How to Choose the Best Financing for Your Business - Fireside Chat

Video Transcription

Mary: Good afternoon everyone and welcome to our latest Fireside Chat, How to Choose the Best Financing for Your Small Business, presented by Grasshopper Academy. My name is Mary Mallard, I'm the social media and community specialist here at Grasshopper, and I will be your host for today.

So business financing definitely isn't the most fun or glamorous topic, but it is something that's essential that you need to think of when you're starting or growing your business.

So what our panelists will cover today, assessing financing needs, financing options for small businesses, and we will talk about the future of small business financing. Whether you're just starting your business or you're up and running, you'll definitely have some insights here that will help you.

Let me take a minute to introduce our panelists. We have Melani Gordon, the CEO and Co-Founder of TapHunter, Raj Sabhlok, the President of ManageEngine and Zoho.com, Mike McDerment, Co-Founder and CEO of FreshBooks, and Mike Rabil, VP of Sales and Partnerships at Funding Circle.

If you'd like to learn more about our panelists, all of their bios are located at grasshopper.com/firesidechat.

So just a couple more things before we start. We have a couple of social media correspondents that will be following along with this chat. You can find them by following the #FRSDCHAT. We will be leaving 15 minutes at the end of the chat to ask questions, so please ask your questions. You can ask questions either on Twitter by hashtagging #FRSDCHAT, or you can use the chat box that is actually in the webinar screen.

If you do tweet, we are having a Twitter giveaway. David Worrell will be giving away his book, "The Entrepreneur's Guide to Financial Statements." He's from Fuse Partners, and Holly Magister of Exit Promise will be giving away an online business valuation program that's valued at about $300.

Our other sponsors that have helped us put on this chat today are listed on the Fireside Chat page, so again that's grasshopper.com/firesidechat. And at the end of the chat, we will be sending out an email that contains a survey that your feedback will help us make these chats even better in the future, and also will contain the winners of the Twitter giveaway. So make sure to keep an eye out for that.

Assessing Your Financing Needs

So let's jump right into the questions. The first question that we are going to cover is documentation. So what kind of documentation do you need to assess your financial needs? For instance business plans, P&L statements, balance sheets, etc.?

Mike Rabil: I'll jump in here and take this one. And so I myself, I'm actually a small business owner and I do that alongside also working at Funding Circle, and so I have some direct experience with this. I think just taking a step back from getting to the nitty-gritty first, always be organized when applying for capital. Be as organized as possible. And so what I mean by that is, think about getting your business tax returns ready to go, your personal tax returns ready to go, and access to your bank statements. At Funding Circle we require two years of business tax returns, one year of personal tax returns, and six months bank statements.

Every lender is different, and so why I say be as organized as possible, is there are going to be nuances to each lender you apply for a loan with, and so just make sure you have all that documentation and give it to them quickly, in an organized fashion, and that will ensure your best opportunity to achieving capital.

Mary: Anyone else?

Melani: I think for us in the early days, we had a lot of our planning and spreadsheets and forecasting, budgeting in trusty old Google Docs, but realized pretty quickly that it was pretty limiting and needed to switch to using Excel, and shortly after hired an accounting and bookkeeping firm that whipped us into shape.

Being organized definitely, but also realizing when it's time to also, as the business owner or founder, not be the one that's handling all of that day to day, to be able to outsource to an accountant or a bookkeeper or interim CFO or controller or whatnot to really help you set a proper foundation and the right foundation. It's not that easy to unwind it once you get going, it's a lot of work to unwind it. So a ton of erring on the side of setting it up right the first time.

Mike McDerment: So I'll just chime in with: set your expectations nice and low because, first of all, it's often like a super painful and time-consuming process that results in no additional capital. So, depending on the nature of your business, I think it's just good to go in eyes wide open. All the other counsel is great, being organized, but perhaps even better having some professionals or to help you sort of talk the language of the bank or the other party that you're working with. I'm sure we'll get into some of the online lending stuff which is actually a lot easier in a lot of cases, which is exciting.

