In this episode we interview Jake Marmulstein, founder and CEO of Groundbreaker. Groundbreaker is an all-in-one investment management software that helps real estate indicators raise capital more efficiently, report to their investors in a more transparent way, look professional, and be secure with investor data. Listen as Jake discusses Groundbreaker and raising capital.
Jake grew up in an entrepreneurial family and believed this was something he wanted to do. He started working young, worked for smaller companies, and started a nonprofit on his own in University. He went into managing a team until there was an opportunity to start Groundbreaker. His “why” comes from wanting to push himself, grow, and take on challenges. Groundbreaker was the perfect fit with his experience. He thinks it is a huge problem he can solve.
What is the reason behind Groundbreaker?
When you are raising money for real estate, you use other people’s money and they write small to large checks, which can fund your entire deal. Or you can add a lot of people into a single deal. Adding a lot of people can become a nightmare, especially when you are required to be on the phone and email all day for two weeks straight.
How did Jake’s first experience with raising capital go?
The first time on his own, he was trying to raise $5,000 for a hotel acquisition in Rio de Janeiro. He was working for the government and identified an old building that was off market, destroyed, and needed to be renovated. He tried to raise money from investors in the United States, and also got an architect to draw up floor plans and put together the pitch deck. It was a lot harder than he thought. There were so many questions he had to answer dealing with the local regulations, the stability of the government, and other aspects that do not typically occur within real estate in the United States
What was Jake’s biggest lesson learned from his first experience raising capital?
When raising money, it is important to start with developing relationships first. Using your network, having people believe in you, and building your network along the way will give you a much better chance at raising capital.
Did Jake have to raise capital to get to where he is today with Groundbreaker?
Yes, he would recommend that every software company raises money. Groundbreaker started out without any funding. Jake had $10,000 to his name and was working in New York City. He started Groundbreaker while consulting on the side so he could pay rent. Eight months later and almost completely broke, the company had their biggest revenue month and were then able to pay the entire team and even reinvest. It kept growing from there.
What advice would Jake give people in terms of starting a company and raising capital?
How much negotiating power does a young start-up have when it comes to asking for money?
Your experience, your team, the size of the market you are going after, and whether you know the investor has good deal flow or not all matter. Be humble and get the deal done, but also know your worth and do not be afraid to walk away if something is unreasonable for you.
If a company receives multiple offers from different investors, what is Jakes advice to make the best, most sound decision?
When you are raising money and are not that experienced, you are not going to know all of the terms and what they mean. It would be wise to check out the National Venture Capital Association (NVCA) website that has all these terms. If an investor deviates from those terms, you need to understand why and examine the investor and the expectations you are setting.
Once a company has landed the deal, what advice does Jake have to maximize the length of the allotted amount of funds?
Keeping this mentality can screw things up. You have to spend money to make money, but you can do it in a smart way. Pay people the appropriate salary, give them equity, use Index Ventures equity calculator online, tax credits, and Amazon web services credits. There are various start-up programs and software. Be creative, but don’t be cheap with your expenses.
Jake’s book recommendations:
- The Millionaire Next Door: The Surprising Secrets of America’s Wealthy by Thomas J. Stanley and William D. Danko: https://www.amazon.com/Millionaire-Next-Door-Surprising-Americas/dp/1589795474
- Deep Work: Rules for Focused Success in a Distracted World by Cal Newport: https://www.amazon.com/Deep-Work-Focused-Success-Distracted/dp/1455586692
How to contact Jake: