Her CEO Journey™: The Business Finance Podcast for Mission-Driven Women Entrepreneurs

Weekly show where my featured guests and I explore the financial and business challenges women face on the entrepreneurial journey to success. You'll hear them talk about the money side of their businesses in ways you've always wanted to know about, but wouldn't dare ask. They openly share their disappointments, failures, successes, and everything in-between as they grew sales ranging from 6 to 9 figures. Knowing where your business stands financially helps you make critical decisions with confidence. It's simply the best way to be sure you grow a business that fuels the life you want to live.

https://www.christinasjahli.com/

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episode 142: Steward Ownership: Maintaining Balance Between Ownership, Governance, and Finance - The Journey of Camille Cannon [transcript]


Raising capital often entails giving up some measure of control over your company. Granting investors ownership isn’t always a bad thing, but when it happens, your business might drift further and further away from your company vision. As mission-driven entrepreneurs, that isn’t acceptable. Thankfully, there is a solution: alternative ownership.

In this episode, Camille Canon, the co-founder and executive director of Purpose US, helps us navigate the tricky maze of ownership, governance, and money. She explains the concepts in ownership structure and alternative finance. Lastly, she clears up misconceptions about raising capital, reveals the secrets to creating a sustainable model for your business, and gives insight into the minds of investors.

Episode Highlights

  • [04:00] Camille’s Journey in Purpose US
  • [06:37] What Problem Does Purpose US Address?
  • [09:13] At What Stage Does Purpose US Help Entrepreneurs?
  • [12:35] Does Being Series A Matter?
  • [14:47] Firebrand Bakery: A Sustainable Model
  • [17:27] Finding The Right Investors For Your Company Vision
  • [19:10] Do Purpose US Investors Look For Similar Return?
  • [21:21] The Field of Alternative Capital
  • [24:20] The Importance of Financial Results
  • [26:01] Demystifying Concepts in Raising Capital
  • [27:37] Camille’s Parting Advice

Resources:

  • Visit Christina Sjahli’s website for more insights on choosing the right ownership structure that aligns with your mission on the Her CEO Journey podcast series!
    • Episode 137 | Steward Ownership: A Method for Preserving Business Owner’s Legacy and Purpose - The Journey of Sarah Joannides
  • Chat with Christina and set up a time here!
  • Download the Forecasting Guide so that you can create a better and improved financial forecast for your business!
  • Connect with Camille: Purpose website

Enjoy this Podcast?

Write us a review and share it! If you enjoyed tuning into the show, then do not hesitate to leave us a review. You can also share this episode with the women you know so they can find financial empowerment and get their ideas into the world.

Have any questions about business finance? You can contact me through LinkedIn or schedule a chat with me at any time. You can also suggest topics you're curious about for future episodes to help your business grow. Thanks for listening!

For more episode updates, feel free to visit my website. You may also tune in on Apple Podcasts, Google Podcasts, Spotify, or Stitcher.


