Today I attended Outlander’s first-ever demo day. All the presenters were Outlander portfolio companies. They’re tackling interesting problems and are great representatives of Southeast start-ups. Here are the demo day companies:

• Talli – An IoT device and software that provides one-touch, mobile, and hands-free logging for infant care, senior care, and home health.
• ChipEleven – An open-source chip-building ecosystem that will spur hardware innovation just like Linux did for software.
• Barometer (formerly Vericrypt ) – AI-based software to help companies analyze, identify, and score bias in their writing.
• Spaceship – A continuous-delivery platform that helps companies deploy software faster.
• Strapt  – Cashless and contactless IoT dispensers that drive new brand engagement and insights for brands through free product sampling and actionable consumer data.

I personally worked with some of these founders to prepare for demo day and couldn’t be prouder of them! They did a great job and I’ll be excited to watch their continued success.

Outlander puts on a monthly speaker series called the Outlandish Speaker Series. Today, the speaker was Lo Toney, founding partner of Plexo Capital. Plexo is a unique fund that makes direct investments in start-ups and in emerging venture capital funds. Lo incubated Plexo while working for GV (the venture capital investment arm of Google’s parent company). The strategy was to increase early-stage deal flow through diversity in people. The strategy proved successful, and he later spun out Plexo into a stand-alone firm (GV is an investor in Plexo). You can read more about Lo’s strategy here.

Today’s session was super insightful. Lo did a great job of articulating his thoughts on what he looks for when making investments in companies. He did an even better job of sharing what he looks for when considering an investment in a fund and how being a fund manager is different from being a great investor. Lo’s wealth of experience as a CEO, investor, and fund manager was evident.

I’m excited about what Plexo is doing and look forward to tracking its success and the success of the fund managers it invests in.

Most start-ups fail because they run out of cash. They can have great press, a great product, and even customers . . . but still run out of cash. Understanding the cash situation is the founder’s responsibility. At CCAW, I received a cash flow report every morning. I always knew exactly how much was in the bank, down to the penny. Cash is a company’s oxygen. When you run out of oxygen, you suffocate.

In the early days of a start-up, the founder is responsible for cash. If investors are the sole source of it, the founder pitches to investors. If customers are the sole source of it, the founder sells to customers. If cash comes from both sources . . . you guessed it, the founder is pitching and selling. Absent product–market fit and a defined sales process, the founder is the rainmaker who keeps the bank account in the black.

Raising capital is a core part of the job for early founders. If you’re considering starting a company or you already have, take this responsibility seriously. If you don’t, your journey will be short.

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When I spoke recently with an investor in a medium-sized city in the Southeast, I asked him about his tech ecosystem. He thinks his city is moving in the right direction, but it keeps running into a couple of major barriers:

• Nontechnical founders – He comes across excellent founders regularly, but they can’t build a technical product. They struggle to find technical co-founders. If they don’t give up, they hire a development shop. His portfolio companies haven’t had great results with outside development shops, even when they have strong founders.
• Funding – The community has wealthy individuals and families. Their wealth derives from legacy industries that have historically been economic drivers in the city (not so much anymore). Founders struggle to raise funding because people who have the means to invest don’t understand tech start‑ups. It’s gotten better, but they’ve got a long way to go. They’re actively organizing a network of angel investors so people can educate one another.

I was happy to hear that this investor is working hard to help tech start-ups succeed in his city. Our conversation reinforced something I’ve thought for a long time. The South has talented founders, but to succeed they need support. Funding is a big piece. So is community to help them connect more easily and form well-rounded founding teams. I’m looking forward to working with this investor and others across the South to help founders reach their full potential!

Yesterday I shared my thoughts on ways entrepreneurs can derisk without selling their entire company. A friend reached out after reading the post and we had a conversation about private companies as an asset class to invest in. He isn’t involved in tech or start-ups, so I enjoyed hearing his perspective.

My friend views high-growth private companies (i.e., start-ups) as a truly unique asset class. He thinks a start-up is an amazing investment opportunity when it’s generating profits (not breaking even or losing money). The ability to generate more cash than the company needs to maintain a high growth rate is what makes it an attractive investment. He sees a supply-versus-demand imbalance that these companies can benefit from. Historically low interest rates have investors seeking higher returns. More investors are seeking this type of investment opportunity than there are companies that meet these criteria. As valuations for these companies rise, the return on invested capital goes down, but if the company is growing at a high rate and generating surplus cash, the return is probably far better than the return on holding cash in a bank account—a great investment.

My buddy makes some good points. If you can build a profitable company that’s growing quickly, it’s unique and hard to replicate. The higher the growth rate and the higher the profit margin, the more unusual the opportunity. If the entrepreneur can receive meaningful distributions without affecting the growth rate, the entrepreneur can derisk without selling ownership in the company and while the company quickly appreciates in value. That’s an amazing position to be in as an entrepreneur.

I think my friend makes a strong case for why entrepreneurs should maintain ownership of profitable high-growth companies. Having been an entrepreneur and having close friends who are founders, though, I can definitively say that everyone’s situation is different. Every entrepreneur must decide for himself or herself whether that advice works for their circumstances.

A lot of entrepreneurs have a goal of selling their company. It makes sense when you think about it. They often take below-market or no salary for years. During the seven to ten years or so that it takes to scale a company, most of them transition to different life stages (marriage, family, home purchase). These and other factors can put immense pressure on an entrepreneur over a long period of time. The pressure can motivate them to carry on through tough times. It can also be a factor in setting a goal to sell.

