Alexa von Tobel, Founder, Inspired Capital
How Alexa von Tobel went from struggling to manage her own personal finances, to founding a $200 million investment fund.
We’ve all heard the motivational mantra that if you love what you do, you’ll never work a day in your life. But Alexa von Tobel sees things a little differently.
“If you love what you do, you’ll work every day of your life,” she says, “and it’s because I’m so passionate about what I’m doing.”
The mission that gets von Tobel jumping out of bed every morning is one that impacts every one of us—finding financial stability. Without it, whether you’re a working family or a creative new startup, it’s near impossible to plan for the long term and ultimately thrive.
Von Tobel came to this understanding after graduating from Harvard and beginning a career on Wall Street, when she realized that, while she was great at managing the business finances of others, she was woefully unprepared to manage her own. And she quickly discovered that she was not alone.
That lit a fire underneath her to improve financial education, inspiring her in 2008 to launch LearnVest, a digital financial planning business that teaches investment and finances. The award-winning company became wildly popular, especially among women.
She ended up selling that business, but in 2019, van Tobel decided to take her passion for financial advising in a new direction. Today, she manages Inspired Capital, a $200 million investment firm that’s supporting early stage startups.
This massive new undertaking is all rooted in van Tobel’s desire to support ambitious entrepreneurs and help people achieve financial stability. That, and a deep love of math.
Freedom to Think Bigger
Von Tobel says she was an entrepreneur from day one. She’s always been drawn to the toughest problems, outside-the-box thinking, and bringing joy to others. And when she recognized her own problem with managing her personal finances, she suspected that this could be a cause worth taking on.
Von Tobel says that 78% of all Americans live paycheck to paycheck and that the average person doesn’t even have $400 in a savings account. And the crippling anxiety that comes from mountains of debt and living one medical crisis away from going broke? She firmly believes it holds people back from concentrating on something bigger.
“If you’re living for tomorrow, you can’t think long term,” she says.
Despite her lifelong love of math and her driven personality, she’d never been taught how to manage her personal accounts, invest her money, or plan for retirement. It became clear that many of her peers had not either.
“I think it’s insane that it’s not taught in every high school, college, and graduate program in America,” von Tobel says. “I mean, it’s not that dissimilar to basic hygiene.”
From von Tobel’s perspective, money is a basic lifeline that enables people to care for themselves. Therefore, she believes everyone should learn how to intelligently manage it.
That’s what drove her during her years as founder and CEO of LearnVest—the unwavering belief that financial education was a key to happiness.
“If you can create real financial stability for a family,” she says, “you can help a family thrive.”
Among the strategies she taught through LearnVest were how to grow a successful savings account by setting aside 20% of each paycheck, no matter what, and the benefit of establishing firm ground rules for financial health. She taught when to begin investing (yesterday), preparing for retirement (the day before yesterday), and how to plan effectively for the ebbs and flows of life.
But what about the people (like, oh, I don’t know, the writer of this article, for instance) who are deeply terrified of math? Von Tobel says that’s not a problem.
“Personal finance is basic math,” she assures. “It’s not complicated math. It’s really straightforward math—what comes in, what goes out, is there something left, and are we saving it properly? Really, it’s more organization than math.”
After more than a decade spent as a financial educator and the sale of her business to Northwestern Mutual in 2015, von Tobel decided it was time to give something new a try.
And when her husband pointed out how many hours she had spent financially advising entrepreneurs for free, she realized she may have inadvertently stumbled upon her next big project.
Shooting for the Moon
Inspired Capital was born from von Tobel’s passion for financial education, combined with her desire to help entrepreneurs reach their goals. The result is an early stage and seed investment firm, driven by women (also led by former Secretary of Commerce Penny Pritzker) and funding startups nationally.
Von Tobel now meets with at least 75 founders each week in pursuit of new investments of all shapes and sizes. From tech to product-based business, von Tobel is interested in all of it, provided they have a good idea and a plan.
She says that the best founders who have pitched her get to know her firm before reaching out. They also don’t get discouraged by rejection. Von Tobel says that just because it’s a no today, doesn’t mean it’ll be a no tomorrow.
And while founders are waiting for their yes, von Tobel says there are many things they can invest time in learning. She says that the biggest mistake she sees founders make is running away from the aspects of the business that make them feel inadequate, passing it off to others before even giving it a try.
“I think it’s the typical kind of head-in-the-sand ostrich move,” she says. “You’ve got to lean into the things that make you nervous.”
She believes this is what enables businesses to address issues before they reach critical mass, while also making founders feel capable and bold.
“If you want to build a really good business—if you want to get really good at being an entrepreneur—you’ve got to get good at everything,” she says. “And I don’t mean you literally have to hold every job, but you have to take the job, get pretty darn good at it to the point where then you know how to hire for it, and then you can pass it off to somebody better at it.”