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 2021-11-18  29m
 
 
00:00  Camille Cannon
I think that
00:00
folks who are doing something
00:06
that's really ambitious and
00:06
incredible for the world, they
00:10
step forward into conversations
00:10
about the possibility of this
00:14
business as a vehicle for impact
00:14
and change. And that's great.
00:18
But, none of that matters if the
00:18
business isn't successful, and
00:22
there isn't an engine for that
00:22
mission.
00:25  Christina Sjahli
Is it possible
00:25
to integrate your mission into
00:29
an inclusive governance form and
00:29
financing structure? Actually,
00:34
it is possible! Alternative
00:34
ownership can tie all the things
00:38
together for you. You can lock
00:38
up the mission, align the
00:42
ownership structures, and then
00:42
tie that to the fundraising in a
00:46
very clear path. That's why we
00:46
curate this alternative
00:50
ownership podcast series for
00:50
you. We invite you to start with
00:55
the first episode in a Series
00:55
Episode 137, where Sarah
01:00
Jonatas, the managing director
01:00
of alternative ownership
01:03
advisors, gives you an overview
01:03
of the different types of
01:07
alternative ownership.
01:09
In today's episode, the 6th
01:09
episodes in this podcast series,
01:13
we are joined by Camille Cannon,
01:13
the co-founder and executive
01:17
director of Purpose US. Purpose
01:17
Foundation helps businesses and
01:21
communities build equitable
01:21
ownership, governance, and
01:25
financing models. Camille share
01:25
how to collaborate with
01:29
investors to structure a deal
01:29
that works for investor, while
01:34
doesn't put founders and
01:34
companies on the conventional
01:37
track to IPO, or selling, or
01:37
failing. Why financial results
01:42
matter to any investors,
01:42
including the impact investors?
01:47
What is the relationship between
01:47
ownership, governance, and
01:50
money? You're listening to her
01:50
CEO journey, the business
01:54
finance podcast for
01:54
mission-driven women
01:56
entrepreneurs.
01:57
I'm your host, Christina Sjahli.
01:57
If you are new here, a big warm
02:02
welcome. If we are not connected
02:02
on LinkedIn, please reach out
02:06
and say "Hi" because that's
02:06
where I hang out and share my
02:10
business finance tips. If you
02:10
have been listening to this
02:13
podcast for a while, and you are
02:13
a regular listener, I want you
02:18
to know I appreciate you. My
02:18
podcast won't be around without
02:22
your support. This is a free
02:22
weekly show where my guests and
02:26
I want to inspire you to balance
02:26
between mission and profit to
02:30
create an impact in this world
02:30
and to achieve financial
02:34
equality through your business
02:34
for good. The more knowledgeable
02:39
you are about your business
02:39
finances, the more confident you
02:43
are to speak with investors who
02:43
are going to support your
02:46
transition to the alternative
02:46
ownership model. When you
02:50
transition to an alternative
02:50
ownership model, it is still a
02:54
business which means
02:54
profitability is important even
02:58
for impact investors. They want
02:58
to see where your business is
03:02
going in the future.
03:04
So, how can you uplevel your
03:04
forecasting process to show
03:08
future profitability? If you are
03:08
unsure how to get started with
03:13
the forecasting process, we have
03:13
created a guide for you. Use the
03:18
link in the show notes to
03:18
download the guide and jumpstart
03:21
your financial forecasting
03:21
journey. When you are ready to
03:25
focus on building your business
03:25
and want us to manage the
03:29
financial back office process
03:29
that comes with a virtual CFO,
03:34
connect with us at
03:34
christinasjahli.com/lets-chat.
03:39
Camille Cannon! Welcome to her
03:39
CEO journey. It is a pleasure to
03:43
have you here today.
03:44  Camille Cannon
Thank you so
03:44
much for having me.
03:46  Christina Sjahli
So before we
03:46
dive into capital structures and
03:49
deals that support steward
03:49
ownership, I want to understand
03:53
your journey in becoming the
03:53
co-founder and executive
03:57
director of Purpose US.
04:00  Camille Cannon
We started
04:00
Purpose here in the US in 2018.
04:04
Purpose is a networked
04:04
organization. We have a team of
04:07
folks in Europe and a team of
04:07
folks in Latin America, and then
04:11
we're a small team here in the
04:11
US for remote. All the teams is
04:15
really autonomous, and we're all
04:15
working on the common goal of
04:18
supporting alternative ownership
04:18
governance and financing
