Serial entrepreneur Todd Belfer started his entrepreneurial journey early at the age of 20 immediately after graduating college. His career has taken him across industries, from a sports nutrition company, M.D. Labs, to SaaS company NETtime Solutions. After many successes under his belt as a founder, he was ready to try on the investor hat, or as he calls it, coach, and started private equity firm Canal Partners to focus on highly scalable companies looking for $1-$3M in investment.
“I really like coaching executives and founders. I enjoy coaching on how to raise capital and coming up with strategic plans to try to put together a team with them, motivate them, and help build the business,” says Belfer. His portfolio companies mimic the wide breadth of his entrepreneurial experience, from marketing software success CallRail to a brick-and-mortar and online retail chain that specializes in hats.
Belfer shares more about his investing strategy and vision with Hype, including what not to do during a meeting with potential investors, why you shouldn’t be afraid to ask for feedback after a failed meeting, and his opinion on Atlanta’s current investor market.
What kind of companies does Canal Partners focus on?
The companies we invest in have a real opportunity to win in their market, so they’re usually pretty small companies, usually sub two million dollars in revenue. In our opinion, they have the team, the product, and the market to win.
Then it comes down to making sure we have the right founder, the right team, and a product. We call this technical debt — the product usually has some technical debt on it because they don’t have capital. We look for a product that we think can scale and really grow into that market.
What kind of founder makes for a good fit at Canal Partners, in your opinion?
They love the business, they’re passionate about it — that’s a must. We also want someone who can work with other people. Right away, we can tell if someone’s a know-it-all. We’ve seen that before and that’s an immediate no for us.
Do you suggest founders reach out after the meeting to ask for feedback?
For sure. The ones that call back and say, “Can you tell us why you didn’t invest and what we can do better?” I would say probably a third of them do that, and that’s very helpful for them because I think they’re going to see their shortcomings and try to fix them.
What other shortcomings have you seen in meetings with founders that they should avoid?
A lot of times they spend too much time way into the future. They might have a really basic product that has a little bit of functionality in the space, but they tend to talk about what they’re going to do in five years. For us, five years is an eternity. We don’t really care about what they’re talking about in five years. We want to know what they’re going to do in the next twelve months.
What positions are you going to put in the organization chart? What’s your go-to-market strategy, what are you going to do to the product? How are you going to create your funnel, your lead generation? We aren’t so interested in their big vision to create a multi-hundred million dollar company. I think founders can get distracted with that because a lot of times just taking a company from one million to three million is very, very difficult.
I love when entrepreneurs ask for help and say, “I come from a marketing background, so I really get the marketing piece, but I don’t understand technology or accounting and I need help in those areas to fill the organization chart with really A+ players.” That, to me, speaks volumes because it shows they’re a team player and they need to add people to the team that are as strong in those areas as they are in their areas of expertise.
At what point would you recommend hiring a professional CEO and what does that entail?
It depends. A lot of CEOs that are founders are first-time CEOs and founders. We fund first-time founders and CEOs and often they don’t know what they’re doing. It’s the ones that ask for help, ask for coaching, read books, and talk to other CEOs — those are the ones that typically can make it and become a good CEO.
The ones that stumble blame the team, the market, or the product, those are the ones that don’t really ask for help and think they can just grind through it. My experience is, you want to give the founder/CEO as much opportunity to perform and succeed as possible, but at some point, because our money’s at risk, we will tell them we need to bring a new CEO in.
We want our CEOs to be completely transparent, we want them to be open, we want them to tell us all the bad news as much as the good news. We want to know exactly what’s going on with the company, where we can help, where they’re falling, and if we don’t have the data and the information, we can’t help.
What are your thoughts on Atlanta’s current investor market?
Atlanta is getting a lot more active. There’s been a lot of success stories out of Atlanta, so I think there are more firms that don’t necessarily have offices there, but they’ve got boots on the street. There are a lot of Boston, New York, San Francisco companies that are starting to send people down the Atlanta to meet with companies and nd they’re going earlier stage. It used to be that until you’re $5M in revenue, the big VCs won’t even look at you. Now they’re investing early.
Our business in Atlanta is a lot more competitive. We’ve funded five companies in Atlanta, and we really didn’t have a lot of competition in those five fundings. They were just talking to us. Now companies that are $2-3M in revenue in Atlanta, they’re talking to a whole bunch of folks. They’ve been discovered.
There’s so much capital in the venture capital market right now, and it has to be put to work, and there are only so many deals that are $10-20 million in revenue that are looking for funding so they have to go downmarket.