From $0 to $2.5M in Monthly Recurring Revenue

[00:00:00] Calan Breckon: Today’s episode is sponsored by Castos. Castos is a podcast hosting platform trusted by thousands of brands. With Castos, you can create as many podcasts and episodes as you want, no matter which plan you choose. Full disclosure, the podcast you’re listening to right now is actually hosted on Castos, and I can say with 100% confidence that Castos is the best option. Castos has their seriously simple podcasting plugin for WordPress, making it easy, easy to run your show through your own website. This is a must have, especially if you’re looking to grow your business and audience through SEO driven content. I’ve been using Castos for over three years and the team has always been super friendly, quick to respond, and has supported my podcasting journey since day one. You can find out more by visiting calanbreckon.com/Castos or just clicking the link in the show notes. Now let’s get into today’s episode.

Welcome to the Business Gay podcast, where we talk about all things business, marketing and entrepreneurship. I’m your host, Calan Breckon, and on today’s episode, I have entrepreneur, CEO, and co-founder of Hangtight, Armando Vera Carvajal.

Hangtight is an AI powered social planning app that is transforming how people come together in life. This is Armando’s second startup, and he’s been in the Austin founder ecosystem for over ten years. Originally from Mexico City before immigrating to America at age four, Armando grew up in McAllen, a city in south Texas on the border with Mexico. He later moved to Austin to study at the University of Texas.

He has also studied in France and Singapore and enjoys world travel along with adventure sports such as mountaineering and Whitewater rafting. As a proud member of the LGBTQ+ community, Armando also serves as a mentor and advisor to many entrepreneurs from diverse minority and disadvantaged backgrounds across industries and geographies. His ultimate goal in life is to help humanity heal y’all.

This interview was absolute fire, and I am so excited for you to listen, so let’s get to it.

Awesome. I’m so excited to have you on the show. Amanda, how are you doing?

[00:02:13] Armando Vera Carvajal: Doing so good, Calan. Thank you so much for the opportunity to be here.

[00:02:16] Calan Breckon: Yeah, for sure. So you’re down in Austin, Texas?

[00:02:20] Armando Vera Carvajal: That’s right. It’s also the beginning of February, but it feels like the end of July, so it is really hot down here right now.

[00:02:28] Calan Breckon: Oh, lucky.

[00:02:29] Armando Vera Carvajal: Yeah.

[00:02:29] Calan Breckon: I’m up in Toronto, and the weather has actually been quite good this week. It was like ten degrees yesterday, and everybody’s like, what is happening? I’m upset about global warming, but I wasn’t upset about warmer weather yesterday because in Toronto it can get quite cold. Anyways, let’s jump in, because I’m really excited to talk about you as a founder, as co founder, all the amazing stuff you’re doing. So you co founded your previous startup and you helped it grow from five people to around 200 ish people globally, and you took it from a zero dollar to $2.5 million in monthly reoccurring revenue. Can you just walk us through that?

[00:03:09] Armando Vera Carvajal: Yeah.

The fairytale resolution at the end of it sounds like, wow, that must have happened so quickly. But I think when I was at the beginning of that journey, if you had told me that in three and a half, almost four years, we would be where we would be, I’d say, you’re crazy, right? There’s absolutely no way that I would be managing a large division of people and having such large cash inflows, really with that company.

I joined it when it was really small, at a moment where they were pivoting away from a product that was not going to really work out. An app at the intersection of investing in startups, through crowd investing, the business model wasn’t really going to give the returns that were needed. So a pivot was in order. And at that time, we needed a radical pivot. Right? I just joined the team. I just left the corporate world, financial world, really, for about four years. And everything that that entailed. Security blanket, sort of a very posh office downtown with a view, benefits, et cetera, for a lifestyle of having nothing other than a wild adventure of building something from the ground up.

It was a lot of trial and error. I think in the beginning, the main co founder, the CEO of the company, said, we need to build this product from the ground up in a month, right? And we need to be ready to be deploying it and getting mvp sales, so to speak, from people that see the immediate value and start getting it out there.

For me, that was a huge opportunity to just do it right, to just actually take all the biggest risks on someone else’s dime and also just build the future of what we envisioned at that point in time.

Which meant that taking risks, making mistakes, having failures, was not just okay, but it was actually expected. Right? If you’re not falling and dropping things and breaking stuff, you’re not doing enough fast enough within this startup.

But we did manage to deploy. We actually launched the week of south by Southwest in 2019.

That was a year before the pandemic. We had our first customers. It was for an online accelerator focused on helping founders raise capital.

And we fast forward that to a year. When the pandemic started, everybody thought that because of the pandemic, the entire ecosystem would suffer a massive setback. In our case, because we were a fully online company and program that ended up being a massive tailwind.

[00:05:53] Calan Breckon: Right.

[00:05:54] Armando Vera Carvajal: It actually drove our growth exponentially, where we were not just getting inbound from lots of different founders, but also inbound from investors, from venture capitalists saying, hey, I need deal flow. And in this sort of new normal, we don’t really know how to find the right startups, how to engage with them. You guys seem to have figured this out, and that was a big milestone for us, having achieved that product market fit and then scaling that across not just the country, but across the world.