04:20
structures. And my journey to
04:20
this is a pretty crooked path.
04:24
To be honest with you, I lived
04:24
in Berlin for 8 years,
04:27
originally from the East Coast.
04:27
And while in Berlin, like many,
04:32
I had the opportunity to work in
04:32
a couple of startups, ended up
04:36
running a startup team and
04:36
relocated to Northern California
04:40
5 years ago. And when I came to
04:40
Northern California, I had an
04:44
opportunity to take on a set of
04:44
real estate development projects
04:48
that were focused on affordable
04:48
housing, and social enterprise,
04:51
and forging public private
04:51
partnerships with the local
04:55
government. And I spent about a
04:55
year doing that. It was wild. I
04:59
ran a consumer crew of 30
04:59
people. And, yes! Stories for a
05:04
different podcast.
05:06
It was really through that
05:06
experience. I was a block away
05:10
from city hall. I was in the
05:10
economic development office on a
05:13
daily basis. I started to
05:13
realize how inefficient the way
05:19
that we move money for the
05:19
benefit of people in communities
05:24
really is. So, I started geeking
05:24
out on this question of like,
05:29
"What is actually this
05:29
relationship between money
05:32
power?" and "How much how we can
05:32
move money more efficiently
05:35
within our system?" And that,
05:35
frankly, led me to a
05:40
conversation with a mentor of
05:40
mine in Berlin, who I've run a
05:44
business for. I said, "Here's a
05:44
whole bag of confusing things
05:48
that I'm thinking about on a
05:48
systems level, and what do I do
05:51
now?" Like, I've sort of opened
05:51
up Pandora's box of a lot of
05:54
interesting questions. How do I
05:54
move forward with this?
05:57
Coincidentally, the German
05:57
co-founders of Purpose had just
06:02
been in his office and said,
06:02
"We're looking for someone to
06:05
help us grow this sort of
06:05
seedling of an idea in the US,
06:10
who's based ideally in the Bay
06:10
Area, and is bilingual. Do you
06:14
know of anyone, they should have
06:14
a lot of operational
06:16
experience?" And my friend, Paul
06:16
said, "Well, this is strange.
06:20
You should meet Camille." So
06:20
that's really how this journey
06:24
started.
06:25  Christina Sjahli
You mentioned
06:25
about money and power, and
06:28
efficiency in how money move.
06:28
So, what exactly the problem
06:34
that Purpose US addressing right
06:34
now?
06:37  Camille Cannon
I think, on the
06:37
most meta-level, the story that
06:40
we tell us about rewriting The
06:40
Code of Capital. And by that, we
06:44
mean the existing legal system
06:44
of how capital is actually
06:49
encoded through the law through
06:49
contracts and ownership, and
06:53
everything else, perpetuates
06:53
inequality and preserves wealth
06:58
accumulation. If we want to have
06:58
a more just, equitable economy
07:04
in society, we need to actually
07:04
address these underlying
07:07
dynamics of how the system is
07:07
perpetuating harm. That's the
07:12
most macro-level.
07:13
On a micro-level, what that
07:13
looks like in practice, is
07:16
supporting entrepreneurs,
07:16
business owners, communities,
07:20
investors in structuring and
07:20
mobilizing capital into
07:26
alternative ownership forms. We
07:26
focus on ownership structures
07:32
that do a couple of things. One,
07:32
they disrupt the relationship
07:38
between money and power, and
07:38
they do that through shared
07:41
ownership. In the structures
07:41
that we support stakeholders,
07:45
whether that be employees or
07:45
supply chain participants, users
07:49
on a platform, they participate
07:49
in both the governance and
07:55
decision-making around the
07:55
stewardship of an entity or
07:58
community of people, and in the
07:58
benefit and the value that they
08:03
helped create. That's one tenant
08:03
of those structures that we work
08:06
with.
08:07
The other is around
08:07
intergenerational. Rather than
08:12
relying on capital structures,
08:12
where liquidity is contingent on
08:16
the sale of assets, we support
08:16
folks in developing capital
08:20
structures that allow for
08:20
liquidity to be provided without
08:25
the sale of a company, enabling
08:25
the intergenerational and
08:28
long-term stewardship of an
08:28
organization.
08:32
The last component is really
08:32
around redefining fiduciary
08:35
duty. That has to do with one of
08:35
the key legal forms that we use,
08:39
which is called the Purpose
08:39
Trust. This kind of goes one
08:43
step beyond public benefit
08:43
corporation. Not just to allow a
08:47
mission and consideration with
08:47
fiduciary duty, but actually
