We're talking with John Biggs, the author of the book Get Funded and a prolific writer. Learn about the high-tech startup tools that are designed to build your business and start growing your revenue even if you are not a technical person at all.

John-Biggs-squareJohn Biggs is a writer, consultant, programmer, former East Coast Editor and current contributing writer for TechCrunch. He writes mainly about technology, cryptocurrency, security, gadgets, gear, wristwatches, and the internet. After spending his formative years as a programmer, he switched his profession and became a full-time entrepreneur and writer.

His work has appeared in the New York Times, Laptop, PC Upgrade, Surge, Gizmodo, Men’s Health, InSync, Linux Journal, Popular Science, Sync, and he has written a book called Black Hat: Misfits, Criminals, and Scammers in the Internet Age.

He builds products, writes books, and consults with startups to help them make cool things.

Transcript

Narrator:        Welcome to Cracking the Cash Flow Code where you'll learn what it takes to create enough cash to fill the four buckets of profit. You'll learn what it takes to have enough cash for a great lifestyle, have enough cash for when emergency strikes, fully fund a growth program, and fund your retirement program. When you do this, you will have a sale‑ready company that will allow you to keep or sell your business. This allows you to do what you want with your business, when you want, in the way you want.

In Cracking the Cash Flow Code, we focus on the four areas of business that let you take your successful business and make it economically and personally sustainable. Your host, Josh Patrick, is going to help us through finding great thought leaders as well as providing insights he's learned through his 40 years of owning, running, planning, and thinking about what it takes to make a successful business sustainable and allow you to be free of cash flow worries.

Josh Patrick:   Hey, how are you today? This is Josh Patrick. And you're at Cracking the Cash Flow Code. And I'll be able to talk someday. And our guest today is John Biggs. And John has written a book recently called Get Funded!. And I checked out his webpage, johnbiggsbooks.com. And I find that John is like a prolific writer. So, we may morph into writing a little bit, just for fun, because that's always a good thing. But we're going to start out talking about getting funded. And instead of me just kind of wandering on and making noise, I'll bring John on.

Hey, John. How are you today?

John Biggs:      Howdy? Howdy? Good, good. Thanks.

Josh:                So, when you wrote the book, Get Funded!, who was your audience for that book?

John:               It was for everybody who's frustrated with getting funded.

I mean, I'm a serial entrepreneur. I've done a few startups and it's probably the hardest thing an entrepreneur can do. And this this ranges from everybody in terms from high tech, to biotech, to somebody wants to open a taco truck. Figuring out what getting funded means, in a very real sense, is part of the problem.

We're in a world where everybody thinks that you can raise $5 million and build your thing instantly, etc. But the real trick to it is that rarely do people actually get funded. And when they do get funded, it's to the tune of far less. And we're in a situation now where there are tools that everyone can use, not just high‑tech folks, to build businesses. If you're trying to build a bar, if you're trying to try to build a restaurant, if you're trying to start a carpentry business, there are any number of tools that you can use to build out your experience, build out your business, and fund your business.

Josh:                So, out of curiosity, what might some of those tools be?

John:               I like things like Kickstarter, especially if you're building something that's physical. If you're building a restaurant, for example, it's a little bit harder to organize, say, a restaurant on Kickstarter but it's possible. So, let's say we need to fund a restaurant and we offer, for a $100‑submission or a $100‑pledge, you'll get a free meal at the restaurant worth, I don't know, $150, let's say. You're giving a little bit of profit away in the beginning to get a lot of cash in early on. So, we can do any number of things like that. Or let's say we get a special dessert or, if everybody knows that we make a really good chicken wing, for $24, you can get unlimited chicken wings for a year or something like that. Obviously, that's a little bit much but let's figure out some clever ways to get people to give us money.

The best thing about Kickstarter is you don't actually have to pay it back. It's your money. And all you have to do, ultimately, is to help the people - to give the people that pledged to you the item that they “bought.” It's easiest to use that system if you already have a great group of friends, or group of fans, or group of admirers in your hometown, for example. That's the best way to do it. You can basically tell the world, “Hey, we're doing this thing” and all your friends and fans are going to say, “I love this guy's chicken. I'm going to fund it.” And in that way, you get anywhere from, I don't know, $5,000 to $100,000, potentially, depending on your ability to hustle.

There's also equity crowdfunding. There's companies called Republic. There are a few others. If you do a search, you can often find restaurants that are doing that or machine shops that are getting funded online. And in that case, you're giving a little bit more away for the pledges you actually give equity which is important. These pledges can range from a thousand dollars to $10,000. And you can raise up to 500 to a million dollars on these platforms. The only thing you really have to do is submit your information and make sure that you have a business plan, that you actually have a going concern that people can invest in.