Once the machine of a new business really starts whirring, von Tobel says that it’s essential to have an eye on building up the reserves.
“You want to make sure you are never within nine months of running out of cash,” she says. “Because if you need to go fix that, putting a plan together to go fix that can sometimes take three to six months, and you don’t want to be in a position where literally you can run out of money.”
While she acknowledges that smaller businesses can get away with slightly less in the bank, she wouldn’t recommend leaving the stability of a company to chance or dependent on a tight timeline.
And ultimately, von Tobel believes these healthy savings accounts are what embolden business leaders to take new and exciting risks.
“I’m not risk-averse,” she says. “I shoot for the moon, but I have a plan B that has enough cash…that gives me enough confidence to shoot for the moon. Having a good solid financial plan gives you the comfort to take more risks.”
And the best part of all is that von Tobel believes there’s never been a better time to launch a business than right now.
“Every year it gets less expensive to stand up a company,” she says. “Every year there are better online resources to make it easier to do.”
From free online resources to highly affordable software for startups, she says founders need only do a light Google to find a flood of resources at their disposal.
As an investor passionate about the startups and founders of tomorrow, she can’t wait to see what thrilling new business plans come across her desk next. And that’s why she encourages struggling founders to keep pushing, keep growing, and keep pursuing their dreams.
“You’re building something new. You’re building something special that serves a purpose,” she says. “And that’s pretty powerful.”
Alexa von Tobel’s Tips for Building a Successful Business
- Get the product right first
Von Tobel says that entrepreneurs can be distracted so easily by the task of building a business and marketing a product that they forget to perfect the product. Talk to the customers. Find out what works and what doesn’t, and make adjustments. Before diving headfirst into marketing a product, she reminds entrepreneurs to really nail product-market fit.
- Begin by stoking word-of-mouth marketing
Rather than sinking tons of cash into a paid marketing strategy up front, von Tobel recommends that founders begin by delighting their customers and encouraging them to share their experiences with the brand. She reminds entrepreneurs that word-of-mouth marketing is free and often more effective than traditional marketing for startups.
- Wait to focus on paid marketing until revenue is up
Once revenue is climbing and there is a little more wiggle room, von Tobel says the time has come to give paid marketing a go.
- Embrace a constant learning process
Above all, von Tobel reminds entrepreneurs that the constant pursuit of growth without fear of negative feedback is essential to success.
“I think the best founders are learners,” she says. “They are comfortable with negative feedback. They want to make it better, and they are constantly just listening and learning obsessively.”
Interview by Nathan Chan, feature article reprinted from Foundr Magazine, by Erica Comitalo
ATTENTION: We’re excited to announce that Alexa von Tobel has partnered with Foundr to teach our course, Finance for Founders. Learn how to structure your finances the smart way to earn and keep more money. Check out the course right here!
- Why von Tobel, a Harvard graduate and Wall Street career woman, found herself struggling with her personal finances
- How this experience drove her to launch LearnVest, a digital financial planning business that teaches investment and finances
- Why von Tobel doesn’t believe a fear of math should stop anyone from pursuing financial education
- The sale of LearnVest to Northwestern Mutual in 2015
- The mission behind Inspired Capital, an early stage and seed investment firm
- Why von Tobel wants to work with founders who embrace aspects of business they’re not good at
- The reason behind von Tobel’s optimism for the future of business
Full Transcript of Podcast with Alexa von Tobel
Nathan: The first question I ask everyone that comes on is how’d you get your job?
Alexa: It’s so funny, I don’t even think of it as a job. I really don’t. I think that’s an important point, which is my mom, when I was growing up, always said this is such a cliche. She would say, “If you love what you do, you’ll never work a day in your life.” I always listened to that and I actually think I now have to really edit it, which is if you love what you do, you will work every day of your life. Because I am so passionate about what I’m doing. I think I got my job by … I think I’ve always been an entrepreneur. I really do. I think I love to think outside the box, I love creative problem solving, I love making customers happy and I love solving really, really big hairy complicated problems.
My first job was LearnVest. We built financial planning software and sold it. My brand new job is Inspired Capital. We just launched Inspired Capital last week. It’s a $200 million venture fund in New York City, focused around investing around the country, seed series as backing the best entrepreneurs of tomorrow. I think what’s really important about that was I was literally working nights and weekends to talk to entrepreneurs and help them get all of their questions sort of answered and I was loving it. My husband looked at me and he goes, “Should probably do that for a living.” He was like, “You’re literally doing it nights and weekends.” That’s kind of a rule between us, which is if you do it for free, should probably do it for a living.
Nathan: I love it. So talk to me around finance. So LearnVest was your first company?
Nathan: Incredible success. A lot of people aren’t that humbled or blessed with their first company to do as well as you did. Has finance always been an interest of yours, a passion of yours?