08:51
fundamentally redefines what the
08:51
decision-making - the fiduciary
08:55
duty is of the people who are
08:55
entrusted with the stock of the
09:00
company.
09:00  Christina Sjahli
I'm really
09:00
interested the type of
09:04
entrepreneurs that you are
09:04
supporting. At what stage that
09:09
Purpose US can help
09:09
entrepreneurs?
09:12  Camille Cannon
When we started
09:12
in 2018, doing this work was
09:15
unbelievably expensive from a
09:15
legal perspective. We spent
09:19
about a year trying to figure
09:19
out how to drive down legal pass
09:22
and implementing one of these
09:22
ownership structures. We've
09:25
taken that figure from about $1
09:25
million dollars in a transaction
09:27
to about a $30,000 in a
09:27
transaction. We did that way
09:30
working with a lot of mid to
09:30
large-sized businesses that were
09:34
looking for alternative
09:34
succession solutions. The
09:37
consequence of that work was not
09:37
only do we drive down legal
09:40
cost, but we also found out that
09:40
the folks who are making this
09:44
decision and the decision having
09:44
the option not to sell to
09:48
private equity, or not to sell
09:48
to a competitor because the
09:53
founders had kept a majority
09:53
stake in the business. That
09:57
ability was really dependent on
09:57
how they had raised capital over
10:01
the lifetime of their business.
10:01
And it wasn't, I don't think
10:05
that they knew what they were
10:05
doing was "alternative finance,"
10:08
but they had figured out nuanced
10:08
ways to protect their control
10:13
over the company, or set
10:13
realistic expectations with
10:16
investors about what their
10:16
intention was long-term. And
10:20
long-term being did protect the
10:20
independence of the company. And
10:22
that looks like having a
10:22
standard valuation across all
10:26
their fundraises. It looked like
10:26
having supervoting controls in
10:29
the hands of the founders or
10:29
other key stakeholders.
10:32
It was this subtle way of
10:32
navigating an alternative path
10:38
to conventional venture capital.
10:38
Over that time, we also work
10:43
directly with startup founders.
10:43
We were and continue to do this
10:47
to some extent, advising them in
10:47
a negotiation process typically
10:52
around the Series A to say,
10:52
"Okay, how do we negotiate terms
10:58
that protect your optionality
10:58
later down the line?" What we
11:01
found was that the entrepreneurs
11:01
who were successful in doing
11:05
this, they could tell the right
11:05
story. They could tell the right
11:08
story, and they were good
11:08
entrepreneurs, and they had good
11:10
ideas, and investors wanted to
11:10
invest in them. We've spent a
11:15
fair amount of time trying to
11:15
figure out how do we equip
11:19
entrepreneurs that we're not
11:19
working directly with, with the
11:22
information and narrative to be
11:22
able to go tell a story to their
11:26
potential investment partners on
11:26
why having an alternative deal
11:31
structure makes sense from a
11:31
business perspective, and aligns
11:34
with the core mission and value
11:34
of the company. The primary way
11:38
that we do that is through an
11:38
educational programming called
11:41
ALT Cab, which is about a 10
11:41
hour online course that we
11:45
offer, that walks folks through
11:45
everything from, "What are the
11:49
tools of the trade of
11:49
alternative finance?", "How do
11:52
you figure out what capital
11:52
sources your mission most aligns
11:55
with?" And then also, "How do
11:55
you build on optionality later
11:58
down the line from a legal
11:58
perspective?"
12:01  Christina Sjahli
Here's a
12:01
question for you. So, you
12:04
mentioned Series A. I know it's
12:04
a price round. At that stage,
12:08
then there is a valuation of the
12:08
company, and then you can figure
12:12
out what is the ownership. But
12:12
wouldn't that be too late
12:17
already to help them? Because if
12:17
they're already at that series,
12:23
a stage, likely they probably
12:23
already did seed round, right?
12:28
That has an impact on the
12:28
ownership in the business.
12:34  Camille Cannon
So, this is like
12:34
a "Yes, and..." response. On the
12:37
one hand, it matters a lot.
12:37
Because if you raise a very
12:41
large seed round, and that gets
12:41
converted into equity, and you
12:44
suddenly have 20-30% of the
12:44
business held by investors, who
12:50
are making the assumption that
12:50
you were going to go out an IPO
12:53
or exit this business in a
12:53
conventional way. One, you have
12:56
a relationship issue on your
12:56
hands because your investors are
13:00
