Fundraising Advice from Female Founders

Okay, hi everyone!

Next part of the session is going to be a fundraising panel where we have three ladies from the Seattle scene who are going to impart some advice on how they've approached fundraising and some of the lessons that they've learned.

My name is Kirsty Nathu; I'm one of the partners at Y Combinator. I'm the CFO there, so I look after all of the finances for both YC internally and also helping founders with raising money, looking at cap tables, understanding dilution. So I've seen a lot, and seen a lot of things happen during fundraising.

Just to give you a couple of stats, in 2017, only 2% of VC funding went to all-female founding teams, and only 12% went to mixed-gender teams. So there's a lot of work to be done there, and we hope that you ladies in the audience can help to change that trend and really get those numbers up in the future.

So I'm going to pass over to the ladies now; they'll do a much better job of introducing themselves. So each of you, if you want to just explain a little bit about your company, who you are, and how much you've raised so far.

Hi, thanks. Christy here. So I'm Beth Kolko, and I am the co-founder of Shift Labs, which is a medical device company here in Seattle. I started the company after being a professor for many years, including at UDub. We have raised a total of, well, $1.7 million of dilutive and then a $300,000 grant, so just about two million dollars, which for a med tech company is not a lot. We have a product that's on the market and approved in the US as well as Europe and a few other places. So that's what I do; that's what I have been doing. And fundraising is, well, I will just say this: when I told my partner what I was doing, he said, "You know, don't take this the wrong way, honey, but you know you've done a lot of things really well, but they do know that fundraising has been the hardest thing for you, right?" I'm like, "Yeah, it has." So maybe that's why I'm here.

My name is Amy Nelson, and I'm the founder and CEO of The Riveter, and we're really excited to host the conference today and to have all of you here. We launched our first base in May. The Riveter is female-forward workspaces and community for business and impact. We launched our second space in September, and we have raised a pre-seed last spring of $720,000, and then we're about halfway through a seed round right now. So I'm in an interesting position to be on this panel kind of in the middle of everything. But fundraising is hard, but it's necessary and it's important to learn how to do it and how to do it well. And so I'm happy that we can all be up here to tell our stories, and that's a small piece of that.

Hi everybody, I just want to say that I've never seen this space look more beautiful than today; and I've seen it before, but it looks amazing! You are all incredibly beautiful. How many people here are in the process of starting a company or have started a company? Awesome! Congrats! And we are here for you and each other. My name is Kristen Hamilton; I am the CEO and co-founder of Karu. We do predictive hiring, so we're helping employers choose the right talent using machine learning and AI, and ultimately leveling the playing field to provide access to opportunities for people based on things like what they can do instead of where they went to school.

We've raised $15,016,000, so a little more. We've raised $15 million in three rounds, and this company, there’s a story in each round, but I’m guessing we’re going to get to that. One stat I’d like to share that someone shared with me that was daunting but interesting: they said you’re more likely to get struck by lightning than to get a term sheet from a Silicon Valley venture investor. A city told me that when I was in the process of fundraising, so I just want to be here to say that it’s all possible despite the odds, and getting more and more possible.

So this is going to be good; we have a lot of different perspectives here.

So first of all, let's talk a little bit about where the money came from. Did you raise money from people here in Seattle, or did you have to go further afield? And if you did go further afield, did you see any real differences in the different geographic locations that made you have to change your approach?

So we went through YC in Winter '15, and before that, we had done a small incubator here in Seattle for kind of social-conscious companies called Fledge. We did a kind of small raise, a little bit of money—mostly friends and family kind of stuff—before we got into YC. Most of our money was raised as a result of YC's demo day, and I gotta be completely honest about that.

Med tech is pretty traditional in terms of investment—at least medical devices. Our team didn't come from that background; that was sort of part of our superpower in terms of thinking about the product, but it made fundraising really challenging. So what worked for us was to tap into people's optimism and desire to change the world. The investors who really came into that first seed round after demo day were people who believed in the vision and also were willing to think not just about the US but globally. So most of those investors came from California, came from Silicon Valley, some came from other parts of the world as well—some institutional, but a lot of angels. They seemed like they had more appetite for risk and they were surrounded by more risky things, and so they were willing to look at us and say, "Hey, why not?" So that was a big difference.

For future fundraising activities similar to where you're at, now we are in a different position, and now we actually are reaching out into that med tech community, which again asks—this is not interested in risk and has different kinds of metrics, so it’s about adapting to that. We definitely see differences geographically as well as based on what people's backgrounds are.