I know you mentioned the 2.5 million MRR. That was definitely towards the end of my time there, right? We did not start with that much money. I remember the days where we didn’t have any money for prolonged periods of time, where we actually had to forego voluntarily our paychecks in order to make some of the other ends in the company meet. And I think that was part of the thrill of being in an early stage startup. Not for everyone, obviously. Some people will just be absolutely terrified when they tell you Monday is payday. There’s eleven us in this company, and there’s also about $10 in the bank account.

It’s kind of like a hard stop where it’s like, oh my goodness, what did I get myself into?

But I think that creates the perspective where you can really appreciate the moment where you have your first paying customer, when you reach your first $500 in revenue, when you reach your first 5000, 10,000, 50,000, 10,0000, 1 million, right? It just creates that sense of progress. And I remember the CEO at the time saying, like, enjoy these hard times because I promise you, they won’t be here forever.

[00:07:40] Calan Breckon: Right?

[00:07:41] Armando Vera Carvajal: You have to have that mindset. You have to have the hope and the vision that we will be better next year, will be bigger, we’ll be onto bigger things. Ten years from today, we’ll be an entirely different thing that will be bigger and successful.

[00:07:52] Calan Breckon: Right?

[00:07:52] Armando Vera Carvajal: So that journey as volatile and roller coasterish of an experience was very much a defining moment in my life.

[00:08:06] Calan Breckon: It’s definitely an adventure getting into entrepreneurship and growing a business and having those moments where you’re like, oh no, we have no money. But you can see it and you’re like, it’s so close, though, we can taste it going through the pandemic and the time frame. I could see how that would definitely be a tailwind for you because people went online, they were quickly unemployed with uncertainty, and you’re definitely going to get an initial influx of people being like, well, I’m not a sitter and a waiter, I’m going to figure this out. And those people who had the entrepreneurial kind of spirit to them are the ones who are like, well, I’m going to just make it happen now because what other time? I wouldn’t say it’s definitely me. I had the spirit for a while, but 2020 was when I actually registered my business and did the things you need to do to actually start your business. So I’m glad to hear that. That definitely was a boost. You mentioned and you shared that bootstrapping played a major role kind of, in how you started the company. How did that benefit the business in the long run, do you think?

[00:09:09] Armando Vera Carvajal: Yeah, I mean, bootstrapping, when we think about it, at its core, I think it’s about depending on yourself internally, more so than others.

And it’s interesting because currently, where we are today in 2024, when it comes to the sort of the venture capital and just fundraising landscape for startups, it’s very much in a bit of a pause. In some places there is capital, but it’s flowing very slowly to a lot of startups. It’s a lot of dry powder. I think bootstrapping has become, for many startups, the only option.

[00:09:50] Calan Breckon: Right.

[00:09:51] Armando Vera Carvajal: I think at that first company, the bootstrapping aspect of it was key in the sense that we were able to move a lot faster without requiring the approval of others, others being investors.

[00:10:06] Calan Breckon: Right.

[00:10:07] Armando Vera Carvajal: In particular, like vcs.

I think the bootstrapping mindset also brought with it a certain expectation that this is your money now, it’s not someone else’s money that you’re, I guess, effectively playing with.

Every single dollar that you’re putting in is either coming from your savings, from a side job that you might have from your loans or credit cards.

How are you going to maximize the value of that dollar, every single that you’re putting into it? And I think that mindset was absolutely valuable at that first startup. And of course, where I am now with my second company, I think it really forces you to focus like, what do I need this dollar for, these $10, these thousand, a million dollars, right. Because I’ve met a lot of founders who will ask them, well, how much are you trying to raise? And they’re like oh, I don’t know. A million sounds about right. And it’s like, well, why do you need a million?

[00:11:09] Calan Breckon: Right.

[00:11:10] Armando Vera Carvajal: What will you do with a million? You have. But when you have a very clear understanding of what the immediate needs are and you think about your roadmap for the product, for the company, where we need to be in six months, twelve months, 18 months, you have a clearer picture of what exactly it is you need from a resource standpoint and you gauge, right. Can I fill this gap and position myself as an owner of the company for long term success without having to dilute myself, without having to give up that control and ownership? Or am I in a situation where I just need outside capital?

[00:11:48] Calan Breckon: Right.

[00:11:48] Armando Vera Carvajal: There’s some businesses where unless you’re really rich, you really do just need outside investment.

[00:11:54] Calan Breckon: Right.

[00:11:54] Armando Vera Carvajal: And I’m thinking more of the brick and mortar businesses in tech, we also think about just like the ones that are deep tech, the ones that will have higher capital costs and overhead, sometimes you just need that investment off the top and bootstrapping is not possible unless you’ve had an exit before, unless you have the money or the means.

But for me, that mindset has become, I think, like a keystone of who we are. Right. It forces us to be wise.

