person is available so they can talk through evermore to unload and move forward. So it sounds like a diary. It's like it, like it's it's it's a name, it's a really it's really kind of a personal diary narrative, a social learning ai companion where you can kind of, you know, see certain patterns. You know that gets threaded, helps you get unstuck and then you can you know, the whole point is allowing the Gen z person to build their own mastery, his or her mastery to where they can start building these core skills and become more resilient as a result of that. Derek, Jen Ziers have all these challenges when they're growing up in life and they don't really have anybody to talk to and they can talk to this APP and it it listens to what they're saying through the understands them better for the tonality of their voice and gives them tips and advice, and it can also lead them to alive relive mentor right right. So that the whole the K operative words, Derek, is is build your own personal mastery. So in many respects it's allowing them, which seems to be a dirt today, is the ability to do critical thinking when I was growing up, you know, this was a big part of the liberal arts education is to is to really do the critical thinking. It seems like today with the Gen Z is as smart as they are. Their their attention spans and the ability to kind of figure out on their own has been on the way in and that's what we're trying to address. But the evermore APP. It's like a critical thinking app for Gen's ears. That's broom okay. So how did I v overcome some of these earlier challenges that we talked about? Talked about that gap of getting that initial precede funding and moving forward. So we're right in the midst right now and and my role as an advisor as the mostly focusing on the reach out to two precede VC's. The product is actually going to be launched in July. So we're really on the cusp and the good news is that she's done a magnificent job building up a lot of excitement with thirtyzero users. That are you know, right now there's an active one hundred, fifty to two hundred data users in the jet in this Gen z category and there's a lot of clamoring there now, will we close all thirty? Of course not. But if it's...

...a if it's a significant number, that's you know, that's going to be the proof positive. So what we've done very methodically is really kind of cycle through it toill we now have a short list of precede VC's where we've locked onto the right ones that really are showing the type of interest to take the smart bet and say wow, this is this is really right on the money. And and that's what we're doing now. We're pending this. She was very clever about standing up a wefunder crowdfunding campaign as kind of a springboard of sorts. So through the wefunder it was only for a smaller denomination of two hundred and fifty k. About half of that is committed, and by showing that you know that metric, it really does help in terms of getting the interests of precede when they see that, wow you. Even though we're looking to close an aggregate of Eight D K precede, when you've got to fifty in the in the bucket of crowdfunding where half of it is already closed. That's an important metric to get across to, you know, to Vc's that say wow. The other thing where IV is has done is being very methodical in the in the Road Map for the next twelve months, so after the precede funding is closed and by you know, we're also doing a lot of pitch events. We just did one woman's in voice last week and there's a another event in August. And getting the visibility at these events really gives you the the cash a along with, you know, doing what I call the pick and show the work of getting yourself position. So the other thing is that we're not coming out on boiling the ocean. Were first hitting education partners, collegis and universities that are looking to deploy for their own you know, populace at their schools. That's phase one and then we'll bring in, after that phase, into wellness partners and then cap it off with getting into healthcare partners that, you know, many of which are in, you know, mental health. But but the underpinnings, the beauty of this thing is all the the background of the psychometrics for health and learning insight is already baked in and that could be extended in terms of bringing into consumer psychology for continuous betterment, because a lot of these APPs. You know, they don't have a long shelf life and that's why we're really positioning evermore in kind of a new quadrant that we're calling social plus audio. Rather than just being yet another chat bought or a meditation APP for behavior change or a APP for where you're you...

...know, you're brought to a mental health specialists, the social audio is really kind of emotion ai poston narrative genre where you can kind of having a contact driven no foam, a companion available for you to be able to really play upon the social intentional learning, and that's really whatever Mars delivering. So is there an upcoming event that you want to an ounce with evermore, like what's your next event and to happening? So the next event forevermore is actually a education Evan in August were. It's called the Global Silicon Valley Summit, which is August nine through eleven in San Diego. It's really a marquis event, the GC event, and there's going to be a number of startups that are at tech specifically invited to the event and the summit's all about connecting leading minds on transforming society and business around learning and work. So you can see the appeal of an APP like evermore is right, you know right. It squarely in the mix there. There's going to be an online component but also a live component as well. I guess we'll see how covid nineteen is playing out. We're coming to the end of the PODCAST, Steve. If someone wants to learn more about what you do, how would they reach out to you? Or work can they go to learn more about you? So more about may besides by Linkedin profile, I have my own personal website which is like a condensed version called force multipliers. Steve Bardary. I know it's long, but it's force. I think you have the link to it and it hasn't it about me and just like this podcast, I do a lot of podcasts, a lot of presentations, a lot of interviews and you see a lot of material up on that website. Okay, I'll definitely put the link in the show notes for that. Yes, that's the way that. That's the way to do the link in the show notes, for sure. Okay, thanks for coming on the show, Steve. Thank you always a pleasure of Derek and appreciate it. Thanks for listening to the Technology Trailblazers podcast. Is your technology start up looking for ways to grow and succeed? Trailblazer writingcom provides advisory services, content marketing consulting, content development and promotion for technology startups, and we offer a free marketing planning session to help them get started. Visit Trailblazer writingcom for details and download our free series of guides on start up marketing.

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