[MUSIC] So lots of entrepreneurs these days are thinking about starting businesses. Maybe they've got a business idea but they haven't gotten started and they think they need to raise some capital or Maybe they've gotten just kind of barely under way created some technology maybe or done something like you did in your early days. But they all think they sort of now need to go out and stop at what they think is the first port of all and that's an angel investor. Somebody who wants to give them the cash they need. What kind of advice given your history would you give an entrepreneur starting today? >> Well, I'll answer it in a couple of questions. The first one is not directly related to cash flow. And the first one is starting a business is a difficult exercise. It's very demanding. It's fraught with problems. There is no guarantee of success. There is no guarantee that you're going to have a financial reward. So the first thing I would say to my son or to one of his friends, or my daughter who if they were planning on starting a business is make sure you enjoy the journey. Because you don't have control over what your destination is going to be. What you do have control over is whether you enjoy the journey, and you gain from the journey. Do you learn something? You can go into work, I used to go into work and there were days when I made money and there were days when I didn't make money. But there was always days when learned something. >> And those were the satisfying days weren't they? >> Yeah and that's the return you can always have, so. The first thing I'd say is make sure it's something that you;re going to learn from. Make sure it's something that you're going to enjoy. Hopefully it becomes something that's profitable, but if it doesn't at least you've got that to take away from the experience. Now the other reason I'd say that is because back to your originally question is angel investors, a smart angel investor picks up on that. They're interested in investing, I'm interested in investing in people who first and foremost can demonstrate to me that they have a passion for what they're doing. And, because if they don't have a passion for it, this is, yeah, I look, I think it's a good idea, I'm going to build it. I mean, the classic thing I hear is, yeah we got this great new idea. We're going to run the company for three years and then we're going to sell ourselves to Google or Facebook. Well the problem is most of these guys don't realize is that's almost exactly the same thing we hear from everybody. Right? And Google and Facebook, as rich and as acquisitive they are, it's not going to buy everybody so, what I want to do is I want to hear from a guy, says look I've got a great idea, I'm really passionate about this, I'm going to work really hard, I hope there's going to be an early exit for investors, but if there isn't I'm just going to continue to grow this business until it just becomes something really fantastic. And maybe it goes public or maybe it becomes a lot more attractive for the next level of investment. >> Yeah, go on. >> So, on the cash flow question, though, when I'm looking at business models, either ideas that I might start myself or ideas that I want to invest in I'm really, really interested in what is the cash flow model. Too many of the deals that I look at are involved in build something and then wait several years until it breaks even on a cash flow basis. When I look at the burn rate-- >> Not you're cup of tea? >> Not my cup of tea, because I look at the banner, right, and I say, okay, you might raise a million dollars now, and maybe I'll give you a part of that million dollars. But the problem is, what do you need next year, what do you need the year after, what do you need the year after that. Because every time you get back out to the market, you're going to dilute the value of the equity that I bought into. And what happens if you can't get it. So I've looked at a lot of deals and they looked really great on paper until I start looking at their financial models and I realize this guy needs to raise 20, $50 million just to get the cash flow to break even. And as an early investor, I'm going to be very deeply diluted. >> Yep. >> And if he doesn't get the money, I'm going to be out of luck. So, back to your original question, I would strongly recommend that people pursue models that they can demonstrate can be cash flow positive as early as possible. >> So when somebody comes to you with an idea that you think could be funded with customers' cash, given your perspectives about this, do you sometimes say, great, good idea. Why don't you go out and get a couple of customers and come back to me when you've done that? >> Well, I personally am very reluctant to finance any company that hasn't gone through the due diligence that is customer acquisition. >> Mm-hm. >> I'm not really keen on pre-revenue companies. I'm okay with early revenue. But I want to see legitimate customers that are not friends and family that are buying the product. >> Yeah. I don't think you're alone. And once somebody's got that, they're in a much better position to deal with somebody like you or not have to deal with someone like your for awhile because they can continue to get more customers if that's giving them positive cash flow. >> There is no better financing mechanism for a company than your customer's cash. You and I have talked about this and we're in complete lockstep. The customer doesn't ask for equity in exchange for his cash. >> Yep. Yeah. >> And the customer gives you the validation for being able to go to your next least expensive form of cash from an equity perspective is the bank. >> Yeah. Exactly. >> Banks like to see revenue. Banks like to see product. They like to see cash flow. >> Yep. And they'll lend against cash flow. >> That's right. You can say that I've got a building here that's worth a million dollars or I've got a house here that I can use as security. They don't want to own it. The last thing they want to do is have you throw the keys across the table and say, well, I'm done! Gotta get your money back by selling my house but I just don't want to do that. >> Yeah, yeah. Red, this has been really fantastic, everybody wants to start a business today and we have all these people participating in this experience with us. Some of them are at idea states, some of them are a little further along and I think some of them, so many of them feel like they need some cash to take the next steps forward. And to the extent that we can get them to think about the customers as the source of that cash. I think we're going to help a lot of people in a lot of parts of the world. Do well and of course, in many parts of the world there aren't developed angel networks like we're fortunate to have in North America or London where I work. So I think your words are going to mean a lot. [MUSIC]