“We want to give you a set of tools that are new, more social, and definitely make it easier for having a central hub for sharing information, networking, tracking who’s seen what document, and so forth.”

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Hey everyone, I’m Mike Sullivan and this is MO.com. Thanks for joining me today. With me today is Eric Jackson of CapLinked. Eric, thanks for being with us today. So your website states that CapLinked makes private investment easy, secure, and social. That’s an intriguing description. Can you tell us a little bit about the company and what that actually means?

Eric: Yes. Sure, I’d be happy to. CapLinked is a platform for companies, investors, and their advisers to all come together and exchange information. If you’re in the process of doing a capital raise or an asset sale, also if you’re an investor and you’re looking to do due diligence, it’s a central platform where you can manage that entire process and exchange updates. Really what you have to think about is for private investing it’s always been a process that’s been run by email and spreadsheets.

Emails to update people and send around new documents, check in with people, and then spreadsheets really keep track of who has seen what and who is talking to whom. It’s really kind of a cumbersome process when you think about it. Those are all 1995 technology. We want to give you a set of tools that are new, more social, and definitely make it easier for having a central hub for sharing information, networking, tracking who’s seen what document, and so forth. That’s what CapLinked does. It makes that process a lot easier for both companies and investors alike, as well as their advisers.

You could send out invitations to attorneys, CPAs, whoever it is that you’re working with, invite them to come to the site, they can check out information in your private deal room, or in your company update depending on what type of information you’re posting. It really streamlines that entire process for both sides of the equation.

Mike: Tell me about your time at PayPal. What did you learn there that helped you with your other ventures?

Eric: Oh my goodness. That’s one of those questions where there is so much. I learned more during the four years there than I did at college. I’ll say for sure. It was an incredible time. I joined there in late 1999. I didn’t even know what position it would be for. The website had just launched at that point. I ended up being in marketing; I ran the marketing team. I ran the modernization team for PayPal back when we went from being a free service to a paid service.

I just really got to see an incredible journey as the company went from losing $10 million a month to being profitable, having the first dot com IPO after 9/11, and then eventually being bought by eBay. So it’s an amazing four year span between ’99 and 2003.

While there are multiple lessons to be learned from an experience like that, I think I can boil it down to a few things. One is be nimble with your thinking, especially when it comes to your business model when you’re launching a new company. The company that I joined in ’99 was based primarily around person-to-person payments and predominantly on the palm pilot handheld platform.

Within three or four months, that was completely gone. We were focused on auction payments, growing much faster as a way to scale up the business, and we were focused on web transactions and within a year we phased out the palm product altogether. So being nimble, responding to data, I would say that’s extremely important because you might not be as smart as you think you are. In fact, you probably aren’t. The customer will know better than you as to what you should be doing for your company. That’s certainly one thing.

Another thing I learned that was incredibly important is that your team matters. Your team matters a lot. It’s never just a situation of having worker bees that are going to come and work for you. You do want people that are going to be contributing, and not afraid to speak up, and really just take advantage of a culture that encourages excellence. You need to make sure you’re bringing those type of people in, let them feel empowered, and let them contribute big ideas.

When you think about what happened for PayPal, we saw just a number of innovations that came from the ranking file folks that were working in the company whether it was ideas for doing a debit card that was tied to a PayPal account, or for making buttons that would work for eBay auctions before eBay had ever bought the company. These were all innovations that came from people that were out there doing the work.

You really want to make sure that your team is bold in their thinking and willing to contribute big ideas. That’s going to help you figure out your business model over the long run as well.

Mike: It’s fascinating to hear that a lot of those innovations came from the doers, the people who were actually executing the work.

Eric: I’ll share one quick story on this topic. I said when we launched I was really focused on P-to-P payments, person-to-person payments, like splitting a dinner bill or settling up with your roommate or something like that. Here’s why I say listen to your customers too. We were getting inquiries from customers about using PayPal on eBay, that we started to actually take a look and see how often this was happening. Somebody wrote in and said, “Hey can I use some HTML from your site with your logo, and post it on my auctions?”

Then we started doing searches on eBay and we realized, gee like 1% to 2% of auctions already had PayPal on it, and it was happening under our nose. We didn’t even know it. It was just one of those instances where some data presented itself, a customer is talking to us, and we learned something totally new about the business. It changed the company and changed Silicon Valley forever by listening to that and following that advice.