Signs You Need More Capital

Mary: So how can you best determine if you need more capital to fund your business? So maybe you've been up and running for a while and you're kind of wanting to grow. At what point do you sort of realize that, oh geez, I need more money coming in, I need to get some capital?

Mike Rabil: I'm happy to jump in here again. And I think that, Mary, you said it best: it's we need to grow. And growing is very situational. Every business grows differently with people, with products, with assets, with marketing spend, and with sales spend.

And so from our perspective, in my perspective as a small business owner and being at Funding Circle, we always want to lend to businesses that have that growth in mind. And so whether, like I said, that's expanding your business, purchasing a new asset, hiring new people, those are always good reasons that spur the need to borrow money, from our perspective.

Melani: I think it's really a philosophy starting at the top with the founders. I think a lot of times business owners and founders might not know initially what the outcome looks like for them, but the sooner you can get clear on what outcome you're looking for as a business owner or a founder, the quicker you will figure out what path or strategy you need to take to funding your business.

Raising money from angels or VCs is not the only way to fund your business, the best way to fund your business is through your own customer revenue.

But I think it's really important to get honest with yourself and figure out what type of company you're building. Are you okay with a couple hundred-thousand-dollars or a million-dollar kind of "lifestyle company", and you're never going to take outside money? That's a very different path than taking outside funding and having to really be held to certain growth rates every year. They're both very different paths. And maybe you start one way and have the other direction. That's fine too. But I think getting honest with yourself on what the outcome is for you.

Raj: I think those are all great points. I would just add that really take a hard look at why you're raising money. Mike talked about growth. That's certainly a driver in terms of being able to support growth.

But I would also say that be very kind of judicious and diligent on when you actually need the money. Because I think one of the things that having money does for you or not having, I should say, readily available, is it keeps you very disciplined within your business. So if you're focused on knowing that you only have a certain amount of capital and working within that, I don't necessarily think that that's a bad thing. I think it makes you think deeper about your business, and puts you in a better position to actually go out and get loans or financing or whatever you need at the right time.

So I think even if capital is readily available, some people say while it's available take it. I don't necessarily agree with that. I think you should be very disciplined in your business before you go out and get money.

Mike McDerment: I think only because this topic is so important, I'll go with the fourth answer to the question, which I generally do try to avoid doing. Those are all good things.

I think often people don't anticipate the downstream effects of taking that capital. Right? And so we touched on that. But like expectation; is somebody going to need that money back? It's not like a gift to you. Right? So be very clear about that. And what may come up if things don't go well. Right? You know, the bank could be taking a chunk of your home. Right? I think you have to accept.

What I like to tell people to do is imagine failure, and then accept it, like everything's going terribly, terribly wrong, and then see if you still want it. And if you can't live with that downstream scenario, you probably shouldn't be taking the capital.

I guess the other thought I'll throw in there is money does not solve all problems. Personally we started a business over a decade ago; 2014 we raised $30 million in venture capital. For about a decade before that, I had people knocking on my door all the time, and decided not to bring on the capital for basically all of these reasons. Like hey, the next problems I needed solved weren't necessarily solved by capital. I didn't want to be deluded into thinking that it solved all problems because it doesn't.

So I guess just think about the downside. And if you're raising capital to stay alive, you probably have bigger problems. You want to have a reputable business model and some other things like that.

Mary: Awesome, all good answers.

Financing Resources

Mary: So along the lines of knowing when you have funding, are there any government institutions, not-for-profits or low cost services that will help a business seek out funding once you've decided that you need it?

Mike Rabil: Yeah. So I think I can also speak to this as well just to rattle a few off.

Obviously the SPA exists to provide a very low cost of capital to small business owners. And if you can access a small business loan from the SPA, kind of what Raj was speaking to earlier around sort of it doesn't make sense for your business, often those loans are priced so well, and the amortization schedule is so long that they're very attractive. And some other sort of non-profit lenders that will take on a little more risk if you're just a little bit earlier in your life as a small business owner.