Alexa: Yeah, I think I’ve always been really good at math. Numbers don’t intimidate me. I’ve always been really excited by … they’re just common sense. You can literally make them make sense. I ended up in financial planning though because I was working on Wall Street out of college. I remember thinking to myself, I couldn’t believe that I was so great at finance, but personal finance was this other barrier. And I remember thinking to myself, how many credit cards should I have? What can I afford in rent? The fact that nobody had given me crystal clear answers to those questions seemed outrageous to me. I started writing a business plan to be like, what does everyone in America do to figure out how to understand their financial lives? Most people don’t have a tonne of money. If you have a lot of money, people want to help you with your finances. If you don’t, which most people don’t, you are left to figure it out. So I said, there’s got to be a better solution.
Nathan: Yeah. I see. Yeah, that’s the crazy thing when it comes to financial literacy. There’s not really much education around it. Why do you think that is?
Alexa: I think it’s insane that it is not taught in every high school, college, graduate programme in America. It’s not that dissimilar to basic hygiene, brushing your teeth, understanding how to take care of yourself. It is vital. I would say money is a lifeline. It’s there every single day of your life. From 20, whenever you become responsible for yourself all the way until the last day of your life. You have to be able to care for yourself. If I could rewrite school code, I would overnight change it. I think it should be in every single programme, basic financial literacy, how to pay bills, what a credit card is, what debt is, how to think about your retirement savings because it is your lifeline. If you can create real financial stability for a family, you can help a family thrive. I really do believe that.
Nathan: Yeah. No, I agree. It’s such an important thing, our whole life, love it or hate it, revolves around money and it’s such an intimidating thing for people. That’s why I think it’s so important that we work with you to create this incredible cause. I’d love to hear, you said you’ve always been good at math. But for many people they might not be good at math, is that easy for them to overcome still?
Alexa: Absolutely. Personal finance is basic math. It’s not complicated math, it’s really straightforward math. What comes in, what goes out, is there something left and are we saving it properly? So, it’s really more organisation than even math.
Nathan: Can you tell me some stories around if people don’t get it right, what can happen or things that you’ve seen throughout your career? Because I know you said you speak to a lot of entrepreneurs, even through Inspired Capital now, I know you’re speaking been to a lot of founders.
Alexa: I think one of the things that really sets just our firm apart, Inspired Capital, is we really do try to think about the founding team, just help them think about their own financial lives. I just think it’s something we kind of do naturally as a firm. But I think here’s the thing, if your finances aren’t taken care of, the majority of America, 78% of the country lives paycheck to paycheck. The average person doesn’t have enough savings, not even $400 of savings. I think what’s really important about that is, just the amount of literally living paycheck to paycheck, that constant juggling and anxiety, it’s really hard when you’re in that like constant stress. It’s really hard to think about a higher order, to think about something bigger.
I think, particularly if you’re an entrepreneur, it is vital. It’s one of the reasons why we did the course around just like you have to understand your core finances so that you can go and think bigger. But if you’re constantly trying to pay every bill to the point where you can’t put your head up and say, “Let’s think long-term, let’s a build a business that changes the country in five years, 10 years, let’s go do something that’s really thoughtful and bold.” If you’re living for tomorrow, you can’t think long-term.
Nathan: Do you have any horror stories where people have, for example, I’ve heard people like they don’t put money aside for taxes and then they haven’t paid the taxes in years?
Alexa: Yeah. For me, it’s like there’s constantly major stories. Young people who find out that they’re sick, really truly sick and those medical bills are insane. People end up with credit card debt, which credit card debt is designed to grow very quickly. It literally compounds daily, not yearly, not monthly, daily. So if you have a lot of it, it gets big really quickly. I had a radio show where we on series, where we’d literally nonstop talk to people around the country. I loved doing it because talking to real people, it just was amazing. Everybody would call in with questions and the next thing you would know, literally 25 people would call in in the same two minutes being like credit card debt issues, credit card debt issues. The horror stories, I wish it was like a rare horror story. It’s a common horror story, which is why I care so much about trying to help people just get better at their financial lives.
Particularly for entrepreneurs, you want to make sure that your house is stable so that you can go and think really big. We like to back big entrepreneurs, big thinkers category creating ideas.
Nathan: Yeah. Because when you think about business, it’s really exciting and when it comes to the numbers, I think, and that’s something that I’ve experienced myself, it can be a little bit daunting. It’s not that fun. It’s not that exciting. What’s the exciting part is the creation and that side of things. I’m curious as well around credit cards. What are your thoughts on them? Should you be using like AMEX to put your Facebook ads on and all those kinds of things or what’s your thoughts? What’s your take there?