Mike: Eric, you also founded World Ahead Media, which seems like a complete shift from the financial industry. What skills were you able to take with you?

Eric: Well, it definitely was different. The focus was certainly different bringing a media product to market is certainly different than bringing a financial product to market. Having run the marketing team at PayPal, and seeing that there were so many ways to distribute content and products online, I felt that was actually a skill set I could leverage in launching World Ahead, which was a nonfiction producer of content.

When we launched back in 2004 with one of my former PayPal colleagues, Norman Book, there definitely was a market opportunity to take advantage of. Now seven years later, in general the market for content has changed quite a bit. I think with handheld devices like this being so ubiquitous and having Kindle, iPad, and other distribution channels, the ability to take advantage of online distribution has been limited from the publisher side of things. You have several gate keepers now that are the primary distribution mechanisms for nonfiction for books, for magazines even, for newspapers.

The game has changed quite a bit. What I did learn was that it’s a tough market for providing content. You have to be very careful with the content you choose and know your niche very well and be able to put out products that you can monetize across different lines, whether it’s a combination of physical stores online, or by selling the rights to some other user of content, that’s really a key thing to be able to do. There’s an interesting environment to launching, and we sold the company in 2008 and I’ve since moved on obviously and learned a lot of lessons, including some which informed CapLinked.

I was happy that I had the opportunity to start and sell a business.

Mike: Back to CapLinked for a second, can you tell me any success stories from either an entrepreneur’s point of view or an investor’s point of view?

Eric: Sure. For one thing, we used it at CapLinked ourselves, so we’ve funded the company a couple times and used the product and made all of our investors use it for investor relations, but you have to eat your own dog food, right? Believe in your own product. Obviously our users on CapLinked are confidential, so I’m not going to disclose any information about a raise that’s ongoing or someone that hasn’t consented to it, but one example that I think is really interesting is a technology company called CritiqueIt.

They have a multimedia document critiquing product used for corporations and higher education, and they were able to raise their seed funding on CapLinked by setting up their seed deal, sending out invitations to their investors and potential investors to come view the deal room, and then ultimately closed a six figure raise using us. Another example in a very different industry just to show you how CapLinked is very robust and useful for all types of companies and start-ups to raise capital, Peninsula Entertainment raised money for a documentary that’s coming out I think sometime within the next year.

It’s a really interesting one. I’m not supposed to talk about what the nature of the movie is, because I guess in the movie business you wait until you actually have your distribution deal lined up and you’re ready to start getting publicity before you talk about it. I will just say, it’s a great documentary for an independent film maker. Just a couple of examples of really diverse companies that use CapLinked to raise money.

I think it just speaks to the need that it’s universal for companies and investors to have an online place where they can collaborate and exchange information. When you set up a deal room on CapLinked, not only can you load documents into it, but you can also send updates. So if you sign a new distribution deal, or expand your team, or something else significant happens that you want to let potential investors know about, you can post that there.

You can also allow the people that you invite to see your deal to invite others. That really helps with syndication too. I could send an invitation to you, you could take a look at it and say, “I know a few investors who might be interested,” and go ahead and send invitations over to them. There’s a number of features like that that really make it easy to get the deal out there, to get the right information in front of the right people, and also to track who is actually seeing it.

One of the most difficult things raising capital for a small business is that you often just don’t hear back from investors. That’s kind of one of the great blow offs. If an investor doesn’t want to say no, they often just don’t say no. Why close the door? it’s a logical thing to do. To be able to see who has looked at information and therefore know who might be interested and send them reminders through the site, it just streamlines that process a little bit and makes communication so much easier for companies that are doing a capital raise.

Mike: You’ve also found the time to write a book. Can you tell us a little about that?

Eric: Sure. The book was about PayPal. It’s called “The PayPal Wars.” The subtitle is: “Battles with eBay, the Media, the Mafia, and the Rest of Planet Earth.” I think the title tells a lot about what that experience was like. I wanted to chronicle my four years at PayPal and just really tell that story of being brought onboard to a really young company that was an early stage start-up, through the launch, ramp up, and then eventual exit of the company.

My motivation for telling at the time, back in 2004 as I’m finishing up the book, was to really capture that story. I thought it was an incredible story to have lived through and I thought they were really amazing people that I worked with as well. I think in some ways history has really born that out because you see what all the other PayPal alumni have gone on to do. It’s just remarkable.