Opportunity Fund is one, another one is Kiva. So they exist to sort of really stimulate the small business economy, especially for sort of early stage businesses. And then those are some that just kind of come top of mind.

How Seasonality & Industry Types Affect Funding

Mary: Okay. So following that a little bit, does it matter how far along a business owner is in their life cycle? And Mike McDerment, you talked about this a little bit. But how...does seasonality affect your need for funding? If you're in business a year versus 10 years, does it really matter? And how would it affect how a lender would look at you?

Mike McDerment: So I think the first thing as one of the things about this subject that makes it really hard, is like every business is kind of in a different context, whether it's in development stage or a different industry, which may have different sort of seasonality and cash flow needs placed upon it. And so it's actually pretty hard other than the philosophical answers to give really specific "what works" for me kinds of thing.

So I'll just call that out, which makes it challenging for the panelists all here, but if you take this as all kind of philosophy around financing, then you're probably pretty good to go.

And then you asked me a second part which I seem to have forgotten partway through saying all that.

Mary: Part of it is does seasonality affect funding needs if you're more of a seasonal business?

Mike McDerment: That's what I was trying to scratch at, is seasonality can. Like in retail for example, 90% of your sales are gonna happen in December or something, depending on what market you're in around the holidays or November. And you might need to ramp up inventory in anticipation of that, right? And so you might need access to capital to do that. So, sure, seasonality can play a role in your cash flow needs, and make you want to raise capital on account of that. But again, very industry and business-specific, and so hardly a generic one-size-fits-all answer.

Melani: I think in terms of "how long", I think of it more as the time period in which you've been able to gain traction and also grow it. Right? So if you think about the first month to the sixth month, – and you should be tracking all of this even if it's on pen and paper (hopefully, it's in a spreadsheet) – how many customers did you sign up in month one? Now it's month five, how many are still with you? And what was your growth rate month over month?

And so I've seen companies raise great money, that had very, very fast traction over a 3 to 6-month period, or maybe a different company where it might have taken them 12 months or 2 years to get there.

So I think in some sense it's less about how long you've been in business; it could be the momentum you're creating and how fast you are able to get to a certain point. But I think showing a three or six-month track record of your month-over-month growth, especially when you're in the very early stages, on top of what your customer retention rate is, are probably two really important things to wrap your head around when you're first starting out.

Mike McDerment: Can I just ask a question? Maybe this helps me give better answers. Maybe the audience can write in to Mary and just say what industry you're in and what stage because I feel like there's venture-backed and technology companies or there's more like retail; there's very different approaches to financing in each one. And I guess if everyone's of one group, we could probably have a pretty deep conversation. But if we're kind of scattershot, then it's hard.

Mike Rabil: Yeah, Mike, you just nailed it on the head. I think I was gonna respond to Melani by saying I totally agree from a lender's perspective, but also addressing sort of small business owners and maybe looking to raise equity capital.

It's all about performance history. From an equity investor's perspective it's, like Melani said: it's customer acquisition cost, how many customers you've been able to get, what's the revenue like over the past 3 to 12 to 36 months.

And from the lender's perspective it's: if you know it's a seasonal business like an ice cream shop, there's gonna be larger sales numbers in the summer, and so then therefore that's taken into account. So just how do you perform summer over summer?

But I think your point is right. If we knew what the audience looked like we could then get deeper.

Raj: I think the other answer to this question is also what's exciting about financing today. There's many options for the various stages of businesses; whether it be bootstrap to credit card to business credit cards to micro lenders, all the way on up. So I think there's a lot of options there, and I think in the context of understanding what the specific businesses and where they are in their life cycle, there's options that you can kind of map to the appropriate kind of funding vehicle, if you will.

Mike McDerment: So one of the best answers to a lot of this stuff is like, hey, do you have a network of people in your industry that you can speak with to see how they have addressed some of this stuff? Because the answers and the options will probably vary quite a bit. And so as an entrepreneur, it's sometimes hard to get out there and actually meet people. But it can be incredibly helpful to tackle problems like financing and countless other ones in your business.