Alexa: I think, in the beginning, you don’t want to be doing a lot of marketing and things like that. You really want to be talking to customers. Your best way to grow your user base is to get your customers to share and refer. It’s somebody who’s like, God, I love this product to go tell their friends. As you get farther along, so the answer is, you really shouldn’t be like at the point where you’re putting your credit card down to acquire ads. You should be really focusing on making sure customers are sharing first. Then by the time that where all revenue’s coming in, that’s when you start to think about marketing and going beyond just true word of mouth because that means if you focus just on true word of mouth in those early days, it means your customers love the product. It means you’ve got it right so that by the time that you’re actually spending on marketing, you’re ready. Does that make sense?
Alexa: I think sometimes people build a product, market the heck out of it, and it’s too early. The product’s not ready. At LearnVest, this was really hard. Our early days, the product market, that wasn’t great and we need to keep making it better and better and better.
Nathan: Yeah. I see. In summary, you think early stage founders, they shouldn’t even be touching credit cards. Get the product right first.
Alexa: Yes. Get the product right first. Get real loyalty among your customers, talk to your customers, answer the phone, talk to them nonstop. Make sure you know why they love it, what they love about it, what they want more about. Give them the psychological space to tell you what’s not working, what they don’t like, and then make it better, and keep doing that over and over and over. I think the best founders are learners. They’re constantly getting better at learning. They’re comfortable with negative feedback. They want to make it better and they’re constantly just listening and learning obsessively.
Nathan: Yeah, I agree. When it comes to, I guess, finances and trying to manage that side of the business, especially in the early days, do you think this is something that you can just leave to an accountant to handle?
Alexa: No. I think here’s the thing. If you want to build a really good business, if you want to get really good at being an entrepreneur, you got to get good at everything. I don’t mean you literally have to hold every job, but you have to take the job, get pretty darn good at it. The point, you then know how to hire for it and then you can pass it off to somebody who’s better on it and then you can move on to the next thing. I don’t think there’s such a thing as like, oh, this part of the business, I never touch, I never get good at it, I don’t ask questions. That’s part of the thing, being an entrepreneur, you literally have to learn so much. And I remember one day, two to three, four years after LearnVest, I dropped out of Harvard business school and I was like, I have learned so much in the last three years because everything mattered.
Our financial balance sheet, I’d understand it, because it was literally the money that I’d put to start the company. Then my early seed round, I couldn’t afford to run out of money. Accounting. I had to look at the details. How we thought about our office space and our office lease. I’d understand the contracts. As we hired people, HR had to understand how we hire, why we hire, what the contracts look like, all of those details. I couldn’t be like, “Oh, I don’t do that topic at all.” Even technology, I wasn’t an engineer, and I had to be like, I need to understand the decisions we’re making and the consequences if this doesn’t work. You can’t be afraid of asking dumb questions. I asked, I still ask five dumb questions today and I actually say, “This is a really dumb question, but can you help me understand something?” And you have to be a learner at all times.
Nathan: 100%. When it comes to balance sheets P&Ls and learning all of that side of things, is that what people can expect in the course?
Alexa: Yeah, so in the course we cover everything. We cover your financials, businesses financials, helping you understand what these different documents are, what’s a balance sheet, what’s P&L. Again, they’re really not that complicated. Once you learn the basics, you’re like, I got this. What’s really awesome is one day you just start feeling so much more competent. As I said, you have that moment that I had one day where I woke up and I was like, oh, for the last three years I have learned more than I could possibly have learned and it’s because I rolled up my sleeves and got in the weeds, asked the questions, learn the stuff. Just remember, the Internet’s incredible. The amount of quick Googling, how does that really work? Just to make you better, you can do it all the time.
Nathan: Yeah, I agree. I feel you there because when it comes to finances, I always used to feel it was quite intimidating and I thought to myself, you know what? I’m going to learn this. I remember even going on like there’s this tool called Clarity. Have you have of it?
Alexa: Yeah, of course.
Nathan: clarity.fm. I jumped on there and I looked for CFOs and I literally spoke to like two to three CFOs. I just asked them every single question that I had and just wanted to just get some confidence around the numbers and the confidence about the way I was doing things. I’m really curious, when it comes to, finances and running a business, how do you know when you should take a profit and when you should put it back into the business?
Alexa: I mean, I think that is so dependent on the type of business and which business. As I said, the course is really good at covering these points in more detail and also helping orient people. If your business is really thriving, I’m an invest back in the business person. I’m like, if you need to do very specific things, send a child to college, maybe you take a little bit of money out. But I always call it the 90-10 rule, which is 90% should be reinvested, 10% can come out. I apply the same, it’s like a bonus. If I get some extra money, I’m like, 10% can do something. You also want to live your life. You can’t take the money with you at the end of the day, but then I like to reinvest 90% of it right back into the future.
Nathan: Yeah. Love it. What are some of the biggest mistakes that you see founders make when it comes to their finances?