[00:12:27] Calan Breckon: Yeah, it definitely helps to be like, cut the fat. Like, where can we cut the fat? Because in the ecosystem we’ve had for the past like 15 years, it’s just been really cheap money. It’s been really low rates, artificially lowered rates. And so we’ve kind of been like riding this high of like, oh, money everywhere. And founders who got millions and millions of dollars are like, oh, I’m going to go talk to an architect and build this. And we need this space. And it’s like, is that necessary for actually running the functional company? Or is that just something you think you need to do because you want to be a founder and you want to look cool. And in my mind, I would rather build the most solid foundation. I think of businesses that stick around that are built well, like the pyramids. You need to have a fat bottom and a structural foundation to really do well. And that is where cut the fat. Just focus on if you’re just starting out, providing that MVP, can you get people using your product and validating that they like it, growing those numbers? Because even if you do, a friends and family precede kind of at the beginning to get money. You do need money to operate. Like, you can’t just quit your job and just be like, I’m going to do this, you do at some degree need money, and that can come in the form of friends and family at the very beginning and say, hey, maybe use safes or something where you’re like, I don’t know exactly what you’re going to get for this, but this is a promise that you will have equity in this business. This money will help us set up our mvp, get everything going so that later on down the road you can take that to a large investor with your mvp, with your numbers saying, hey, we keep growing x amount of percent every single month in users. This is the data we’re getting in. This is how we’re already making money now we need that lead investor. And sometimes you don’t need that lead investor if you’re doing well enough. And I think that that’s how you can kind of play in that world of bootstrapping where in my mind it’s like, yes, there still is some sort of a fundraising, but it’s not the vcs, angel investors, big times. It’s like people who believe in you, who are going to help support you to get through that. And then what does that look like?

Can I ask what maybe some disadvantages of that approach were for you?

[00:14:48] Armando Vera Carvajal: Yeah. So I think you really hit on a lot of the benefits. I think an immediate disadvantage is that you really do depend on yourself.

[00:14:59] Calan Breckon: Right.

[00:15:00] Armando Vera Carvajal: And I think when we talk about bootstrapping, I liken bootstrapping a lot less. To friends and family, I consider that like outside capital, albeit like very trusted, low stakes capital. But when I think of bootstrapping, it’s like, what do I have immediately to bring to the table? Whether it’s savings, whether it’s credit, whether whatever it may be.

And I think that is finite, right. Unless you have infinite resources, of which there might be many founders who have done that and they’ve bankrolled these great businesses without outside, external capital, I think the limitation is there. I think another potential slippery slope is the trajectory of the company.

[00:15:46] Calan Breckon: Right.

[00:15:46] Armando Vera Carvajal: I think in the world that I live for, that specific ecosystem, we’re building businesses that will be scalable, right. Businesses that will be venture backable. There are companies that are tech enabled, but are more than anything just more lifestyle businesses, more brick and mortar.

Like a restaurant, perhaps. Unless the idea is like, I want to turn this into a franchise and be in 1000 cities in the next five years, that’s not necessarily venture back, right?

[00:16:17] Calan Breckon: No. And that’s very difficult to do. As somebody who has a history in food industry, your profit margins are so slim in that world. It’s very difficult to have a VC be like, sure, this is a great idea. No, Jan, not going to happen.

[00:16:30] Armando Vera Carvajal: Yeah, exactly. And I think that’s where, unless you have the money and the relationships to keep adding that to operate, it’s very difficult.

I think another one of the challenges there is that oftentimes founders do slip into that slippery slip that I mentioned, right. They say, you know what? I can keep bootstrapping this.

It might hinder the potential trajectory of that company growth wise. They might say, oh, you know what, actually, we’re doing quite well. I think we’ll just stick to something smaller, maybe turn it a bit more into a consulting business or something that’s super, super niche. Again, like a lifestyle business. Maybe you’ll be doing a million to 10 million ARR, and that’s great, right? That’s a great payday for that operator and that owner. But for the people in the tech ecosystem and for bcs alone, they want something that will be a billion plus.

[00:17:28] Calan Breckon: Right?

[00:17:28] Armando Vera Carvajal: The number of times that I’ve been asked that question by a VC is crazy, right? They say, how is this going to be a billion dollars plus within the next five years? And that’s the mindset. When you really go into that Bootstrap mode, I think you have to decide which path you’re going to follow.

Where do I see this company? 510 years?

And if it is a lifestyle business, that’s okay. Bootstrapping may be the right path for you, but if it’s not, bootstrapping is just a step in that direction.

For us, it’s been necessary because that entails dilution.

[00:18:03] Calan Breckon: Right.

[00:18:03] Armando Vera Carvajal: If you realize that we have been able to get this far by bootstrapping, but we want to take over the world and we want to be billion plus one day. Well, unless we’ve created a time machine and everyone’s trying to get their hands on it, you’ll probably need outside capital.

[00:18:18] Calan Breckon: Right.

[00:18:19] Armando Vera Carvajal: And it’s a different mindset shift. It’s bringing other people who you may not really know but have the ability, have the means, have the experience to help you get there.

And that last part of it, I think, is the experience part, I think when we think about outside capital, more often than not, we tend to tremble in a little bit of fear where it’s like, oh, no, these are the sort of the raiders at the gates, right? They’re the people who are just going to take over my company, fire me, change the product, so on and so forth. But in reality, they’re in the business of managing money for, I guess, very rich people and institutions. And they’re making bets, right? Betting on different horses, showing that you’re the right one. Intel is that they’re on your side of the table, right? That they want to help you succeed and help you take that business in a direction that perhaps you weren’t immediately thinking about it. So it’s hard to oftentimes have that when you’re just bootstrapping and you don’t bring in professionals to guide you on that path.