not going to be happy that they
13:00
signed up for something that
13:03
didn't actually end up being the
13:03
course. And two, you've given up
13:07
a fair amount of control before
13:07
your Series A, and you're
13:10
probably going to end up with
13:10
less than majority control one
13:13
or two funding rounds down the
13:13
line. So, that's the "Yes, it
13:16
does matter."
13:17
The "No, it doesn't matter" is
13:17
that from a structural
13:20
perspective, if you're raising
13:20
funds on a safe note, which
13:23
basically will convert into a
13:23
future equity structure, you're
13:27
not distributing any voting
13:27
rights at the time of issuing
13:31
that convertible note. The risk
13:31
is much lower than at the time
13:36
of the Series A where you are,
13:36
you know, distributing equity
13:40
and with it, voting control and
13:40
other investor rights at that
13:44
stage. One of the core things
13:44
that I think that we've heard
13:49
from entrepreneurs as feedback,
13:49
one of the most valuable
13:52
heuristics to have in mind,
13:52
particularly at that seed stage
13:56
is, capital is not free. Capital
13:56
has a cost to it. Because I
14:02
think of just the culture of
14:02
venture capital and the culture
14:05
of startups, there's kind of
14:05
this assumption or mythos that,
14:10
"You need to raise as much money
14:10
as possible," "You need to do it
14:12
quickly," "You're going to fail
14:12
if you don't." And the
14:16
consequence of that is, you
14:16
basically just try to raise as
14:19
much money as possible. This is
14:19
an obvious statement. But the
14:22
riskier that business is, the
14:22
more expensive that capital is.
14:25
And so, we advise folks, and
14:25
this is why it's relevant to
14:28
seed founders on, "What's the
14:28
amount of capital, it's actually
14:32
realistic for you to be
14:32
raising?" And "How do you build
14:34
in sustainability and
14:34
profitability into your model
14:37
earlier on?" So that you can
14:37
reduce the cost of capital as
14:42
you continue to raise funds, if
14:42
that's what you're looking to
14:44
do.
14:45  Christina Sjahli
Do you have
14:45
any example?
14:47  Camille Cannon
One is the
14:47
consumer packaged goods company
14:50
in Oakland called Firebrand
14:50
Bakery, that the founder had
14:54
actually been running the
14:54
business for 12 years, had never
14:57
raised outside capital. Matt's
14:57
amazing! The company focuses on
15:01
hiring formerly incarcerated
15:01
folks and people who are
15:04
formerly without houses. When he
15:04
started going out to the market
15:09
and talking to VCs and private
15:09
equity investors, he realized,
15:12
"These folks want to sell the
15:12
business." And as Matt puts it,
15:16
"If I sold the business, I would
15:16
just turn around, and found the
15:19
exact same business over again,
15:19
because I don't want to work for
15:23
someone else, and I really
15:23
believe in our mission. So, why
15:25
would I do that?" We helped Matt
15:25
raise $2.5 million to expand.
15:31
They opened up an entire
15:31
factory, and now have an entire
15:36
consumer packaged goods lines
15:36
that they've been working on.
15:38
In that transaction, we
15:38
transitioned 30% of the business
15:42
into an Employee Benefit Trust.
15:42
The structure of that $2.5
15:47
million is this really cool
15:47
profit flip that we modeled
15:51
after restaurant investing. In
15:51
that structure, the investors
15:57
receive 90% of distributed
15:57
profits until they achieve 2X
16:01
their initial investment, after
16:01
which time the profits are
16:05
distributed pro rata based off
16:05
of ownership. And there is a, I
16:10
can't remember the exact term -
16:10
if it's 7 or 10 years, but
16:14
there's a retention rate at...
16:14
you're 7, and at you're 10, for
16:17
the investor and the company. At
16:17
that time, the valuation is
16:22
either fair market value -
16:22
Redemption at Fair Market Value,
16:26
or 3X I believe, the initial
16:26
investment. That's one way that
16:33
we've approached it. Investors
16:33
in that scenario have voting
16:36
rights. That was a desire from
16:36
the founder. He didn't want to
16:38
take away voting rights from the
16:38
investors. In another, we're
16:43
working with a psychedelic
16:43
company that just raised $7
16:46
million dollars, and they
16:46
decided to do not a non voting
16:51
equity structure. It's a longer
16:51
term-oriented investment. The
16:57
rights on that are Redemption at
16:57
Fair Market Value, 7 to 10 years
17:02
down the line.
17:04  Christina Sjahli
Purpose-driven
17:04
businesses are normally more
17:06
focused on building
17:06