I talked about in the angel round that we raised, and then how I have approached raising the seed round. We raised on a SAFE, so it's an important kind of precursor to going out to raise, deciding on the vehicle on which you will raise, which is something I had to learn about. I was a lawyer for ten years, so it was brand new to all of this when I started this a year ago.

So we decided on the vehicle we would raise on, and then I kind of stumbled into my first angel investors by attending events. So I went to Startup Week, and I raised my hand. I think you were on the panel. That was at the mompreneur panel, yes, and I raised my hand and asked a question and prefaced it by talking about my business because I would say that is the one thing: you have to talk about what you're doing to everyone because you never know who you're talking to.

So you know, I raised my hand and asked a question about the business, and afterward, a woman came up to me and asked me some questions about it. I ended up pitching her, and she became my first investor. My second investor, I was in my daughter's co-op preschool class talking to another mother who I barely knew about what I was doing, and she said you should talk to my husband; he's a serial entrepreneur. He became my second investor and then introduced me to my third and fourth investors.

For me, that was really a lesson: you don’t know who does angel investing and who you’re talking to who might be interested in your business. On the flip side, I then went ahead after those kind of instances and I made a list of people in my network or people I wanted to invest, and then for the people I wanted to invest, I found connections to them. I was super methodical about it—you know, spreadsheet going on LinkedIn: I want to connect to person X who can introduce me, asking people to introduce me and seeking out those really warm connections, which I think is massively helpful in fundraising.

It makes sense because you know, it’s easier to say yes to taking the time to listen to someone or listen to an idea if you have an introduction from a trusted person. The final piece I guess about the angel investing piece that I learned a lot in the pre-seed round is that early in a company—and I was raising money when The Riveter was just an idea that I had. You know, I had a deck and an idea and myself, and angel investors, and early, early investors are largely investing in the founder and what they think if they think you can pull it off. So you have to be really confident that you can and present that every way that you can with the VCs.

In approaching the seed round, I at the beginning don’t think I was incredibly organized about how I would go out and do it. Then I realized what I needed to do was put together a full deck, which I didn’t want to do. It’s like a high school project: oh, I have to sit down and write all the slides! But it’s really, really important because it’s what people will look at when they’re being introduced to your business and thinking about it.

So I made a deck, and then I sat down and made a long list of VCs that I wanted to talk to, and then, once again, I figured out a way to get warm introductions, which took a lot of time. I completely underestimated how much of my time as the CEO would go to fundraising in the early days.

But that’s kind of, and then I’ve gone geographically all over the country both times. So just in terms of where our investors come from: they come from Seattle, they come from San Francisco, Los Angeles, New York, Boston—everywhere, which is where The Riveter will be.

So yeah, when we were on the mompreneur panel, I asked when the dadpreneur panel was going to be. So I’ve raised money in seven different rounds of venture, and that one one failed, so seven plus one failed that, plus upon IPO. So scattered geographically everywhere, I would say.

My learning has been to generalize and stereotype: Silicon Valley investors are the most risk-tolerant and do the least due diligence. They have had so many more reps, you know, it’s just about learning right then. Most of them, many of them have been in other cities, so that city has just that environment has just seen so many more iterations.

It’s definitely a unique environment. Seattle is emerging; my first company was started in Seattle. We did not raise any money from Seattle other than some angels who jumped in after we had a term sheet, but it’s definitely emerging. There just haven’t been that many venture capital funds in Seattle, and I think that it has been initially maybe more of a follower, but it’s really exciting to see what’s happening now in Seattle because there’s an increasing number of venture funds and more dollars in Seattle.

And the nature of Seattle's history and tech has been more enterprise and B2B, so therefore, you know, raising money for a consumer business in Seattle was a little bit harder. Again, that’s evolving, so there are differences in nuances, I think, geographically. New York investors are financial investors, and they do a lot of due diligence— they ask me questions I had never been asked before that would make people in Silicon Valley roll their eyes.

So it’s really interesting, but I think the differentiator about the fundraising I have experienced is more relevant from early when you haven’t raised money before versus late when you’ve raised it before. A good friend of mine, the CEO of ProCom, said that, “Kristen, we know who’s going to lead our next round. We don’t know who it’s going to be, but we know that person. We have a relationship with the person who’s going to lead our next round.”