Mary: In response to, Mike, your question about who's watching, we have gotten some responses. We have some service businesses, we have some brick and mortars, some franchisees. Someone just said they're in medical legal counsel or consulting. So we kind of have less of the traditional tech space if you will, and more of service businesses, brick and mortar, that type of thing, which is typically what our customer base is. So that's sort of who we see, if that helps.

Mike McDerment: I think that's very helpful. So we'll see how it plays out in the other questions, but we can use that.

Exploring Your Financing Options

Mary: Awesome. So moving on a little bit to financing options, and Mike Rabil, you might be able to sort of give us the insight on this right now. But how difficult is the current financial market for small businesses to get loans?

Mike Rabil: That's a great question. And look, I think to Raj's point earlier, there are definitely a myriad of more options in the market. But just looking at some stats, everyone thinks since the financial crisis, and since the recovery that we've had in certain parts of the United States, that there's more access to capital.

But great offers, great sort of priced capital, especially from the banks, they're lending 20% less than they were before the recession. The only people that are getting more loans from banks, are big, big businesses. There's about a 4% increase since the financial crisis.

And so what you're seeing is a decrease of well-priced capital to small business owners. And when I say small business owners, we think of our small business owners as businesses doing $1 million to $10 million in top line revenue, with 10 to 30 employees. That's kind of our wheelhouse at Funding Circle.

But there are more options. I think it's very situational to what everyone said, and really sort of evaluating what you need, what type of capital is going to be most useful for your business, and then just really educating yourself and taking the time.

And I think Melani said it well; if you don't have the time to dedicate to investing and figuring out and applying for loans (which can be complicated), you need someone to help that process. Because lenders out there try to speak a bunch of different languages, people have realized there's a gap in the market. So you're seeing venture-backed companies come to the space and say, "we'll give you loans and no recourse and just a percentage of sales." But then when you do the math and you look at what that type of loan actually is and what the annual interest rate will be, it's a lot higher than what they originally pitched.

So while there's a lot of different lenders out there, be careful and do your diligence and be thoughtful around what does this loan actually mean to my business? What's the term and what's the interest rate and how is that going to affect my profit and loss statement?

Short-Term vs Long-Term Loan

Mary: All right. Anyone else have anything to contribute to that question? If not, we'll move on.

So as far as when you're looking at funding, talking specifically about loans, how can you best determine whether to get a short-term or a long-term loan? Like what would you need to look at as far as your business information to decide that?

Mike Rabil: So again, this is kind of situational, as everyone's been talking about. And I'll be brief, I don't want to overwhelm. But essentially the way to get longer-term capital, better-priced capital is to, one, be organized, and two, is obviously you think about performance history. So the longer you've been in business, the more free cash flow your business generates, the more likely you are to receive a very low-priced long-term loan.

And so we look for those things at Funding Circle as well. We have a two-year minimum in business, and we like to see some level of profitability, but it's not necessary. People often...and don't worry, often lenders will say you need to be profitable. You don't have to necessarily show profitability on your tax returns, because people often will show negative cash flow for tax purposes. And so we'll dive in there and try to understand the story.

And so I think that's part of it as well, is being a small business owner is really sort of understanding your story and being able to clearly articulate that to the lender. But again, it goes back to operating history and cash generated, and that will be a very good indicator of your affordability of a loan, and then your ability to achieve a very well-priced long loan.

Mike McDerment: I think being very specific with the purpose for raising capital is important. And so for example like, "Hey, I want more cash." Well, probably not specific enough. Directionally great, but is it because you have a season coming up, right, and you need to buy inventory for that season? In which case shorter term things can be appropriate.

And you might even be prepared to spend a little more on an annual interest rate basis because you're going to pay it back quickly after you have some sales, versus, "Hey, I need to invest...put all capital in the CapEx." So capital expenditure and adding new addition...building, right? And in that case it's like, well, you're turning it into real estate, so maybe that's not all bad, and you're going to use it over a period of years.

I think the purpose and intent of the capital is important.