When I talk with entrepreneurs, I like to understand the “why” behind their desire to sell in X years. With some digging, I often learn that what they really want is to derisk their financial situation. They decide to sell because it’s the only option they know of to get some liquidity. I define derisking as removing enough financial pressure to be comfortable—not to be in a position where they can do whatever they want without having to work. Maybe their home and their children’s educations are paid for and they have some savings. They’re not flying around in private jets to their multiple homes.

There are lots of options that allow entrepreneurs to derisk without selling the entire company. Secondary share purchases are one tool. Raising a round of capital through investors buying shares from employees or executives is common. Private equity and venture capitalists do these deals regularly. The founders can maintain a controlling majority ownership and continue to execute on their vision for the company. One founder friend likes this route because it “takes the edge off.” I know another founder who took this route so he could “swing for the fences” without worrying about his family. Because he knew that his family was comfortable, he felt good about growing more aggressively and making some bold bets.

If you’re trying to build a large company, know that there are ways to derisk during the journey that don’t require selling your company. Also, be mindful that most investors understand the desire for some security once enough scale is reached. Most will want to work with someone who’s focused on building something big, not ejecting at the first offer to sell the entire company.

Outlander Labs and Women Who Code Atlanta held a virtual pitch competition today. It was an opportunity for innovative women-led startups in the Southeast to compete for a $100K investment. Lots of great applicants were whittled down to the following six finalists:

• Boddle Learning – An interactive and adaptive math game that helps kids learn in a fun way
• BRIDGE – A mobile app that allows consumers to discover local businesses via video
• CaseCTRL – A surgery coordination platform that simplifies the logistics of surgery planning and improves the patient experience through AI and predictive analytics
• Eyegage – A mobile app that quickly and accurately determines drug and alcohol levels by using computer vision to analyze characteristics of the eye
• SoleVenture – An all-in-one back office and HR platform for freelancers
• Trado – A platform that uses machine learning to voice-record stories and turn them into books delivered to your door.

I enjoyed hearing from some great founders who I’m sure will go on to do amazing things. I’m looking forward to tracking each of these companies.

I’m happy to announce that Eyegage was the winner! All the companies made outstanding pitches and I’m sure the judges had a tough time picking a winner. Congrats to Eyegage and all the other founders for building interesting companies.

Relationships—with founders, community builders, other investors, LPs—are at the heart of venture capital. Healthy relationships with these people and others are important to a successful fund. Over the last few months, I’ve had the opportunity to connect with more investors.

One thing I’ve noticed is that investors interact with their investments in different ways. Some take formal roles as board members, some act as informal advisors (and therapists), and others are mostly passive. To be clear, I don’t think there is a right or wrong approach—what matters is what works best for that investor. I’ve learned that each investor has reasons for their approach.

Founders need to be aware of this when raising capital. Ideally, you should think about what you want from your investor, beyond capital, and partner with one whose style aligns with what you’re seeking. Write down what you need help with. As you speak with investors, ask how they can help you—and how they’ve helped others—in those areas. The responses can help you identify the right investor for you.

This week I had a setback that stung badly. I’ve been working with an entrepreneur on an investment. He’s smart and has built a great product. I was excited about partnering with him to help him reach his full potential. Then, at the last possible moment, the deal fell apart.

The news caught me off guard. I thought about it a bit, and the next day I talked with the founder and wished him well. I offered to maintain our relationship and share my experiences as a founder with him. We discussed some of the things he’s learned and agreed to touch base soon. He even wants to make an introduction to another founder. The conversation ended on a very positive note.

Winning the opportunity to invest was my goal, but it didn’t happen. In business sometimes things don’t work out, and that’s OK. Though I lost this opportunity, I built a good relationship with a strong founder who’ll go on to do interesting things. I’m excited about watching his journey, sharing my experiences when he asks, and helping him if I can.

This was a loss as an investor, but it won’t be my last. I learned a lot. Most important: handle losses the right way and maintain relationships.

I was a nontechnical founder who used technology to scale CCAW. I’m often asked how I went about it. Full transparency: I got lucky. I was fortunate enough to be in the right place at the right time to build relationships with talented technical founders. But I also made a point of researching and preparing. I was determined to understand the tech-y world they lived in. It wasn’t fun or easy, and I went through a period of discomfort, but I grew from it. In the beginning, I had a bad case of imposter syndrome. I felt out of place and often had no idea what they were talking about. But as I’ve written before, I took mental notes and made a point of researching and understanding (at a high level) concepts that were new to me. There were some embarrassing moments, but over time I gained a decent understanding of things.

To this day, I’m still learning. When I meet with early technical founders, I use the same approach: I ask questions and research what I don’t understand.

One of the things that used to trip me up was terminology. I simply didn’t know what certain things meant. This can be detrimental to early founders trying to raise capital. Fair or not, investors expect founders to know certain acronyms and other terminology. Here are two good resources for this:

• The Ultimate VC Glossary
• 16 Startup Metrics

As Roman philosopher Seneca said, luck is what happens when preparation meets opportunity. If you’re an early-stage founder considering raising capital, make some time to prepare by learning the lingo of the investor world. Your efforts could lead to the luckiest break of your life!