[00:19:18] Calan Breckon: Yeah, it can be very difficult as founders. That’s why you need co founders, because one person can only do so much and can also only have so much capacity in their brain for information. And so if you don’t have that experience or your first time founder, you’re not going to have the understanding of like, oh, well, this was a pitfall before, so now I know what to look for in the future. Those contracts or the investments when they come in, what portion of that equity are they getting? What’s that percentage? What’s that saying or doing to your shares? How much is that diluting you? Is that going to a place where you and your co founders will no longer have the majority voting rights? Or is it, you need to pay attention to these numbers so that you don’t over dilute yourself and lose that control of the company? Because that can happen. But you would only know that if you either did the research and really spent your time understanding it, or you had somebody who’d been through it and had that knowledge to bring to the table. And that’s really important for founders, that if you’re going to do it, you need to have somebody who either wants to educate themselves on that so you don’t get screwed or already has been through it so that they can bring that knowledge to the table. And that’s what you’re saying. Here’s your equity piece for protecting this.

I’m really curious. When you went from the zero to, obviously, you started making no money at the beginning, how was that really tight period of, like, we’re not making money.

How quickly did you get it to, like, we’re making enough to kind of keep ourselves going, so let’s keep going here. I’m curious about that really tight time frame at the early beginning.

[00:20:54] Armando Vera Carvajal: Yeah, I think during that time frame, it’s kind of like what you mentioned earlier, just cutting out a lot of the fat.

[00:21:02] Calan Breckon: Right.

[00:21:02] Armando Vera Carvajal: I remember because we had pivoted. There was a cash burn from the previous business. There were a lot of decisions that didn’t make sense. And we quite literally went back to the drawing board, right? Literally writing out with a marker, like, every single expense, justifying why I had to be there. And we basically slashed, I think, nearly like 75% of stuff that was just waste, right? And in many cases, we were paying top annual subscriptions for three products that are the same thing, just different brands, right? So being very critical about what our burn is, where is every single dollar going?

Giving a nice little haircut to salaries was also critical, right. Expectations around that it was a startup, so I think we weren’t necessarily competitive for the Austin market, and Austin’s very competitive when it comes to tech. But I think everybody there had that reality check where it’s like, hey, this is where we’re at. If you want to be making competitive rates, go work at Facebook or Google. They’re like two blocks down the road, they’ll take care of you. But here, this is where we’re at. This is where we’re going. And you do need to sort of be okay with that.

I think you touched on it just now a bit. The equity part of it was critical, right? Deciding who gets to stay on the team, how much they’re agreeing to stay for, and how we can incentivize them so that they’re not just working a job. They’re actually here because they want to build a company, and they want to make a big impact and obviously reap the benefits down the road and balancing that out with equity, with shares in the company. At that point in time, another big part of it, other than being more prudent in terms of how we operate, it was selling everybody. Every single person on the team was selling. And I think that’s such an underrated and understated aspect of every early stage startup, there’s often going to be someone who says, oh, I’m not a salesperson, I’m too shy, or I’m an introvert. Everybody has to be selling. The CEO, the co founders, the engineers, everyone is selling because at that point, we all have to be aligned with what it is we’re putting out there, what we’re building, and also helping build that funnel.

And selling came in different ways.

[00:23:35] Calan Breckon: Right?

[00:23:35] Armando Vera Carvajal: Austin has a ton of different events for the tech scene south by being present there, building that brand awareness, selling, like getting on the phone and talking to different startups that wanted to be a part of the program. Selling in terms of marketing, right? Selling in terms of writing content, so on and so forth.

But understanding that to get over this hump, we did need to all be aligned and really pushing ourselves and overextending ourselves through that comfort zone and being okay with it.

[00:24:04] Calan Breckon: Right.

[00:24:04] Armando Vera Carvajal: I think a lot of early stage companies in that period that you’re describing, they’re not ready for that. And when they get slammed with that reality check, most of them give up. Some of them panic and feel like they’re being singled out. That’s just sort of the natural state of affairs when you’re building a startup.

[00:24:23] Calan Breckon: Yeah. And sales don’t have to be like, oh, I need to go and push this product on this person. It can be as simple as like, oh, there’s a networking event, I’m just going to go and talk about the product. Like, if you’re not necessarily a service based business or say you’re an ad revenue based business or something like that, you can just share like, oh, this is this product, go check it out.

It doesn’t have to be a hard sell. It can be whatever you want it to be and finding out who has what strengths so that you can give them the gift of that time of saying, okay, you’re not going to work late tonight because you’re going to go to this event and you’re just going to talk to people about the product. You’re going to work late because you like those hard sales and you want to be on a phone with somebody and you want to be giving those details. Finding out what those strengths are on the team is also definitely important.

[00:25:09] Armando Vera Carvajal: Yeah. And I think to that point, at the same time, if you’re the CEO or one of the co founders, if you’re leadership at that startup, however small the team, that selling exercise really helps you figure out what people are good at.

[00:25:23] Calan Breckon: Right.

[00:25:24] Armando Vera Carvajal: And again, it’s not something that everyone’s going to do forever, but it also helps you figure out, are they the right person for the job? Are they the right person for the team? Are they the right person for what we’re building in general.

