409A Valutions, Cap Table Pro-Formas and More with Jonathan Gass of NomadFinancial

Jonathan Gass

In Episode #405, Nathan interviews Jonathan Gass of Nomad Financial. Jonathan founded his company because he decided to focus his career on entrepreneurship and startups. His business works with startups to help them make smart financial plans and fundraising decisions. Today we’ll learn from him about what pitfalls to avoid in our own startups.

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Famous Five:

  • Favorite Book? – Give and Take
  • What CEO do you follow? — Johnny Rockefeller, of the book Titan
  • Favorite online tool? — Audible
  • Do you get 8 hours of sleep? — I try for 7 to 8.
  • If you could let your 20 year old self know one thing, what would it be? – Listen to your gut when you are making decisions. Focus on culture.

Time Stamped Show Notes:

  • 01:35 – Nathan introduces Jonathan
  • 02:10 – His main focus is entrepreneurship
  • 02:25 – He saw the same problems with most startup founders
    • 02:50 – They weren’t setting up their accounting systems to support decision making
  • 03:10 – He worked for Vimeo a few years ago
    • 03:25 – They had to pitch what set them apart from YouTube and other companies
    • 03:55 – Building tools to support video makers
  • 04:10 – Nomad Financial generates revenue for a number of services, paid for by the hour.
  • 04:30 – Their employees specialize in helping startups
    • 05:25 – A role as an advocate
    • 05:45 – Push back from auditors
    • 06:00 – Staying on top of trends
  • 06:20 – What is a 409a valuation?
    • 06:58 – Startups mix that up with a valuation for selling stock.
  • 07:30 – Mistakes early entrepreneurs make with cap tables
    • 07:40 – No consistent terms
    • 08:15 – Even the software can’t always solve those problems
    • 09:00 – Understanding the implications of sale
    • 09:15 – One man who had an option to sell his company, but wasn’t really going to make any money
    • 10:10 – Nathan’s interview with Teachable (Episode 117)
  • 11:00 – Explaining preferred shareholders
    • 11:35 – Investors that ask for really aggressive terms
    • 12:00 – Be careful with the terms in your agreement
  • 12:35 – Smart money vs. “plain dollars”
    • 12:55 – People who are there to actually help the business
    • 13:25 – Understanding the goals of your investors
    • 14:50 – The importance of a fit culture and a fit vision
  • 14:40 – The friendliest investor for the entrepreneur
    • 15:00 — Great term sheets, and providing great value
  • 15:15 – Interplay investors
    • 16:10 – Jonathan is making about 4 or 5 investments each year.
    • 16:35 – Seed-stage and a-round investments
  • 17:00 – Why put a portion of your portfolio into startups?
    • 17:20 – You keep that portion for that, and you use the other portion for other things.
    • 17:45 – Living for entrepreneurship and believing in these startups.
  • 19:00 – Connect with Jonathan at J@NomadFinancial.com and NomadFinancial.com
  • 20:45 – The Famous Five

3 Key Points:

  1. Set up your accounting to support decision making in your startup.
  2. Be aware of your investor’s goals and what value they will contribute to your company.
  3. You need a cohesive culture and vision, among founders and investors.

Resources Mentioned:

  • Host Gator – The site Nathan uses to buy his domain names and hosting for cheapest price possible.
  • Freshbooks – The site Nathan uses to manage his invoices and accounts.
  • Leadpages  – The drag and drop tool Nathan uses to quickly create his webinar landing pages which convert at 35%+
  • Audible – Nathan uses Audible when he’s driving from Austin to San Antonio (1.5 hour drive) to listen to audio books.
  • Give and Take – A business book that teaches philosophies Jonathan lives by
  • Interplay – A reliable team of investors and partners
  • Toptal – Great for people to get access to software developers
  • Show Notes provided by Mallard Creatives