The overall “checking” for these platforms is fairly low. You don't have to worry about it too much. Obviously, you don't go in there expecting to scam everybody out of a million dollars but it's entirely feasible to raise that million dollars if you're serious about this thing.

And then, you have friends and family rounds, people who would just give you money because they know you. That's one way to do it. It helps if you have rich friends and family.

And then, there's just other ways to hustle. You basically create a business that's just a web page. And you see, if people like it, if people start giving you business, then at that point, you have to start actually providing something. But, in that case, you have a lot more impetus and, slowly but surely, you can grow the business that way.

I love to bootstrap. I always tell people to bootstrap. There's definitely no reason to raise money from VCs or even take a loan if you can bootstrap the thing yourself. If you're really good at one thing and you believe you could sell it, then just do that.

I know it's frustrating. I know it's hard. And I know it's scary. But it's the only way to do it primarily because nobody else is going to do it for you. And the more you sell to somebody else, the more equity you sell, the more parts of your business that you sell to somebody else, the less control you have.

Josh:                So, the Kickstarter sort of stuff in the online thing seem to me to require a fair amount of technical ability to do that. And in the blue‑collar world, you know, a restaurant owner, or a drywall contractor, or a vending machine operator, any of those sort of guys, they don't have any technical skills and many of them just went to high school and have never been to college. So, how would somebody like that-- I mean, I agree with you, bootstrapping is the number one way to build a business. It’s slow. It's hard. It takes a tremendous amount of work. You're banging your head against the wall a lot. You're short on cash all the time. But, at the end of the day, you've not given anything away and it's still your business.

But saying I want to go down the other roads, which I'm not sure I totally support, under all circumstances, how would somebody, who's not technically competent, go around and do this, you know, navigating these relatively technical platforms?

John:               Well, let's give these folks some credit. I mean, we're maybe in a different age group. They might be a little more difficult. But if we're talking millennials, Gen Z, for example, those old enough to start a business, especially like a vending business, or let's say a storage business, that sort of thing, or even a restaurant. They're pretty technologically savvy already. And the tools available to them are really simple. They're designed to be simple. And, again, I think--

Josh:                I have to interrupt you here because you're making an assumption which, in my experience, just isn't true. I mean, there are some millennials who are really technically competent. My daughter is one. My son is not. The millennial that works for me is incompetent when it comes to technology. If something breaks in our office, she has a core meltdown. Not that she has a core meltdown, which usually kicks it to me and I'm 68 years old. And I'm certainly not a millennial.

So, I think, yes, there are a lot of millennials who know how to use Facebook and Instagram. I'm not sure how many millennials actually know how to go to the back end and build web pages and design Kickstarter stuff.

John:               Well, you don't need to. You don't really need to at this point. design. It's far easier now. You could, basically, go on a Fiverr thing and basically have somebody create a web page for you. So, Fiverr, for example, or Upwork - those are two sites that have somebody smarter than both of us who can design web pages for us. And they'll just build it out for us. It's honestly not that difficult.

And I think that you are doing the audience sort of a disservice by dissuading them from that. It's a dangerous path because, essentially, all the opportunities now are mostly online. You putting fliers in front of somebody's house or on their windshield just doesn't work anymore.

Josh:                Well, the truth is, I'm not dissuading when I'm asking your question. You just gave a great answer is that, you know, for a few hundred dollars, you can go to Fiverr or Upwork and probably get what you need. It's not completely free but it's certainly affordable. If you can't come up with a couple hundred bucks then you shouldn't be starting a business, period.

John:               Yeah, exactly.

Yeah. I mean, that's where the friends and family round comes in. That's where you're in a situation where, “Okay. I have these different options.” A Kickstarter page is, at bare minimum, a two‑day operation to set something up that you like. And then, the rest of it’s just hustle. The rest of it’s just telling your friends and family to get on the page and click a button. And maybe they won't know. And everybody knows how to type in a credit card at this point, so they could figure that out. So, this is very similar to a friends and family route. So, at the absolute, very least, that's entirely feasible for almost anybody in the world.

Josh:                Cool.

So, do you ever talk to folks about bank financing?

John:               We never-- in high tech, you never really talk about bank financing. We had a chapter in the book about federal grants. There are a number of small business grants available. Well, my writing partner, he focused a lot on those. We do describe how to build proposals for those as well. So, I guess, you could say RFPs, answering RFPs, and all those sorts of things.

Josh:                Hmm, interesting.

So, would those federal grants be good for traditional businesses as well as high tech?

John:               100%. A lot of them are focused on minorities and underrepresented constituencies. So, if you're a woman of color, there's stuff out there for you, essentially, just waiting to help out. Further, you also have grants for any number of things, especially the blue‑collar stuff.