I'll just talk about another source of financing which I think is interesting, and we see a lot at FreshBooks. So we help people with invoicing and accounting, and we work with a company in this case called Fundbox, that does invoice factoring. So if you're a medical office or some financial services firm, like sometimes you can use your invoices, those that are outstanding, and actually help raise like sort of short-term capital based on those funds in case you haven't collected them yet.

So again, I think just be specific about what the purpose is and look for appropriate options.

Crowdfunding: Good or Bad?

Mary: So one of the more popular types of funding lately is crowdfunding. So I'm not sure if any of you have had experience with that, but if you could just speak to maybe a little bit about what small businesses should know about crowdfunding, what type of research should they do. Should you protect your company assets before doing crowdfunding, like patents or trademarks, etc.?

Mike Rabil: So at Funding Circle we're not a crowdfunding lender, we're a marketplace that takes institutional investors and lends their money to small business owners with a term loan that's very similar to a bank product. So I think that where a lot of early franchisees or small businesses that are looking, that can't raise venture money or friends and family money, they'll often go to crowdfunding lenders. It's a good way (especially on a consumer product side) to get momentum behind a product. There are platforms that will spread out to their user base, so it's a good way to sort of get that early traction and create like a viral reaction around it. So it can be useful.

But I think, Mary, to your point is sort of understanding the terms. A lot of these crowdfunding equity lenders will take a bunch of equity, which you may not want to give up – kind of what Melani was talking to earlier. And they will also require you to often give away free products which may affect your supply chain.

So just really get into the Ts and Cs of some of these crowdfunding lenders who are mostly on the equity side these days.

Raj: I do think it's exciting and I think it is an option for companies. But there are things that potentially concern me about it. One thing to look into is your patents and your trademarks or really protecting your IP, I should say. And that is a little bit concerning to me. I think you've got to go in with your eyes wide open.

I mean, you're putting your business strategy on the internet. I don't necessarily think you're going to protect all your IP through patents. On the other hand, think twice about putting your whole business strategy out there on the internet.

So I would be concerned about that. But it is an option where many of these crowdfunding sites, you don't have to give away equity. You can raise some capital to jumpstart your business, and I think it is a viable option for many startups.

Melani: I think we've seen crowdfunding work really well for consumer device focused type companies. So I mentor a handful of startups here in San Diego. One specifically had a consumer device earbud for blocking out noise. It was initially targeted at college students at UCSD and it was four founders from there. And they were prototyping out their product, bootstrapping it.

I think they've won like a pitch fest a little bit so that they could feed themselves, and we...a handful of the mentors encouraged them to build their video, get their story out there, and launch on Kickstarter so that they could really validate the product idea that they had. And ultimately they did.

And I think that some of the crowdfunding platforms are fantastic for validating on a consumer-based type product if that's the idea or direction that you have, before you go sink your life savings into an idea. I think it's really great for that.

The Future of Small Business Financing

Mary: I want to take a few minutes for each of you just to talk quickly about what you see as the future of small business financing, and a little bit of advice for maybe small businesses that are either starting up and maybe overcoming startup costs, or that are maybe a little longer into their business life cycle and starting to be in the growth portion to get funding. Any advice you might have for them?

Melani, why don't we start with you?

Melani: Sure. So, I think that it's never been more exciting to start a business or a company than it is today, whether you're service-based, product or tech. I think that the software as a service market is helping fuel that. So services like Grasshopper, like FreshBooks are making it just dead simple to start a company.

TapHunter is my second company, my first company was more on the agency and services side, and a lot of these tools didn't exist. It was very expensive and cost prohibitive to start up a company.

Mary: Raj, why don't you go next?

Raj: Sure. You know, I would concur with Melani, it's exciting times. The options have probably never been more readily available to all size of businesses in whatever stage they are in their life cycle. So all that kind of points to a great opportunity for entrepreneurs right now. I would kind of reiterate that, you know, read the fine print so to speak, and really understand what your goals are before you dive in, because as they say, cash is available.

And at the same time, I'd say really be judicious about how much money, how much financing you're taking on, because there's the adage of "Nothing's for free" is really true.