It was a really interesting thing that he said because I thought, “Yeah, that’s right; I’m not gonna go to a stranger at this point because we have relationships.” But that first round—that first time—it was like beg, borrow, steal. I was also 28 years old, so you know, it was really, really hard. So to me, that’s just the difference: it’s geographical to some extent, as I described, but I think it’s different strategies depending on where you are yourself in your fundraising evolution, and then also obviously where you are in your company, of course, as well.

So how does, in terms of that strategy, how does it work? Even if you’re raising a seed round or a pre-seed round or whatever you want to call it—everybody calls things differently—you know even that’s early, early first money, you’re talking to a combination of individuals and institutional investors of one form or another. How do you change your approach, or do you talk differently to each of those sets of people? How does that work?

I guess I have thoughts on this, and being kind of in the middle of it, I have a background in political fundraising because I was able to go out and raise kind money for candidates I believed in, which has been very helpful in this. I think the main difference that I’ve had to learn between raising from individuals and raising from institutions is that it is less of a conversation when you’re talking to institutions.

When I started, I kind of went in more conversational—how I am, you know, just me—and I realized I kind of sat back after the first few pitches and thought, “You know, I used to be a litigator, and I know what going into a meeting like that is, and being very professional and talking about a deal.” I needed to go in and say, “This is my business; this is an opportunity I’m giving to you to join something I’m building that will show incredible returns. This is a great business, and I’m a really good CEO, and this is the deal; I’d love for you to join me.”

That’s it. Taking that approach has worked a lot better for me; it doesn’t feel entirely natural; it’s not how I approach conversations with people every day, but this is a business conversation, and to present it as such.

I’ve learned that the further I’ve gotten into this, and like I only have nine months of experience in this, so I am NOT an expert, but you have to nail the numbers. You need to know your numbers inside and out; you need to know the model that you built, why you put those assumptions in, and how things can change.

If you don’t know, say there was a downturn—how would it change this or X or Y, but you really need to know your numbers? You come across as much more knowledgeable about your business, and you do actually know your business better when you know the numbers. I think that’s something that we don’t talk about enough, but knowing the numbers you’re presenting inside and out is so critical.

Yeah, that's definitely a sad fact really when out fundraising that women are held to a higher standard, and really knowing your numbers inside and out is absolutely crucial because as soon as you start wavering, you lose the confidence of the investors.

I'm going to just add something as someone who came to fundraise doing very little relevant experience. So I've been a professor; I know how to teach a class, but that was pretty much it. Turns out I didn’t know how to build a medical device. But, so I didn’t have a list of people to go to. I’m in a second this spreadsheet warm intros LinkedIn. Anyone who knows me knows how much I hate social media, but LinkedIn is my best friend. I spend a tremendous amount of time looking for those warm intros.

When we first worked on raising it, we did it for years, I mean years—talking to everyone. The first check came from a friend who had a company and had gave us like their supply closet—basically turned it into an office for us. He just saw us working every day for years on end and saw the terrible things that were happening; you know, all the typical stories you hear about investors—they all happened, and he just watched us go through it. He saw how dedicated we were, and that’s where the first check came from.

But my co-founder Knight—we didn’t know anybody with money. We didn’t have any family with money; we don’t have any friends with money. Well, turns out we did have one, but you know, so I guess what I want to say is, even when you're new at it and you have that existing network, perseverance—that's what you need. That’s really all you need is that perseverance.

One quick story; the first-ever check that was written was by the guy I had worked for for my first job after college. So I was a consultant, and he was the partner who started this consulting firm for tech companies. I really did I but I was a person that made his life okay because he didn't have to sleep under the desk. So I did that for four years or something, and then fast forward.

I start this company with this guy I went to college with, and we're like, "Here's our idea," and I went his office with Glenn and we sat there. I’ll never forget; he hand wrote the check for $25,000 and he slid it across the desk and he said, "Don't lose my money."

Okay, I was terrified actually; I really am the most responsible, and I can't stand the idea of losing someone's money. It’s like a Canadian puritanical work ethic thing. But I would say that the lesson is that the first person who will write you a check is the person who knows you. I think to the point of you who were in their supply closet or I was sleeping under the desk to make his life better, so he saw what I was capable of. And they invest in me; they'll invest in you as opposed to necessarily your company, and it’s funny now I do some angel investing, and I invest in people, you know, people I know really well.

And when they're starting something, it’s sort of almost doesn’t matter what they’re starting. I know them that well, so I think a lot of angels actually think about it that way. One quick thing to add to this because we’ve talked about LinkedIn a lot for warm introductions: you might kill me for saying this, but like Kristen Ovni, Kieran—who you will hear from later—they have all made introductions for me, and that’s what your community will do for you. You are a female founder, or this tribe will help you; you just have to ask.