Peter Thiel, who is the co-founder of PayPal, started Founders Fund and Clarium Capital; he was the first investor at Facebook. Reid Hoffman went on to start LinkedIn. Chad Hurley started YouTube. My old boss, David Sacks, now runs Yammer. Just an incredible bunch. Elon Musk, of course, SpaceX, also the head of Tesla. It’s a pretty remarkable group of people. Oh, I can’t forget Jeremy Stoppelman at Yelp. It’s a roster of who’s who of incredible entrepreneurs who have gone on to do amazing things.

Having lived through that and worked alongside these people, I felt like those stories need to be told. I just had no idea of the magnitude of the importance that all the PayPal alumni, who I know call the PayPal mafia, have. That was the motivation, just to tell a story, tell it from being in the trenches, and just kind of capture that experience. It’s not a case study. It’s definitely not meant to be dusty. It’s actually meant to be kind of fast paced, and nerve-wracking, and a little bit of those ups and downs that go along with having a start-up. Hopefully people can read it and just really enjoy it because it’s meant to read like a novel.

You’re supposed to get that firsthand sense. Go check out “The PayPal Wars,” download it to Kindle, and let me know what you think about it. I’ll be very curious to your people’s feedback.

Mike: So you’ve had some experience starting a business, what would you say some of the most important first steps are when considering starting a business?

Eric: Oh, that’s tough. I think talk to everyone you can. Too many people have an idea for a business and they think, “Oh, I need to protect my idea. I need to make sure that nobody else steals it.” Let me tell you, stealing an idea does not happen very often. Don’t let what you’ve seen on movies and “The Social Network” tell you otherwise because it’s incredibly hard to build a company. It’s a multi-year journey where you’re making a huge commitment, it impacts your lifestyle, it impacts your friends and family, your significant other, your children if you have children. It’s a very big commitment.

Don’t take that commitment lightly. Talk to everyone you can to get advice. Bounce your ideas off of them. You’re going to hear no, or it’s stupid, or don’t do that, or there’s something like that already multiple times. Maybe those people are right, maybe they’re not, but you definitely need to hear from people and really vet your idea. It says in the Book of Proverbs that iron sharpens iron.

I think that’s true when you’re starting a company. You want to actually exchange ideas and be challenged by smart people. Don’t sit on it, don’t keep it to yourself, don’t play it out up here. What’s up here is not that useful at all. It has to get out there in the real world and be tested and the first way you test it is to get feedback from people.

If you’re starting a web business, there are other ways you can test it too. Feedback from influential people is kind of the first stage, putting a website out there, drawing a little attention to it. Maybe not even having a product finished, maybe just have a sign up form where people can request more info. That’s another way to get some initial feedback just to see if people are interested. You can learn a little bit about conversion rates. If you make it a survey, you can understand what people are looking for. Ultimately, selling it in the market place is the ultimate way to get validation for your idea.

You’ve got to start with talking about your ideas. You won’t get anywhere unless you’re able to go out there and do that.

Mike: Anything else you’d like to cover before we wrap up?

Eric: Well, with starting a company there’s so much to talk about. I’ll just talk a little bit about financing a company because I think that’s a really important thing and obviously at CapLinked, that’s what we’re trying to do to build a platform for people to be able to manage their networking and their information sharing and their capital raise all in one site. The one piece of advice I’d give people is start your financing early and try to close round as quickly as possible.

It’s extremely hard. It takes a long time. People always underestimate the difficulty and complexity of managing a capital raise. They last longer than you think they will, the legal bills will be more than you think they will be. That’s okay. You want to have a good lawyer. It’s a necessary evil, is the way to look at it. Be prepared to spend a lot of time working on that and understand it is an important part of your job and it never really ends.

Most start ups go from one capital raise, they stop it and move on directly to another or where you’re sometimes working on multiple ones at the same time. Just appreciate that it’s a very difficult part of the job. That was a learning experience for me when I was starting World Ahead as a first time CEO and a first time entrepreneur on my own, so I think you’ll definitely appreciate it. CapLinked will help you. It will make it a little bit easier, but be prepared that that’s an important part of what you’re doing.

At the end of the day, if you are the co-founder of a company, keeping the lights on long enough to figure out what your business model is and to fine tune it and get it to the point where it works, that’s your responsibility and probably your greatest responsibility. Making sure you have the capital to do it is necessary to do that so that would be my one advice. Never underestimate the time, difficulty, cost, and general exhaustion stemming from a capital raise, but it’s an important and necessary part of the job.