Fundraising Panel at Female Founders Conference 2016

Company Introductions and Funding Stages

• Elle (Talia Frankel):
  • Produces natural personal care products (condoms, organic tampons/pads) with a social impact mission.
  • Completed YC Summer 2015 (S15); raised a seed round of just over $2.5 million.
  • Reported 94% profit margins on Demo Day, challenging the notion that high margins are exclusive to software.
• Eligible (Caitlin Gleason):
  • Healthcare infrastructure company processing medical eligibility and claims.
  • Bootstrapped for one year before raising $1.6 million in Summer 2012 (W12).
  • Achieved profitability within three years by growing annual recurring revenue 8.4x using the initial capital.
  • Recently raised just over $20 million after prioritizing value creation over immediate fundraising.
• LoomWide (Amorti):
  • "Try-before-you-buy" service for consumer electronics and gadgets.
  • Completed YC Summer 2013 (S13).
  • Raised approximately $3.3 million to date; closing a new round soon.
  • Noted that 70% of the team are women; endured an 8-month fundraising cycle for their first $1.2 million round.
• WayUp (Liz Wessel):
  • Largest marketplace for college students to find jobs and internships.
  • Completed YC Winter 2015 (W15); founded roughly 1.5 years prior to the discussion.
  • Raised just over $9 million.

Fundraising Strategies and Narratives

• Eligible's Bootstrapping Approach:
  • Caitlin opted to bootstrap to avoid the risk of a long, drawn-out fundraising process killing the company.
  • Leveraged personal sales skills to secure initial deals without engineering expertise or a technical co-founder.
  • The strategy of creating immediate value allowed the team to walk away from unfavorable investment terms.
• LoomWide's Persistence:
  • Founder sent approximately 250 emails to investors; met with 85 individuals before closing the first check.
  • The arduous process (taking eight months to close) built resilience and confidence for future rounds.
• Elle's Investor Outreach:
  • Faced initial awkwardness discussing sensitive topics (sex and menstruation) but shifted focus to market size (50% of population) and pain points.
  • Framed social impact as a business strategy that aids in talent acquisition and consumer inspiration, directly contributing to the financial bottom line.
• WayUp's Preparation:
  • Relied on the universality of the problem (difficulty finding internships) to make the pitch personal and relatable to investors.
  • Did not create a pitch deck for the initial meetings to avoid wasting time; insisted on knowing all metrics "down pat."
  • Focused on controlling the conversation by answering any question with specific numbers and steering discussion to key metrics.

Securing First Introductions

• WayUp:
  • Secured early introductions through personal connections: a Google VP's wife (LP at Female Founders Fund) and a former colleague at a VC fund (Box Group).
  • Box Group provided an offer on the spot after a follow-up meeting and supported the rest of the round.
• Elle:
  • Leveraged YC Demo Day to generate interest, receiving the first check three weeks later.
  • The first check came from investors focused on women's reproductive rights, secured by consistently networking and advocating for the product despite having no revenue or partnerships at the time.
• LoomWide:
  • Follow-up interactions after Demo Day led to the first check, which unlocked a network of referrals from that investor's circle.

Investor Relations and Negotiation Tactics

• Educational Approach:
  • Founders advised treating unfamiliar investors as an opportunity to educate them rather than assuming resistance.
  • Deep knowledge of business terms is critical; ignorance during negotiation leads to unfavorable deal terms and loss of control.
• Handling Rejection:
  • Adopted a strategy of grace when investors say "no," recognizing that a "no" at one stage may become a "yes" later as traction improves.
  • Noted that smart investors often give soft rejections (e.g., "wait until someone else leads") rather than hard "no"s; founders should move on rather than wait.
  • Avoided aggressive or "nasty" reactions to rejection to maintain long-term relationships in a small industry.
• Confidence and Composure:
  • Confidence involves succinctly stating key performance indicators (KPIs), knowing when to negotiate or walk away, and managing emotional responses.
  • Preparing the narrative of how the company can become a multi-billion dollar entity is essential for institutional investors.
• Specific Resource Used:
  • Followed Fred Wilson's "MBA Mondays" blog to understand specific deal terms and concepts before meetings.

Notable Anecdotes and Challenges

• LoomWide's "Scam" Incident:
  • An investor verbally assaulted the founder during a meeting, labeling the business a "fucking scam" and accusing them of using the same pitch for everyone.
  • The founder had to leave the meeting to compose herself at a nearby Starbucks but maintained civility and professionalism upon leaving.
  • The associate later apologized, revealing the incident was an outlier rather than a reflection of the business model.
• Elle's Early Struggles:
  • Raised $1.6 million and worked obsessively for three years, sacrificing personal milestones (e.g., missing a best friend's wedding) to build profitability.
  • Faced pressure from family and peers regarding the choice of a non-traditional career path despite having a strong educational background.

Key Advice for Founders

• Fundraising Necessity:
  • Founders are reminded that fundraising is not mandatory; businesses do not need to raise capital if they can achieve profitability or growth without it.
  • Do not raise simply because it is a cultural norm in Silicon Valley.
• Self-Belief:
  • Founders must trust that they are significantly smarter (often 1,000x) about their specific business than the investors they pitch.
  • While investor feedback should be considered, founders should be confident in their disagreement if their market analysis differs.
• Persistence:
  • The primary advice is to not give up, even when faced with external criticism or personal struggles.
  • View the fundraising process as a business transaction where relationships can be rebuilt over time.