[00:25:36] Calan Breckon: Right.

[00:25:36] Armando Vera Carvajal: And again, you have to be very sort of focused on where we’re headed and make decisions early on to figure out if these people are able to do things beyond their immediate role. If they’re able to sell the company and they’re not natural salespeople, they probably should have a place in this company, and they’ll probably go very far out because as you were saying, it’s not always a hard sell.

[00:25:57] Calan Breckon: Right.

[00:25:57] Armando Vera Carvajal: It’s spreading the message, evangelizing, so to speak, at events on an airplane, wherever they go.

[00:26:03] Calan Breckon: Exactly.

Cool.

What advice would you have to founders in the early stages who are debating kind of the bootstrapping that we’ve been talking about versus that raising capital. And if they do go the raising capital route, are there any warnings that you might have, and maybe from personal experience?

[00:26:22] Armando Vera Carvajal: For sure, several.

[00:26:24] Calan Breckon: You’re like, let me tell you all the things.

[00:26:27] Armando Vera Carvajal: Yeah, no, happy to be here.

[00:26:30] Calan Breckon: Build the tea, spill the tea.

[00:26:33] Armando Vera Carvajal: I think if you’re considering bootstrapping, I would almost say it’s like you probably have no other option right now.

[00:26:39] Calan Breckon: Right?

[00:26:40] Armando Vera Carvajal: And I say it is a short term thing. These things happen in cycles. We’re at that point of the cycle where capital is not, we’re not two years prior where everybody was writing checks for anything. As you said, we zero.

[00:26:51] Calan Breckon: But it could be good now because Uber, so many big unicorns were built in the 2008 910 down economy because it forces them to cut the fat and to be more bootstrappy. So sorry to cut you off.

[00:27:09] Armando Vera Carvajal: You got to where I was going at. And that’s something that I’ve internalized personally that has helped me be okay with the way things are fundraising wise. You’re right. A lot of the titans, a lot of the tech behemoths that we take for granted and rely on today, they were built. They were born during down cycles in the market. 2008.

[00:27:30] Calan Breckon: Right.

[00:27:31] Armando Vera Carvajal: Airbnb, Uber, WhatsApp, Instagram, a lot of them, right. They all came out of those periods.

I’ve been saying this for about a year. I think this great reset is not just overdue, but it’s necessary. And I see it almost as a blessing in disguise for founders this year. We’re already beginning to see a lot of companies closing. We’re seeing a lot of bankruptcies coming up. We’re seeing a lot of winding downs.

[00:27:57] Calan Breckon: The zombies.

[00:27:58] Armando Vera Carvajal: The zombies.

[00:27:59] Calan Breckon: Right.

[00:28:00] Armando Vera Carvajal: I think as worrying as that might be, see it as an opportunity. See it as an opportunity to really focus on what it is you’re building, the problem you’re solving. And try to do that with as little resource as possible, because if you can figure it out, if you can find a way to meet those needs and solve those problems with something that does not require a ton of capital and people start to use it and people start to pay for it, just imagine how it’s going to be in an upcycle, which is going to come, right. We will have an upcycle, this thing will have an end, and we will be back to the great times. And companies born today will probably be the great ones ten years later.

So I would say see it as an opportunity to really focus and think, how can I do far more with way less? And that’s how I think about the bootstrapping part. One thing that I love to tell founders, I use the example of the founder who’s like, oh, well, I guess I need a million dollars, right?

Wrong year to ask for just a million dollars, right. You’ll be lucky if you get 100, I think.

Be very specific about what you could be doing today with no money.

[00:29:13] Calan Breckon: Right.

[00:29:13] Armando Vera Carvajal: And I think a lot of founders don’t actually need money. They just need to be talking to potential customers and potential users. Because I think through the digging deep and doing a lot of the fundamental product and user research work, you’ll find out that perhaps the idea that you originally had for which you were requesting a million dollars plus is not the idea that’s going to really take off. And instead of putting yourself through the agony of raising money, selling investors on that, learning the hard way that it was the wrong idea, conveying to them that you made a huge mistake, lost their money, and now you’re pivoting. Just do it lean. Right, do it lean, do it fast, do it quick with as little as possible, and then sell them the story. But I will say this, and I’ll tie this to the part of considering to raise capital. Even if you’re bootstrapping right now, you absolutely should be building relationships with angel investors, with vcs. And I say that because the relationship of a professional investor to a startup is tantamounts to a marriage. I even quit that. It’s oftentimes longer than the average marriage, right. The modern day marriage, like seven years.

[00:30:24] Calan Breckon: Right.

[00:30:26] Armando Vera Carvajal: A VC, an angel investor. They’re not a hedge fund, they’re not a mutual fund. They don’t just buy a stock and dump it 2 hours later. They’re here for like 710, 15 years plus. So it’s really like a marriage. You really want to date them. The first meeting you have with them, unless you have a time machine, they’re not going to say yes, right? It takes time. We’ve built a lot of those relationships over the past year and a half at my company. Now hang tight knowing that we’re going to get those no’s, knowing that we’re way too early. But we know that one day when we are a fit for their thesis, when we are a fit for their specific criteria for their fund, they’ll know who we are, right. We’re not just a bunch of random founders asking for money. There is a relationship there. So I think that is very key. Even if you think you want to bootstrap infinitely, still build the relationships, right? Because sometimes a partner or someone at a fund may not invest on behalf of the fund, but they might write you a personal check as an angel. And just because they believe in you.