profitability, and raising the
17:09
right amount of capital, and
17:09
then they care about their
17:12
mission. If you can share the
17:12
significant differences between
17:16
working with conventional
17:16
investors and alternative
17:19
capital investors, from the
17:19
point of view of the return that
17:25
this type of investor are
17:25
looking for?
17:27  Camille Cannon
That's a good
17:27
question. I'm not sure that I
17:29
would put people into two camps
17:29
of conventional investors and
17:33
alternative capital investors.
17:33
To go back to sort of the the
17:37
core learning origins and our
17:37
work, the folks that had built
17:42
successful mid to large-sized
17:42
businesses who had negotiated
17:46
alternative terms, they were
17:46
raising from conventional
17:48
investors. Although in some of
17:48
the transactions that we work
17:52
on, there are impact investors
17:52
or family offices sitting at the
17:55
table who can invest on more
17:55
flexible and perhaps
18:00
"concessionary returns." In a
18:00
lot of cases, we have
18:02
conventional investors sitting
18:02
at the table.
18:05
A couple of things. One is, I
18:05
think that good deals are hard
18:09
to find. There is room and
18:09
optionality at the table if you
18:15
are a proven entrepreneur with a
18:15
good business idea that's
18:19
gaining traction for
18:19
negotiation. I think that to
18:24
caveat all of that, I would say
18:24
that these transactions take a
18:28
little bit longer. There's more
18:28
negotiation, and they can be
18:31
more involved. You want to make
18:31
sure you have the right partner
18:34
sitting at the table to go
18:34
through that process with you.
18:37
If your intention as a startup
18:37
founder is to protect your
18:43
mission, and you don't want to
18:43
sell the business, you probably
18:46
don't want investors on your cap
18:46
table who don't share that
18:50
vision, or don't understand your
18:50
motivations, because they're
18:54
probably not the right investors
18:54
for you.
18:56  Christina Sjahli
I'm just
18:56
wondering. The type of investor
18:59
that Purpose US brought to the
18:59
table in this alternative
19:03
capital deals, are they looking
19:03
for exactly or similar return?
19:08
Or is it different?
19:09  Camille Cannon
This is a great
19:09
question. And it's a hard one to
19:12
answer for the following reason.
19:12
I think that a lot of this has
19:15
to do with perception of upside.
19:15
I think that there is the
19:18
feeling that when you take
19:18
optionality off the table for a
19:21
future sale or IPO, that you are
19:21
reducing the potential of
19:25
returns. The irony, though, is
19:25
that in most of these
19:28
transactions that we're
19:28
supporting, we have negotiated
19:31
in for investors, redemption at
19:31
fair market value, at a future
19:35
point in time. But the feel of
19:35
that, I think is markedly
19:39
different for investors because
19:39
in many ways, we're kind of
19:41
taking out the gambling - the
19:41
chance of it, right? That can
19:45
feel limiting to investors and
19:45
it definitely turns away some
19:49
investors who are looking to
19:49
extract as much value as
19:53
possible.
19:54
The other limitation is what the
19:54
structure of the investors fund
19:56
is and whether or not they can
19:56
invest in a timeline that
19:58
actually aligns with the
19:58
company, reaching a cash flow
20:02
that would enable them to do
20:02
redemptions. I think in terms of
20:06
the return, the investors who
20:06
have been the most
20:12
collaborative, I would say, have
20:12
been investors who are willing
20:15
to have a conversation about
20:15
what the appropriate risk return
20:18
profile is, for a given company.
20:18
Not all companies are going to
20:23
have hockey stick growth and
20:23
have a 10X return. That's just
20:27
not going to happen for every
20:27
business. What is the
20:30
alternative return model or
20:30
approach that makes sense for a
20:35
consumer packaged goods company
20:35
that's delivering bread, as an
20:38
example? That's a different
20:38
Gestalt. It's a different
20:41
approach to thinking about
20:41
returns and your investment
20:44
thesis.
20:45  Christina Sjahli
"Conventional."
20:45
The way I see it is the one that
20:49
always pushing for hypergrowth
20:49
at any costs. They want to see a
20:57
certain amount of returns in a
20:57
shorter period of time, when
21:01
possible. But when we're talking
21:01
about alternative capital, or
21:07
investors, it seems that the
21:07
timeline is longer, the return
21:13
his cap to a certain X number,
21:13
and they're basically more
21:20
patient.