Alexa: Not recognising. It is a critical asset that you must understand. I think it’s the typical kind of head in the sand ostrich move where you just lean in, I call it LITTP, lean in to the pain, LITTP. You got to lean into the things that make you nervous. One day you start creating … I don’t know if personally I’ve always been fearless, I don’t know, but when something scares me, I force myself to do it. When I know there’s like a really awkward, hard, challenging something, I’m like, oh, this is going to be … I’ve got to go learn it. I just lean in to it. I think that that’s how you build better businesses, it’s how you solve your problems. If you avoid a problem or if you avoid topic like your finances, guess what? It’s not getting better. It’s going to get worse. You may as well just to now, dig right in. Actually, at some point, you create a competency and you feel so strong and then you begin to realise, wow, I’m actually pretty capable of doing a lot of things.
Nathan: Yeah. Have you always had this courage or do you think it’s something that’s developed over time?
Alexa: If you meet like five year old Alexa von Tobel, I’ve always been pretty courageous. I do think that over time, you build a confidence in your own ability to learn and do things. It’s not to say I’m perfect, right? There are still things I get wrong and I think that’s okay. I think it’s comfort with failure, comfort with learning, comfort with leaning into challenges. At some point you begin to realise that you just trust your own skillsets and you’re developing skillsets. Again, we really, at Inspired Capital, we love entrepreneurs who have a learning mindset, are comfortable learning, are comfortable being out of their comfort zone because that’s what being an entrepreneur is, as you know.
Nathan: Yeah. Look, I think I agree with you 110%. The most successful founders are absolute learning machines because what you find is more often than not, they’re disrupting a certain area, so they’ve gone into it with 100% naivety and they just have to work it out. Yeah, it’s purely just out learning like everyone around you. I think that’s really, really important. When it comes to, I guess you talk about failures and challenges, anything you’d like to share in your journey?
Alexa: We had so many challenges. I actually think one thing that, we put this very glossy image on entrepreneurship where it’s kind of glamorous and feels really amazing. Real entrepreneurs know that it is a labour of love. It is the people in the arena. I love the Teddy Roosevelt quote, like you have so much respect for people that are out there. One of the reasons why I went into backing entrepreneurs now is, I have so much respect for the ones that are in it because I recognise it is stressful, it’s anxious, you’re constantly worrying if you’re doing things right, but you’re building something new, you’re building something special that serves a purpose and that’s pretty powerful.
I’ll just say, I think that the glossy image of entrepreneurs being so amazing, the real entrepreneurs which I’ve been in the shoes, I’ve held the reins, I know that it’s hard, dark, stressful incredibly complicated at times. As your business gets bigger, your problems get bigger, your anxiety at times can be so stressful. Again, I just have a lot of empathy and also just a lot of commitment to entrepreneurs. It takes a special sort of DNA.
Nathan: Yeah. I’m curious, why did you decide to start the firm, Inspired Capital?
Alexa: One day, again, a major credit to my husband, it was a weekend. I was learning. I met this incredible entrepreneur who had this big idea. I quickly pulled out audible. I was downloading content to learn about this topic and I was having the best time, and my husband just looked at me and he was like, “Should probably do this for a living.” Somebody once said to me, “If you figure out what you’re good at and you figure out what you love and you do it as early in your career, you’re going to be completely successful.” So figure out what you’re good at, figure out what you love and do both early in your career together, you’re going to be incredibly successful. I think for me, I have a natural affinity to entrepreneurs, to entrepreneurship.
I love hard problems. I’m like, the harder the problem, the better. I love the like underdog of let’s go figure things out. I want to be in the boat with the entrepreneur. I want to row, I want to work for them. Then on the flip side, having done it myself, I think we’ve developed some incredible hacks, tricks, skillsets to get around the corner. Again, some of them are in the course, so that’s why, and it literally came out of my mouth one day. I was like, imagine if there could be a firm that was filled with entrepreneurs who had already built, scaled, sold, etc., companies. We pulled together an incredible group of people to do just that, raise $200 million super quickly, which was amazing.
And we said, let’s go build a firm, a modern venture firm for tomorrow that includes passionate entrepreneurs who know how to build great companies. It came out of my mouth. I said it would be Inspired Capital. Then I was like, is that name taken? And we got it. So it was awesome. It was a great day.
Nathan: Amazing. When it comes to raising capital, how do you know when you should stay bootstrapped or look to raise venture?
Alexa: Yeah. That’s a really a specific question to the entrepreneur and to the business. For the business, let’s start with it. I was going into financial services. It’s a compliant industry, highly regulated. You can’t overnight, they’ll be like, I’m going to go build a bank with no money. You have to be able to have security and engineers and regulatory practises set up. So I had to raise money. If you’re building a cupcake shop and you can bootstrap it with a little bit of money and get your name out there, you may be able to take out a small business loan. Those are the differences. It’s very, very dependent.