I think in terms of that, start that process now, start going to events, start putting yourself out there and get feedback, get advice. You might be surprised, right? There are always those companies that do end up closing a check with just an idea on a napkin.

You never know, but you got to just try it in terms of the things to be aware of.

You hit on this a little bit earlier. And I think oftentimes a lot of the early stage startups are just not ready for professional investors. When a professional investor comes in, they come in with a lot of expectation, because the vcs, it’s not their money. More often than not, it’s the money of other people, right? These funds, they have the gps and then they have the lps. The lps are the very rich families that are investing in that fund and the funds placing bets, the professional investors, it’s their job to make sure that you deliver an outsized return. And what that entails for the founder is that you’re under pressure now, right? Like they want to SEO that growth, they’re going to be in your corner trying to figure things out. And that’s why I say really focus on building the relationship. There are a lot of different professional investors, lots of vcs, lots of different funds. Some of them will never be a fit for you structurally, right? Some of them just don’t invest in your industry.

[00:33:00] Calan Breckon: And homophobically.

[00:33:03] Armando Vera Carvajal: Yes, that is a very real consideration. I’ve had to face it, right, where they look fantastic on paper, they’re the perfect life partner for us at this company. But then you get down to the basics. It’s like, would we even see eye to eye, would we even fundamentally appreciate each other, right? And that’s a deal breaker, right, because if they’re going to be effectively your boss on your board, that’s problematic at a very value principles level.

So ensuring that you do your homework on those investors is critical. It’s a two way street. And I think a lot of founders, a mistake we make is we see raising capital from vcs as like a begging process, where we’re begging on the streets for money, when we actually should be seeing it as an opportunity that we’re giving them, right? They exist because of us, we give them the reason to exist, right? And I think treating it as a two way street is critical. They’re doing a lot of diligence on you. You should be doing a lot of diligence on them, which means doing a lot of back channeling, looking at their portfolio companies, reaching out to the founders, asking, how have they treated you in your worst moments? How have they treated you when you’ve disagreed?

[00:34:20] Calan Breckon: Right.

[00:34:21] Armando Vera Carvajal: Did you ever feel threatened by this investor? So on and so forth.

[00:34:25] Calan Breckon: Right.

[00:34:25] Armando Vera Carvajal: And what were the best aspects of it? I think that’s all very much required. I think also I like how you mentioned earlier, having mentorship, having guidance from people who’ve done it before is very valuable. We see this a lot with founders who are minorities or who come from disadvantaged backgrounds, who might not really know what they’re doing, and they get taken advantage of by investors. When they get a term sheet that is very aggressive and is effectively taking a lot of the company.

They don’t know what they can ask for. They don’t know that they should push back. They don’t know that it’s a negotiation process, right. And it’s not shark tank.

[00:35:07] Calan Breckon: Right.

[00:35:07] Armando Vera Carvajal: It’s not like deal or no deal, it’s like attorneys will go back and forth. Everything is negotiable on these term sheets and contracts.

The devil really is in the details when it comes to these kinds of deals. And I’ve seen founders who raised lots of money, but then because they didn’t pay close attention, they didn’t pay close attention to the details on the term sheets. But also the investors, they got screwed out of the exit, right? They might have had 100 million dollar buyout, but because of the specificities and the way things are structured, all of the money by and large went to the investors and very little was left for the actual owners because of the class structure.

[00:35:46] Calan Breckon: But that’s their job as well, right? So we need to expect them to want the best for their own exit, because if they’re a vc, they are investing other people’s money and those other people are expecting an exit. That’s why they’re investing. That’s why they’re hedging their bets with putting it into you instead of the stock market, because your 100 times return is going to be better than that over year after year, 10% that the stock market returns. So their job is to get the best return for those people. We can’t expect them not to do their job. But then that means it’s our job to do our due diligence to make sure that it’s like, no, girl, you don’t get 30% of my company. You can get like ten to 20 Max, especially at this early stage, because that’s going to equate SEO much more later on if we achieve the things. But you need to educate yourself on these things.

[00:36:40] Armando Vera Carvajal: Yeah. And oftentimes a lot of people learn by failure or mistakes.

[00:36:46] Calan Breckon: Right.

[00:36:46] Armando Vera Carvajal: So I think at this point in history, there are so much context, so many stories, and founders should actively be seeking out the guidance and mentorship of other founders who’ve been through it. But I would also say get yourself a good attorney. I think a startup attorney.

[00:37:02] Calan Breckon: Right.

[00:37:02] Armando Vera Carvajal: I think they understand the world in which you’re playing. And to your point, precisely that is their profession. The people managing these funds, many of them have been doing this their whole career. They have a fiduciary duty to their underlying investors to maximize that and to ensure that they’re doing everything in the best interest of that fund. Yes, they’re on the side of the table with you. They want to see you succeed. But it’s money at the end of the day, and it’s maximizing that. It’s the system in which we live, right? The markets and capitalism. So I think just being smart about that is good, and a good attorney will help you navigate that.