If you need to build a business-- for example, a construction business, there are a number of grants available for those. And there are also a number of programs, in New York, specifically. I know that there are programs that help fledgling businesses start working with the MTA, for example, the subway system. And that's a pretty nice gig, if you can get it, which is basically building the subway. And it's hard and it's a heavy gig, but they give you the advice. They give you the help on how to build those things out, so you're well within compliance and you're working with the subway system based on their roles.

Josh:                And I assume that there's also a bunch of stuff for veterans that would help them get grants and start businesses if they wanted to.

John:               Yeah, yeah.

Again, like I said, we had a list of a few ones. We didn't go through all the groups. One of the groups that we did look at were women, women of color especially, and they definitely have-- There's definitely opportunities there.

Josh:                Cool.

So, um, what is your favorite way to raise money?

John:               Um, I think my favorite way to raise money is equity crowdfunding, right now. It's an opportunity that allows you to sell pieces of the company. It allows opportunity to sell pieces of the company without too much trouble. There are also SAFE notes. Especially, if you're doing high tech, this is obviously for high tech stuff. There are these things called SAFE notes which allow accredited investors to put in a little bit of cash into an early business.

Again, I focused a lot on high‑tech startup stuff. And I've traveled America and essentially the world seeing all these little companies pop up everywhere - little high‑tech companies, little robotics companies, biotech companies. And everybody is basically doing this. It's sort of a-- I would call it the theater of entrepreneurship at this point, very specifically.

And, again, we're not talking we're not talking about that as much as the as the color stuff but, as far as I've seen, it's one of the easiest and fastest ways to do it. You build something. You have some sort of revenue coming in. It could be $5 a week even. And you tell an angel investor about it. You get onto AngelList. You get onto one of the groups and get cash that way.

Josh:                So, this is what you would call angel investing, this sort of investment?

John:               Yeah. Super early investments. Definitely, angel investing. And, again, friends and family and angels, they're approximately the same thing. Angels, occasionally, are strangers. There are angel groups in every city.

One of my favorite ways to really break into entrepreneurship, on a on a higher tech level, is to join an accelerator in your town. Most bigger cities now happen have their own accelerator where you can meet like‑minded people that sort of thing.

Josh:                So, can you explain what an accelerator is?

John:               So, an accelerator-- and they actually have accelerators for any number of things now. An accelerator used to be a place you went. Now, it's more online. You have a situation where you would have a few mentors - a marketing mentor, a tech mentor, somebody who can help you build businesses, help fill out forms and things, and you all get together and you take classes, essentially.

It's an MBA in a box, let's say. And you're building this. You're working with these folks to get everybody's business off the ground - 99% of those businesses fail but one or two succeed and go on to greater things. And what happens there is you basically get about $25,000 to $75,000 to build your business out. And even if you're not technical at all, you can join these things and work with people who can help you become technical, I guess, you could say.

Josh:                Yeah, so I have a question for you since you're in tech. And this is one of my favorite things I like to bandy about a bit. How important are profits and positive cash flow, if you want your business to last more than five years?

John:               In tech, they're not that important, unfortunately, or, fortunately, I guess, you could say. I would argue that positive cash flow allows you to grow any business. You can either feed the funds back into the organization for growth or you can take a little profit or some sort of salary. It's extremely frustrating. I've experienced this myself. It's extremely frustrating to run a business that isn't profitable. And it drives you crazy.

So, to a degree, it's probably psychologically vital. You can survive in tech without having the issue, especially if you're well‑funded and especially if you have the right connections to become acquired, for example. A lot of tech companies are acquired. And then that profitability problem goes away because they get folded into a bigger animal that can get them the cash.

Josh:                Yeah. In my experience, that's-- you know, one of the reasons I think that 99% of tech companies fail is they focus on growth not on cash flow. And, you know, there's an awful lot of good tech ideas which, if they focus on cash flow and not growth, necessarily, yeah, they may not become unicorns but, boy, they could become really, really nice businesses.

John:               Sure.

Yeah. And I see this a lot in places like Chicago, places like St. Louis, where you have a logistics company that's basically tweaked logistics to a degree that they're able to speed things up. They have great revenue coming in. They're a high‑tech company, but they're still putting boxes on trucks, let's just say. That's just fine. And by getting the cash, by getting revenue and profit in, they're able to continue indefinitely.

One of my favorite little examples of that is a place outside of Chicago. They make switches which is like a switch for like a, like a light switch, or a switch for-- they made all the switches for the Apollo landing, for the Apollo spaceships which tells you just how long they've been around.

And they still make the switches by hand, in Chicago. Grayhill it's called. They still make the switches by hand in Chicago. It's artisanal switches. These are the best switches in the world. Every car uses these Grayhill switches. And they've been profitable for-- I think, it's probably almost a century, I guess, at this point. And the important thing is they're under the radar. Nobody really knows that they exist. But if they didn't exist, we wouldn't have a space program. We wouldn't have been able to fight World War II. It's a crazy situation.