If you’re an entrepreneur who can put a little bit of your own savings in to get it going and own more of the business and then maybe raise later, that’s another way to think about it. So as I said, it’s very dependent on the entrepreneur and their circumstances where they are in their life, what they can add to the business and what they can bring, and then the type and nature of the business. Some businesses, you’re more likely to have to go and raise capital. Some other businesses, it’s actually, they’re easier to bootstrap. The final thing I’ll say that I love about just technology these days, every year it gets less expensive to stand up a company. Every year there’s better online resources to make it easier to do.
Nathan: Yeah. 100%. You’ve got tools like Stripe, you can take payments straight away.
Alexa: Squarespace, Stripe, the list goes on of just great services that can help you air table organise, get up to running, run your team, etc.
Nathan: Yeah. That brings me to a really good next question. Talk to me about tools, because I know you’re really into your digital tools. What are some great tools that people can use to manage their finances in today’s age?
Alexa: Yeah. I think the first just most obvious is, look to your financial account wherever you have them and download those apps immediately and be able to look and view and track your resources. There are some incredible tools. We’re working on a tool in self mode. I think just being able to like really get a handle on your wallet, where it’s going and having clear visibility is an important thing to do. The final thing I’ll just say is, don’t underestimate just the value of creating good rules and routines and hygiene around your finances.
Nathan: Talk to me around budgeting. When should people start? How often should they review their budget?
Alexa: Yesterday and all the time.
Nathan: Okay. How often should they review it? How often should they create a new one or …? Yeah.
Alexa: Remember, for a business, you do a monthly budget on purpose. You run monthly financials on purpose. We talk about it in the course at length. For yourself, it should be the exact same. What came in, what goes out every month, rinse and repeat to make sure that you’re properly saving. One rule of thumb we always say is about 20% of what comes in each month should go directly into a savings account. Doesn’t even pass, go. You don’t even get to look at it. It goes straight to a savings account.
Alexa: Personally, of your own savings.
Nathan: If you had a company and that would be 20% owner’s contribution or that would be the wage?
Alexa: No, this is it for your own personal life. For the company, you should be running a really clear annual budget and then you literally look at it monthly and if you’re under budget, you can reevaluate. If you’re over budget, you have to reevaluate, but to make sure that you’re constantly tracking every dollar. It’s not dissimilar to your personal finances, which is why I always say to be good at being an entrepreneur, you actually have to understand personal finance because business finance, while it may have a few differences, it’s not really that different. It’s what comes in, where’s it going? Is it going to high value places? What’s left at the end of each month?
Nathan: One thing that constantly comes up a lot, which people always say they have problems with is cashflow. What do you think people should be doing when it comes to managing cashflow besides the fact that sales queue is all?
Alexa: Yup. I think one of the great things about technology that’s happening right now is that, if you used to have these long lags of cash flow, it’s getting everyday more immediate. You have services, from the Stripes of the world to like the Venmos of the world to say, I delivered you something, I’d like to be paid today. Why would I wait? I think there’s a lot of things that you can do. One thing about your technology choices to help make that shorter. Your cash cycle, you want to be shorter. Think about your contracts. So if your contract says 45 days, why not make it 15? If your contracts says 45 days, maybe it’s 30. You’ve got to understand the nature of who your vendors are and who you’re servicing, but shorten your own cash cycle and then get a really good handle on your cash.
Also, honestly, what goes out shouldn’t be 15, it should be 45. You want to make sure more money’s coming in than is going out the door and you want to give yourself those flexibilities. So, look at your contracts, look at your technologies, look at your service providers, and then finally, make sure you are earning some interest on your own savings too. Again, back to business, the cash that’s there should be getting the absolute best savings rate that it can to the extent that you know you don’t need to use it. That’s 2%. That’s your money working for you, to give yourself more money to invest in your business.
Nathan: Yeah. I see. One thing that also comes up these reserves. What is your thoughts there for a fast growing business? You talk about 90-10, put aside 10 or put aside 20 personally. When you’ve got a fast growing business and it’s just cash hungry and you need to keep fueling it, fueling, fueling etc, you look at your budget, how do you know how much you should have in your reserves? Is it six months? Is it 12 months? Is it one month? Is it two months?
Alexa: Yes, it’s definitely not one month and it’s definitely not two months. I’m a financial planner and so for me, I’m always more mindful of, you want to make sure that you are never within nine months of running out of cash.
Alexa: Because if you need to go fix that, putting a plan together to go fix that, sometimes can take three to six months, and you don’t want to be in a position where you literally can run out of money. Again, all businesses are different. If your business is relatively simple and you have two employees, maybe it can be shorter. If your 200 person business, the second people are worried about whether or not you’re going to run out of cash, you’re going to create a lot of chaos. I’m more conservative in those nature. When it comes to your finances, I’m like anchor the fences, but always have plan B, plan C, plan D. I’m a doomsday planner.
Nathan: Yup. Love it. Yeah, I’m extremely risk averse as well. So nine months op ex.