[00:37:36] Calan Breckon: Definitely. Awesome. You mentioned hang tight. So I want to kind of shift and pivot a little bit and start talking a little bit more about your new startup, hang tight. So can you tell us more about that?

[00:37:46] Armando Vera Carvajal: Definitely. So TlDR like Hang Tight is an AI powered mobile app. We’re very much focused on boosting community engagement, simplifying the event planning process for existing groups of. We’re very, very focused on the university or the college ecosystem and in particular reslife.

[00:38:07] Calan Breckon: Right.

[00:38:07] Armando Vera Carvajal: Ras their residents, the way those people come together.

We’ve talked to a lot of our different users over the past month, and there is a large need for driving engagement within those communities and then across the broader campus ecosystem, which can be very fragmented.

We started the company almost two years ago. I was still transitioning out of my past company, and I had that gut feeling that it was time to move on to something, been there, something bigger. Right? And it wasn’t just me. It was my parents. Being a first gen immigrant here in Texas, my parents were like, well, that’s great. You’re a co founder here, you’re vice president of product, you’re doing all these great things, blah, blah, blah, blah, blah, what’s next? And that really, it’s like, oh, like, I could be doing more. I could be going bigger. I was comfortable where I was, and I didn’t want to move on, but I knew that I had to do something, and I felt it deep down. My peers, my friends, my mentors, they’re all saying, what’s next?

[00:39:10] Calan Breckon: Right?

[00:39:10] Armando Vera Carvajal: And I’ve had this idea for several years now. I just didn’t really have, I guess, the time or the will to actually pursue it.

But where I was in time, it made sense to do that jump. I met my co founder at that past company.

The chemistry was there, the alignment with the North Star was there. And a few months later, we made the joint decision that we would pursue this together and not look back. And that’s what we did. I came on full time just for hang tight, August 2022. And it’s been quite a journey, right? I think even though this is my second time doing a startup, it is my first time doing it as a CEO, it is my first time being the person that is accountable for everything, right? I was so used to in the past job when there’s a fire turning my head to the CEO, and it’s, I guess, at the end of the day, his problem. Now it’s my problem. All the heads turned to me. It’s like, well, what do we do?

But we’ve had a lot of great milestones, including the acquisition of one of our competitors based here in Austin. It was a very opportunistic situation where we had the same stars. It made sense to come together. They had the machine learning models, they had the users. They had a working app. We had the vision. We had the go to market strategy. We had the relationships to open those doors. So we brought them on. Their engineers are working with us on contract, and fast forward that a year later. We’ve been out on the App Stores since late July, growing user accounts, but very focused on the university ecosystem. And we’re excited. We’re excited because we talk to our users every day, and it’s very exciting to see them tell us, like, I love how this is bringing me closer to my communities, to my groups. I’m also using hang tight in different ways, right. That we weren’t even imagining. And we’re learning more and more about users, which is to say, I don’t believe we’re yet at product market fit. I think we’re getting closer to it, but it’s those conversations with our users that give us that hope and that gleam of possibility.

[00:41:32] Calan Breckon: Yeah. Fail fast and fail forward so that you can learn all these things because you can dream up the best idea in your head. But in actuality, when it’s out there in the market, the market is going to tell you what they want and what they need it to be. And it’s your job to then decide, is this actually going to fit? And does this make sense for us? Or is that something completely different, that maybe we need to provide them a different space, that they could do those kinds of things?

Last kind of big question. Why do you think now this one is a big winner?

[00:42:09] Armando Vera Carvajal: Yeah, it’s a really good question.

[00:42:11] Calan Breckon: I think it’s a very vc big question.

[00:42:14] Armando Vera Carvajal: Why?

I get it all the time. I think it comes down to the timing. And when we think about the timing, we look at different dimensions and factors.

I think one of the underlying reasons why I’m building hang tight today is because I’m trying to solve a problem that is so pervasive, right. We live in a world that is ostensibly most connected in the history of mankind. Technology has bound us all together, perhaps in some very unhealthy ways, and yet we’re so disconnected and yet we all feel lonely. Right now, the United States, and I would argue a lot of the world, western world, is in the midst of.

[00:42:55] Calan Breckon: An epidemic of loneliness crisis, for sure, big time.

[00:42:59] Armando Vera Carvajal: I think the pandemic definitely exacerbated that situation, but it’s also created a problem where, I don’t know, it’s like giving us a bit of license with social media, with content, to sort of just tune out and not prioritize relationships. It’s been very challenging for me to see this firsthand with the demographic in the segment. We’re very focused on Gen Z. I’ve heard it from Gen Z users, I’ve heard it from administrators at universities and saying, hey, this is a very real problem because the pandemic, the rise of TikTok social media, has really stunted the growth of a generation. And that’s problematic because we don’t just see them as our present, they’re our future, right? The students that are in college that would much rather just stay in their dorm room alone, scrolling on TikTok for hours. One day they’re going to be in positions of power, making decisions for us. And I feel it is our duty to ensure that we are giving them the right tools to connect intentionally to build the right relationships.

So there’s that human social element, which I think is very important. I think another bit comes just to what’s out there in the market. We keep hearing from a lot of different people that the existing tools just aren’t good.

[00:44:21] Calan Breckon: Right.