My personal philosophy here and our business philosophy has been to limit the amount of debt to an absolute requirement that the business has, or even what you need personally. And if possible, keep those to short term, have good line of sight to how quickly you can pay those off.

On the personal side, I would try to limit the amount of exposure you have on your debt. In other words, if you can just isolate it to your business as opposed to collateralizing your debt with personal assets, do that. Because if you're going to have problems with your business, that's one thing, but you don't want it to necessarily impact your personal finances.

Mike Rabil: Being an entrepreneur myself, I used to refuse to sign personal guarantees on offices leases because I'm paying them rent to use it, and if my business goes out of business, why should I continue to. Why should I guarantee that rent?

The other side of it is, even if you're raising equity, you're essentially still guaranteeing as much as you can, your business is guaranteeing that equity position. And then when you're getting a loan, whether it's from a bank, a small business lender or the SPA for a well-priced, great loan, every single lender requires a personal guarantee. And the ones that don't, the APRs are very, very high.

And so I would say it's never comfortable, and that's why you should do the education piece to really understand if you can afford the loan or not, but it is part of receiving well-priced capital. There's a couple of things I would also say on sort of the broader market, I think Raj hit the nail on the head saying there's a lot of different offerings out there these days for capital. There's an NFIB study done a couple of months ago that showed that only 25% of small business owners were satisfied with the capital they received. So what that says is there's still lack of education. People are getting capital and then being unsatisfied with what it does to their business.

And so what you're seeing is a transformation of how people are getting capital. If you go to Google, type in "small business loan," you're going see a million different options for five pages, and it's going to be anyone from brokers to lenders to people saying they're someone else, because that's where people go to look for anything these days. And so I still go back to my point of really sort of educating your space.

And borrowing money, whether it's borrowing money from an investor, they take equity in their business, or borrowing money from a bank or a lender, it's a partnership. And so really understand who this lender is, or who the investor is, right? Because there are different terms and conditions with taking equity, with taking a loan, and you want to know that that lender is also going to be around for a long time.

There's nothing worse than taking a loan from a lender that's been around, is venture-backed, and all of a sudden you get a notice 16 months into your loan that that business is gone. Who's servicing your loan? Who do you make payments to? You want to be borrowing money from investors and also lenders who are around for a long time, who have great track records, and are also complying. There's a compliance perspective that's come into the small business lending space and it's already in the consumer lending space.

Mike McDerment: I'm quite excited about the future of financing for small business. But I think philosophically all these things are true, you need to understand who your partner is. I sort of believe in a world of choice, and with these things like Funding Circle and there's OnDeck Capital, there's a whole bunch of people who now are new options. They're often faster and easier to work with. It may mean that you're paying more in some cases. But I see that as having the option to pay more is better than having no option at all. So I see that as positive.

Questions from the Audience

Mary: All right. Well, we have a lot of questions in the chat, we have a lot of questions in email from our participants. So I'm going to jump right into those.

The first one, Melani, kind of speaks to one of the points that you talked about earlier as far as organization. There's a question, "Are there any online spreadsheet templates that can assist with keeping your records?"

Melani: I can't think of any. I mean, the templates I've used are for SaaS or software as a service like business modeling, which there's a lot of great ones out there. So if you're a software as a service company listening to this, feel free to ping me, I'm happy to share all of those links. But I can't think of any others offhand.

Mike McDerment: Maybe I can speak to this one fairly credibly. So FreshBooks accounting software in the cloud; using a provider like us, you're running your business in this kind of automated fashion. And then what happens is when it's in the cloud, we can interact with your bank and feed them data if you choose, to help you source funding.

I think that's a big part of the future; accounting software and the systems people use to run their businesses start to go up into the cloud, and then those providers can connect with your bank or other banks to offer you financing.

Mary: All right, next question comes from a person who has a fast growing service business, and they found themselves with a lot of work and they have a backlog. They're asking, what performance indicators do you use to help decide to break out of the chicken and the egg, taking money to support the hires to relieve the backlog and grow?