Alexa: Yeah, so let me say it again. I’m not risk averse. I shoot for the moon, but I have a plan B that has enough cash so that we’re not in a position where if, God forbid, something goes wrong, it gives me the confidence to shoot for the moon. Does that make sense?
Alexa: Having a good solid financial plan, having a clear understanding of your finances gives you the comfort to take more risk. I love risk. I just like to take risk properly, and it is having enough cash on the balance sheet that’s set aside to then say, let’s go invest this $10,000 in exact best spot to go make more money. Does that makes sense?
Nathan: Yeah, it does. So if you’ve got those reserves and you’ve got cash coming in as well, and the business is taking on nice, you can take a little bit of it to invest in a new tool to produce or a new line of product where you’ve got … if that focus goes away and the core business goes down a little, you’re still okay.
Alexa: And you have a plan. What I’m also really into is people just being very thoughtful and constantly reevaluating, saying, if that’s not working, let’s not do it. Sometimes I feel like we put plans in place and we’re just like, oh, it’s already going … No, if it’s not working, take money. Don’t do it anymore. Say no. So you have to get really good at, what do we turn on? What do we turn off? Constantly using the beginner’s mindset to thinking those things through.
Nathan: Yeah. Someone once told me that when it comes to business, and as you start to grow, it’s really like you have all these different dials and you can turn them up or you can turn them down. When I think of finances, it’s very, very similar, right? You turn these dials up, you can invest it more here you turn these dials down, you bring things back and that is how you grow. Just managing those dials.
Alexa: That’s exactly right.
Nathan: One thing that people think about is I need to make more money first before I worry about this kind of stuff. Don’t I just need to focus on sales. I’ll bring in sales. What do you have to say to that?
Alexa: I think that the most important thing for any business is that your top of your food chain is we are doing something for our customers that is different, that stands out, that they love, that is unique and that they are willing to pay for over and over again. It’s the most important thing to think about. Then ask yourself, how do you make those customers even happier? How do we provide something that’s unique or special or different that they’re willing to pay for and they feel happy to pay for? If that is always the most important question, every other lever is, should we do more of this thing that they love more? Probably yes. They don’t really like this thing. Maybe we do less of it. Constantly, your financials are really just levers to figure out that question. I think everything should be oriented to that.
The second order of that really is how happy are employees. They’re the second biggest asset. Your customers and products are biggest, and the second biggest asset for a company is the team. Figuring out how happy are they, how do we make them do better work? Again, this goes back to those dials. I really do think that it’s that simple. Yes, the balance sheets look a certain way, I guess P&L looks a certain way, but the concept is really that simple. If either of those two things are not true, you can turn the dials all day long and you’re not going to build a good business. Does that make sense?
Alexa: I think it’s easy to get lost in this versus this versus this, but those are the two highest orders. Do we have happy customers? Do we have happy employees? If those two things are always working and the dials are working towards those things, you’re going to end up building really special business. And there’s a great book called the Purple Cow by Seth Godin, and I love it. The idea is if you have a purple cow and you see it, it’s so spectacular, you would tell everybody about it. You want your product to be a purple cow, you want your product to be something that stands out that much. It’s a really simple value.
Nathan: Yeah. No, great book. Talk me around, everyone needs a CPA, everyone needs an accountant. I know you talk about this in the course, but I think it would be valuable for people still in this interview. How do you know, what is a good accountant, good CPA versus a bad one?
Alexa: Yeah. I would just be really clear of using a reputable firm. Doesn’t have to be a big firm but a reputable firm. Get a few references, make sure that the CPAs has an active licence. I would ask them for two to three reputable references and ask them why do you like them? What do they do? Give me feedback. I think it’s a really good thing, before you ever bring anybody on to actually call a few people around that person to say what makes this person stand out, what makes them special, how best to work with them, anything I should know that I shouldn’t do, to make sure my relationship with them is strong. That’s how we think about it.
Nathan: For people that aren’t just consider themselves money minded, what would you say to them?
Alexa: For people who don’t consider with them themselves to be money minded, I would say, you can learn anything. I don’t know what it means to be money minded because it’s, again, I think we do this weird bury our head in the sand when it comes to money, and so much of that is like truly historical. Money is just like anything else. It’s interesting to me. People are like, “Oh, I love branding,” and I’m like, branding and financials are actually not … different categories, but same level of just, you have to understand them, you have to get good at them, you have to look at them. We have more fun looking at branding often. This is one of those places where it’s just like, if you can learn branding, you can learn money. Do you know what I mean?
Alexa: I think it’s actually good to compare it to something that you love because you’re not an natural expert at branding, but you’re excited to get good at it. Why not do the same with money? Again, it is literally the water that fuels your business.
Nathan: Yeah. Why do you think that this kind of stuff is so intimidating? It’s not as sexy as like branding? Why do you think that is?