21:21  Camille Cannon
I think that
21:21
there is definitely truth in it.
21:23
I do think, though, that there
21:23
are conventional investors who
21:26
we... I mean, we've just done a
21:26
lot of deals with investors who
21:29
are pretty conventional, who are
21:29
coming along for the ride. So,
21:34
the question of who to raise
21:34
capital from and what the
21:38
narrative is for those
21:38
investors, and what the return,
21:42
how to structure the terms of
21:42
that really depends on the
21:46
business. It depends on the
21:46
industry. It depends on the
21:48
entrepreneur. It depends on
21:48
their network of people. There's
21:52
so many factors that go into
21:52
thinking about how do we
21:56
actually structure something
21:56
that works. And I would caveat
21:59
all that by saying that, this is
21:59
an unbelievably emerging field,
22:03
right? There is no standard
22:03
alternative capital terms out
22:08
there. Although, we do have a VC
22:08
light, a term sheet that we
22:11
worked on with lawyers, there
22:11
isn't a standard approach. I
22:14
think part of what this whole
22:14
field in this moment is about is
22:20
asking those questions in real
22:20
time with investors at the
22:23
table, and collaborating
22:23
together to find an approach
22:27
that feels appropriate, and that
22:27
feels like a fair risk return.
22:31
And that works for investors
22:31
funds, but while also doesn't
22:35
fall into, or put founders and
22:35
companies on the conventional
22:39
track to IPO buying, or selling
22:39
or failing.
22:43  Christina Sjahli
You are saying
22:43
that there are many investors
22:46
out there that are willing to
22:46
come to the table and listen to
22:50
the type of deal that benefit
22:50
both the founder, that is trying
22:56
to protect their purpose,
22:56
they're not trying to exit
22:59
through IPO or selling their
22:59
business, but get a decent
23:03
return as well.
23:04  Camille Cannon
From the
23:04
psychology of an investor,
23:06
investors want to invest in good
23:06
businesses, good entrepreneurs,
23:09
good bets. The more an
23:09
entrepreneur can come to the
23:12
table with those things well
23:12
stocked, so to speak, the better
23:17
the likelihood is that they're
23:17
going to be able to negotiate
23:20
more control for themselves.
23:23  Christina Sjahli
Recently, I
23:23
was talking to an entrepreneur
23:26
that is... Have like this
23:26
mission and is a social impact
23:30
mission. Looking at the models,
23:30
looking at the the financial
23:34
model, specifically and the
23:34
business model, she basically
23:38
got a response from an investor
23:38
- potential investor to say,
23:42
"You know what, there's some
23:42
inconsistency in your business
23:46
model, and then what you are
23:46
showing on the financial model."
23:51
The reaction from the
23:51
entrepreneur and basically
23:54
saying that, no investors
23:54
understand about anything beyond
23:59
financial results. They're only
23:59
looking at finance strictly on
24:03
financial results. Based on the
24:03
conversation, every investor is
24:08
looking for good business, good
24:08
story as well, and creating some
24:14
impact in the world. And then,
24:14
no matter what financial results
24:18
still matters?
24:20  Camille Cannon
Yes, it matters.
24:20
The thing that I've said most
24:22
frequently to social
24:22
entrepreneurs, and looking at
24:24
their initial pitches is, "Don't
24:24
focus as much on the impact." I
24:29
think that folks who are doing
24:29
something that's really
24:33
ambitious and incredible for the
24:33
world, they step forward into
24:37
conversations about the
24:37
possibility of this business as
24:41
a vehicle for impact and change.
24:41
And that's great! But none of
24:45
that matters if the business
24:45
isn't successful, and there
24:48
isn't an engine for that
24:48
mission. I think that we can
24:53
frame it as investors are
24:53
looking for financial returns
24:57
and then it's extractive, or we
24:57
can frame it as, "Their looking
25:00
for it to work."
25:01
The first step to working is
25:01
having a business that
25:04
functions, having a business
25:04
that's profitable, having a
25:06
startup team that's successful.
25:06
And I think that's what
25:10
investors are looking at in that
25:10
first instance. I do think there
25:14
are investors in the room who
25:14
just want to make financial
25:17
returns and don't care about
25:17
impact, just to be clear. I
25:20
think that there are definitely
25:20
investors out there probably,
25:24
the majority to some extent, who
25:24
are solely financially
25:28
motivated. But I do think that