Mike McDerment: I think again I would just have a look at how much cash we have, like can you sustain a couple months of their salary as they ramp up? And what is the runway? Like do you have contracts that are 6 or 12 months in length, or is it a project that's short term? Because using things like contractors is the middle step.

So going from yourself and maybe some full-time employees, to contractors on the margin before going to the next full-time employee is a great way to de-risk growing the size of your team, and a good way of thinking about things.

Mary: All right, next question. What is needed to get a line of credit established? Which is a super open-ended question, but I think a good one to address.

Mike Rabil: You can get a line of credit which is a credit card essentially, which doesn't require that much. If you want like a very well-priced line of credit with your local bank, you're going to go back to the documentation I talked about earlier, which are your business tax returns, your personal tax returns, and at least having six months of your most recent bank statements available, ready to go.

And they may require, depending on what time of year, end term financials, things like that. And so just being prepared to apply for a loan with all that documentation is something that for a very well-priced line of credit you should be ready to have.

Mary: What do you think about OnDeck and Kabbage style of loans?

Mike McDerment: My understanding is they're [OnDeck] going to price what they're lending to you based on you and your business. So someone else might get like a really good deal and you may not or vice versa, and I don't think that makes OnDeck good or bad. I think it just means you should keep your eyes wide open; be aware and know what the prices are, and compare around and figure whether you can live with it.

Like 30% annual interest rate for two months probably makes a lot of sense. However, 30% annual interest rates for two years probably makes no sense, right? Like what is it you need the capital for and what kind of deal you're. These are the questions that you need to ask yourself.

Mary: Great. Okay. Next question kind of goes back a little bit to trademarking and patenting. What is, or is there value in intellectual property and a strong business plan when you are going to lenders or VCs or angels and seeking funding?

Mike McDerment: I actually think patents are often really dangerous in a lot of industries. And the reason is this: except in extremely rare cases, you probably patented something that's just not as valuable as you think it is. You just manage to create documentation around it that seems special. And what then will happen is you may start to become like this anchor in the way you think about your business or your product or something, that will maybe hold you back from evolving because you feel like it is defensible, and you should have changed that thing you patented then because you've learned something new or whatever it is.

Especially in technical things like software and sciences, they're nice, like somebody gave you a patent for that thing; but I think of them almost more as defense. You see how big technology companies use patents as defense. They buy libraries of patents, and in case somebody sues them, they have a catalog of patents to go to and use to sue the other company. It's like an arms race.

And so for most small companies and things of this nature, my opinion is they're not as important as you might think they are. And they're expensive.

Mary: All right. I think we have time for one last question. Is it a good strategy to hire a funding strategist?

Mike Rabil: If you have a VP of finance or a CFO or even a controller, this is something that's in their wheelhouse, and they should be able to handle. I don't think it makes sense to hire a funding strategist or specialist. I can't really think of a business that would need it as a full-time hire.

There are really good brokers or referral partners who can be that resource for you. You outsource it to them and you'll pay a fee for them, and that can be a good option. Sometimes accountants or CPAs can do it as well. But I wouldn't make a full-time hire for that.

And if you have someone who controls all your finances, this is something that they could probably lead the way and take it out of your workflow.

Mary: Great. Awesome. Well, that's just about all the time we have today. For any audience questions that we didn't get to, we will send those over to the panelists, have them take a stab at answers, so everyone's question gets answered.

Thank you all to our panelists, Melani, Raj, Mike and Mike, it was really great, you were really informative today.

Just a reminder to our audience, we will be sending out a survey in the next 30 minutes or so that will also contain our announcement of the Twitter giveaway winners, and as soon as we have all of the questions answered and the video together, we will also be posting this on our Fireside Chat page, so it will be there for your viewing pleasure forever.

Thank you everyone again, have a great afternoon.

Raj: Thanks, Mary.

Melani: Bye.

Mike Rabil: Thank you.

Mike McDerment: Thanks, everybody.

Mike Rabil: Thanks, everybody.

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