[00:44:22] Armando Vera Carvajal: We use iMessage, WhatsApp, Groupme, slack messenger, all these different tools, but it’s not meeting the specific need that we want to drive that engagement to connect more intentionally with people, to simplify the planning process.

And I think a lot of startups that have tried to go after it have given up too soon. I think a lot of the developments in AI that have come out in the past year, let alone the past three months, are making it more likely that we’ll be able to find solutions to those challenges with technology. And that’s why I think being in the game right now, innovating in this space, social tech, is the best time to do it, because two years ago, AI could not do what it could do today to solve these kinds of problems.

I also think the other part of it is that the allure of a lot of the social platforms, the facebooks, the instagrams, they kind of lost their north star, right? I think they were created with the guise of connecting people and bringing them together. I don’t really think they do that. I’d argue they separate us more than anything. They make us jealous, they make us envy each other.

[00:45:32] Calan Breckon: Right.

[00:45:33] Calan Breckon: I think that also came just from the learning. Like we were children dealing with things we’d never dealt with before, the whole society of the world. And so we’re now growing up and maturing as a digital people, and we’re maturing to a space that we’re like, oh, okay, we understand how this is actually affecting people now. And people are visual, but now they’re just looking to get those likes because we’ve told them and we’ve told the younger generation, your only value is how you look and how you appear. And that is a narrative that definitely needs to be changed.

[00:46:04] Armando Vera Carvajal: Absolutely. And the reason why that needs to change is really the last dimension that really strikes a chord for me, is we need relationships, like it or not.

[00:46:15] Calan Breckon: Right?

[00:46:15] Armando Vera Carvajal: And I say this to my most extroverted friends, I say to the most introverted person I know who says, I don’t need friends, I just need you.

[00:46:23] Calan Breckon: And that’s it.

[00:46:24] Armando Vera Carvajal: It’s like, well, guess what? In this world, you need relationships to do just about anything. You can fight it, you can argue it. It’s not going to change the reality. How you’re able about to foster those relationships will really determine your path and your success.

We also live in a world where, again, because we’re so digitally connected, everything’s tech forward, we have data on everything. Why can’t we maximize the utility of those interactions, those experiences, tying that to me personally, I feel like I’m really tired of wasting my time and life doing things I don’t really want to do with people I don’t really like.

[00:47:03] Calan Breckon: Right?

[00:47:04] Armando Vera Carvajal: And giving time, money, wasting all of that, it’s time, it’s energy, it’s feeling, it’s emotion, it’s potential that I will never get back. And I think we can use technology to bring alignment to people’s lives and show them what could be, not what should be, which I think is what social is telling you. You should be this. You should be doing that. Because this is what I guess a cohort of influencers has decided. We can use data massively and power it with AI to show you what you could be doing with people you don’t even know exist, with doors that you know could open for you. And I think that’s the future we want to create, and the time is now.

[00:47:40] Calan Breckon: I fully agree. As a hyper chronic, insane introvert, I love being alone. I love staying at home. I love working at home. I understand the value of those relationships, and I think that it’s the gift of being the age that I am. And growing up when I did, like, you kind of had to. I’m pre Internet, pre cell phones, pre all that stuff.

And it’s so important that it’s like, yes, I like my time alone, but I need to be around those people. But finding those people was difficult. I didn’t feel like I had found kind of the people I really liked to engage with until know joined the SCGLCC or down the states. You have the NGLCC, these organizations where I could talk like this with other people, and I was like, oh, there’s other people that exist. So I definitely agree. Your product is definitely needed right now, and I’m excited for it. Where can people find out more about it if they want or more about you?

[00:48:33] Armando Vera Carvajal: Yeah. So we are on the App Stores for iOS and Android. So just hang tight. One word. Hang tight. Just google us as well. Hangtight live is our website.

If you want to connect with me, I am on LinkedIn. Armando veracarvahal. I’m also on Instagram. I think LinkedIn and Instagram is where I’m most responsive. My handle is Odin six e. I’ll.

[00:48:57] Calan Breckon: Have the link for everybody. I’ll make sure that these links are in the show notes for everybody.

[00:49:01] Calan Breckon: Yeah.

[00:49:01] Armando Vera Carvajal: And I’m always happy to be a resource. I do appreciate people who are direct and to the point. Like, if you need advice and guidance, just ask for it, right?

More than happy to help.

[00:49:10] Calan Breckon: Cool. Awesome. This has been an absolutely enlightening conversation. I want to thank you so much Armando, for taking the time to be a guest on the podcast. So thank you.

[00:49:21] Armando Vera Carvajal: Thank you so much Calan. This has been fantastic and I hope it was valuable to everyone in the audience.

[00:49:26] Calan Breckon: I personally just got so much out of this interview. Armando is full of such great information, especially when it comes to starting your own startup, and I think there was a lot of really amazing golden nuggets in here. Thank you so much for tuning in today. Don’t forget to hit that like and subscribe button. And if you really enjoyed today’s episode, I would very much appreciate a star rating from you. The business Gay podcast is written, produced and edited by me, Calan Breckon. And if you’re looking to get some free SEO website audit device, you can head on over to calanbreckon.com/audit it or just click the link in the show notes. That’s it for today. Peace, love, rainbows.