25:28
there is a growing number of
25:33
investors who are interested in
25:33
driving, supporting interesting
25:38
missions in cases where they
25:38
believe that the business is
25:41
going to be successful.
25:43  Christina Sjahli
Lastly, if
25:43
there is a founder that comes to
25:46
you, right? And then they want
25:46
to raise capital. What other
25:51
demystifying concept that you
25:51
are trying to teach this
25:56
entrepreneur, aside from their
25:56
thinking that capital is free?
26:01  Camille Cannon
I think that a
26:01
lot of our work and framing, and
26:04
education focuses on the
26:04
objective of optionality. You
26:10
don't have to find the perfect
26:10
solution to your ownership
26:15
structure, the perfect solution
26:15
to your governance, all on day
26:19
one. And in fact, I would argue
26:19
that you shouldn't, right? We
26:22
have folks reach out to us who
26:22
want to set up a Purpose Trust
26:25
and put their startup into a
26:25
Purpose Trust structure. I don't
26:28
know if that's really well
26:28
advised for a bunch of reasons.
26:32
You don't know necessarily at
26:32
year two what exactly your
26:35
purpose is, and who your core
26:35
stakeholders are. You should
26:38
enable iteration, allow for
26:38
iteration within that concept.
26:42
We've seen startups be very
26:42
successful in sort of a
26:45
benevolent dictator dynamic,
26:45
where founders hold control for
26:50
the first couple of years,
26:50
because that's just the energy
26:52
that's required to do something
26:52
hard and set it up and be
26:55
successful with it.
26:56
The last bit, I think, is around
26:56
this question of optionality. We
27:00
don't need to jump into the
27:00
full-blown trust structure,
27:03
protecting independence at the
27:03
very start. We can build in
27:08
optionality to the terms of a
27:08
given deal to ensure that you
27:13
can later down the line, decide
27:13
how you want to exit and to whom
27:17
and what framework. And that
27:17
looks like making sure that you
27:19
don't give investors things like
27:19
"drag-along rights" as an
27:22
example. And that you have
27:22
conversations with investors
27:25
that clearly articulate what
27:25
your future intention is around
27:29
the ownership of the business.
27:29
It's things like that.
27:32  Christina Sjahli
Is there
27:32
anything else that you want to
27:34
share with my audience, Camille,
27:34
that I haven't asked you.
27:37  Camille Cannon
I think that
27:37
raising capital is really,
27:39
really hard, and we see this a
27:39
lot. I think we have faced at
27:43
ourselves as an organization.
27:43
Going out to market and trying
27:47
to fundraise and trying to find
27:47
the Aligned Capital Partners can
27:50
be very, very difficult on a lot
27:50
of different levels. The
27:54
frustration of that and the
27:54
friction of the system sometimes
27:56
makes people feel like they
27:56
don't have options. And I would
28:00
push to say that, you should
28:00
explore the options and raising
28:03
capital. You should look at
28:03
opportunities, and feel free to
28:07
reach out to us to have a bit
28:07
more context for your specific
28:11
business what this looks like in
28:11
practice, because it is very...
28:14
there's a lot of diversity of
28:14
approaches, depending on what
28:17
the scale of the businesses. As
28:17
I said earlier, industry is a
28:21
huge factor, what a particular
28:21
segment of the capital pool
28:26
you're looking to tap into. But
28:26
yeah, there's a lot of
28:30
creativity that we're seeing in
28:30
the market. I think that we're
28:34
very hopeful about more money
28:34
moving into companies in this
28:37
format going forward.
28:39  Christina Sjahli
Okay, so where
28:39
can people find you then?
28:41  Camille Cannon
You can reach
28:41
out to us at purpose-us.com
28:46
There's a form on the website.
28:48  Christina Sjahli
To apply.
28:48
Camille, thank you so much for
28:50
being here.
28:51  Camille Cannon
Oh, you're so
28:51
welcome. Thank you so much for
28:52
your curiosity and for having
28:52
me, and for the fun
28:55
conversation.
28:57  Christina Sjahli
And that's
28:57
bring us to the end of another
28:59
show. Thank you so much for
28:59
listening to another episode of
29:03
Her CEO journey, the business
29:03
finance podcast for women
29:07
entrepreneurs. If you want to
29:07
create a proactive financial
29:11
plan and process for your
29:11
business, so you are ready to
29:15
weather the financial storm over
29:15
the next few months. Let's chat
29:19
and see what's possible for you.
29:19
Book at a time to speak with me
29:23
at
29:23
christinasjahli.com/lets-chat.