Alexa: I’ll take it back to my … I have a four year old. At school, her teacher said to all the parents, tell your children today that you love math. There are studies that show if you heard that math was hard growing up or if it was like, ah, math, it actually impacts the way you view your ability to learn it. The teacher literally said to the class, fake it till you make it. I happen to love math. So my daughter’s like, math is the best thing ever. But it really is our emotional orientation towards it. For some reason, we think it’s complicated. It is the most simple math. By the way, there’s tools to do it for you. So it’s not even like you actually have to run the numbers. It just, you have to understand the inputs and the assumptions that go into how we think about it. Again, it’s very fun and I’m here to tell you that math is so fun.
Nathan: Love it. We have to work towards wrapping up. I’d love to hear, so you’ve just launched your VC firm. What’s on the horizon? What’s exciting for you right now?
Alexa: What’s really exciting for us is literally the email address, [email protected], or like, send us your ideas, send us your pitches. We’re hiring for our firm. We’re bringing on one or two special people over the next few years. We’re looking at 75 startups a week, so send us everything, we want to get to know you. Even if we’re not a great fit for you, we’re happy to point you in the right direction and help you. I really do believe in just paying it forward. Karma is an important thing and we’re here to just help people build good businesses. Again, I would do it for free and so that’s why I do it for a living.
Nathan: Amazing. What kind of companies are you guys looking at? Tech, SaaS, marketplace?
Alexa: We invest around the country. We look everywhere. We’re headquartered in New York. We look at seed series A, we look at all categories. We’ll literally look at consumer technology to SaaS, to enterprise technology, to consumer products, to AI, FinTech, InsureTech. We look at it all.
Nathan: Yeah. You said you’re getting like 75 pitches a week?
Alexa: 75 entrepreneurs a week.
Nathan: Okay. For people that are pitching VCs, what do they need to be doing to do it right?
Alexa: I think the main thing is don’t just randomly send in an email and have no sense of who you’re sending it to or what the firm does. I always think that the best entrepreneurs are really thoughtful about saying, here’s my deck, here’s my materials, here’s what I’m doing, and you don’t need your full deck. You can have a teaser that just says, here’s my company in two pages, three pages. If you have a personal connection to somebody at a firm, have somebody ping them. We’re just normal people too. So the emails that come in through a friend get triaged to the top because we care about our friends. Just again, being really thoughtful about how to get to people and just be relentless. The other thing I would just say is, if someone doesn’t get back to immediately, that’s not a sign of you. It’s often a sign of somebody juggling something else.
I call it the artful finesse of staying in touch. Don’t be annoying, but be persistent. People like me, I really appreciate people who are really resilient. If we say no today, it doesn’t mean we can’t say yes tomorrow, and so stay in touch with people. Some of my best investors were people who said no early and then we changed their mind later. I think that people really appreciate people who are just very thoughtful and very persistent.
Nathan: Yeah, that’s really important. When it comes to how many founders, any particulars, do they have to have sales or some form of market validation?
Alexa: We literally truly will look at everything for a few special entrepreneurs, we’re excited at the like napkin stage. Most of the time we like there to be a product, we like there to be some customers. We like to show that you’ve already stood something up in some form or fashion. Keep in mind, I know what that feels like. Early days at LearnVest, I was like, it’s really hard to stand something up because I have no money and I have to build something that’s regulated and how do I get there? But I figured out a way to start talking to people about their wallets and showed a way, just using content to do that. We like ingenuity, creativity. We like relentless, passionate founders.
Nathan: Yeah. I’m curious actually, tell us around how you found your first investor for LearnVest.
Alexa: Literally, somebody knew I was super passionate about financial literacy, which is what LearnVest was. A student from Columbia business school said to me, “You have to meet this woman named Ann Kaplan.” And then made the introduction. I went to her cold, had never met her before, and I said, “Here’s why I think we can change the country’s wallet.” She happened to believe it was a really good mission. She believed in our mission. I think the mission is a really important thing behind a business. By the end of the meeting she said, “Let’s keep chatting.” Within a few weeks she was like, I remember chatting with her on a Friday night, and she was like, “I’m having a glass of wine. I’m really excited about your business.” In my head I was like, I’m not having any wine. I’m so nervous. And she ended up being our first investor and she’s now a dear friend. She’s like family to us.
Nathan: Amazing. Well, look. Yeah, look, we’ll wrap there, Alexa, but this was incredible conversation.
Alexa: Thank you.
Nathan: Thank you so much for your time. Yeah, if people want to find out more, just [email protected]
Alexa: [email protected] or www.inspiredcapital.com, and follow us on Instagram and all the other places. We actively are listening, send us messages, DMs. We truly look at all channels. So thank you.
Nathan: Amazing. Look, thank you so much.
Alexa: Thank you so much. I really appreciate it. Thank you.
Key Resources From Our Interview With Alexa von Tobel
- Visit the Inspired Capital website
- Email the team at [email protected]
- Follow Inspired Capital on Instagram