So, again, these things are absolutely vital. And by thinking in terms of keeping your head down and continuously working on revenue and profit, then you continue the business. It's not as sexy as some of the high‑tech folks like it to be, where you're sitting there and saying that you have 5 million pageviews or whatever a month. I don't think Grayhill has 100 page views a month on their website, but they definitely have $100 million in profit every year.

Josh:                You know, one of my sayings, when I had my vending and food service company, was “happiness is positive cash flow.” And, in my experience, you know, they say 80% of businesses fail in the first five years. And I don't think they fail because they're lousy businesses or it's a lousy idea. I think they fail because they flat run out of cash and they haven't figured out how to keep enough cash around for them to make it over the hump.

John:               Well, I think the other way to think about is that “they don't build a business.” A lot of people don't realize this, especially in high tech, especially as you're starting out, you're building a business. And a business is literally somebody coming to give you cash for some object or service. That's all it is.

And we came into an age, the early 2000’s, where we decided it would be fun to give services away and hope for cash flow later. If you have the wherewithal to achieve that, by all means, enjoy yourself.

But, otherwise, if you're going to if you're building a small business, you're building a business where somebody has to pay you money. If they're not paying you money on day one, you have a huge problem. And a lot of people ignore this problem for far too long.

And I know I was guilty of the same thing. We figured, “Okay. It's a great thing. We'll eventually get customers.” But, if the customers don't come on day one, your clock is ticking. And it's taking far faster than you even expect.

Josh:                Yeah. It's also really important to understand what eats cash and what makes cash.

My problem was I couldn't read a cash flow statement, when I started my business. And we grew at about 200% for two years. And I was in the vending business where every machine cost about $2,000. This was in 1976 so that that was a lot of money back then, by the way. So, we just ran out of cash. And I never knew what was going to happen. So, I had to learn about cash flow really, really, really fast and learn about renegotiating with all my suppliers really, really, really fast or I would’ve been out of business and forced into bankruptcy. You know, it's--

John:               And, again, the same situation can happen with an app, for example.

Josh:                Sure.

John:               If you don't know where the cash is going to come from and you have to update the app, every iOS version, you're sunk, ultimately. And the same thing happens in a restaurant. The same thing happens in any other business.

Again, what we're talking about specifically is funding businesses. And if you don't feel like you have a business, which means that nobody's paying you for your troubles, then you probably shouldn't get it funded. (a) You try something else. You should figure out - until somebody starts paying you for your chicken wings, you don't get chicken wings out for free.

Josh:                Yeah. That's really great advice.

John, unfortunately, we are out of time. we could go on for quite a while about getting funding because it's a really big deal.

And for the blue‑collar folks living, you do also need to learn how your bank thinks because bank financing for you guys is still the primary way you're likely going to raise money, not in the beginning, but after you've been around for three to five years, you can go to a bank and you can borrow money from them.

So, John, how would folks find you and how would they find your books? And I wish we had some time to talk about your writing because, boy, you're a prolific author.

John:               Yeah. Well, just go to johnbiggsbooks.com. All my books are up there. I've written for Gizmodo, New York Times, TechCrunch and a few other places. So, just look for John Biggs online. I think I beat out the other John Biggs that exist. There are a couple of ‘em that I've discovered, but I think I beat all those guys out on Google. So, I'm [inaudible 00:21:54].

Josh:                You have because I checked yesterday.

And I have two things I would like you to do. First, I ask every podcast episode for you to do this. Please go to where you're listening this podcast and give us an honest, and I mean, honest rating and review. That means if you love us, you can give us five stars. And if you hate us, you can give us less, but I hope you love us. So, please, please do that. It's really important to help people find our podcast.

And the second is I'm not as prolific as John, but I do love writing books. And I just released my second book about a month ago. It's called The Sale Ready Company. It's really easy to get. You can go to all the regular places to buy the book for $14.95 or you can go to www.salereadycompany.com and get the book for $7.95 with a bunch of bonuses.

So, if you want to know about creating a sale‑ready company, it's a parable, which means it's a business novel. You can follow the Aardvark family as they go through all the processes they need to figure out whether a company is sale ready and what they need to do to get there.

So, this is Josh Patrick. You're with John Biggs. You're at Cracking the Cash Flow Code. Thanks a lot for stopping by. I hope to see you back here really soon.

 

Narrator:        You've been listening to Cracking the Cash Flow Code where we ask the question, “What would it take for your business to still be around a hundred years from now?”

If you've liked what you've heard and want more information, please contact Josh Patrick at 802-846-1264 extension 102, or visit us on our website at www.sustainablebusiness.co, or you can send Josh an email at jpatrick@stage2solution.com.

Thanks for listening and we hope to see you at Cracking the Cash Flow Code in the near future.

 

Topics: fundraising, bootstrapping, writing, John Biggs, startup, Get Funded

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