So I think it’s been made fairly clear here that fundraising is pretty hard; it’s a long process and it has ups and downs. So how have you learned to cope with the lows of it, and what support networks have you been able to leverage through that?

Okay, so I'm going to tell my nightmare story. I won’t tell the nitty-gritty details, but there was a horrible thing that happened. Just an investor was completely inappropriate, and it was in a Starbucks on Mercer Island, so it was really public, and I couldn't even get outraged. Then I had to take the bus home afterward, and I had kept my composure in front of him, and then I got on the bus and I’m sobbing and I’m just texting everyone I know, like, “Is this normal? This person said these things,” and they’re like, “No, it’s not normal.”

The next day I walked in and my co-founder—I was telling him about it, and I had been texting with him. He said, “I want you to write it down. Just write it all down right now; write the story down.” It was sort of this purging thing, but basically your network, I mean the people who support you in everything else in your life, they will support you through the lows. Because there will be lows; I mean there's no way around it. Everyone—men and women—fundraising is really hard, but it’s also crucial.

I'd say other than a lot of red wine, my co-founder, because there’s nobody else to party process with in that way. Like we go to the party, which was not really a party; we have the pitch, and then we process. We process it to death and we wonder about the body language in the room and whatever. So for me, I’ve never actually—I’m a co-founder; I’m not a founder.

I mean I’m just in my core; I think I just prefer to co-found things. So it's a team, and that for me has been my saving grace. You know, there are days I do well at processing and days I don’t. I think for me, knowing expectations is really important that I’m going to hear "no" all the time until I hear "yes," and accepting that and knowing that it’s absolutely not personal—even though it can feel like it—changes the bar for me.

I am on my own pitching largely, which is somewhat different, but I rely on my team a ton to talk through things with me, to prepare me, to bounce things off of. I talk to my family about it a lot too because probably they wish I wouldn’t, but I do, and it’s good. I take time out to exercise, which is really important for my own mental health because you can let this consume you 24 hours a day, and you should give yourself an hour, right? You should give yourself an hour a day.

I think that’s really important, and you're going to hear horrible things; you’re going to hear things that people wouldn’t say to men, but it's really equally as hard for men and women in terms of the number of investors you’re going to have to pitch to before you hear "yes." So just a good attitude is really important, and red wine.

Okay, so we just have a couple of minutes left. So I guess for each of you, is there anything that you wished you’d known when you were starting that you can share with the audience here, so that when they go off to do their fundraising, they've got that piece of advice in their mind?

So there was a time with my company where I was working to raise—essentially for med tech; you know we raised this money to build a device. It’s really expensive to commercialize devices. I should have raised more money to commercialize it and I didn’t. I started, and it was hard, and I was like, "Oh, I’d rather just talk to our customers because they love me," and that’s what I did. I let myself stop doing the hard thing, and then I did the comfortable thing, which was all working on sales because I love doing that. You know that’s where I get the positive feedback, and it’s not where I’m getting the relentless no’s, and that was a mistake. I should have stuck with the hard thing.

Now that would have been better for the future for the growth trajectory of our company. So don’t be afraid of the hard things. I think for me it would be, as I was going out to raise the seed, I wish I had said, “I am going to start raising the seed on this day, and at that time I will have my deck ready. I will have my list of VCs I want to approach ready, and I will just go and do it.”

I kind of dragged the process out a little bit on the front end of not having everything prepared and starting to talk to people. I think every time I go forward, I’ll have my list of people I’m reaching out to, the dates I'm going to fundraise. Like you make a business plan and make a fundraising plan; I think that’s the best way to put it.

I’m going to give you something very tactical that I didn’t do before and I started doing in this company, which has been incredibly helpful. So the first few times you pitch, you're terrible at some pie—so they say go with the—you know, that’s the right way to say this.

Let the VCs that seem like your least favorite marry or the less— you know, impressive. I know you want to have some reps, so don’t have those reps with an investor. The only other person in the fundraising process is an unfair equation because as entrepreneurs we raise—I’ve raised seven rounds of venture; that’s a lot in a career. Mostly you raised two or three, right? One. In venture capitalists, they’re doing many, many more deals than that, so they’ve seen the picture before.

So the only other person who can really give you good feedback other than an investor is a CEO who’s raised money. So what I started to do is I do this like—I don’t name four—but all in one day I ask my friends, who are founders who have raised money successfully, to come for 45-minute chunks, and we pitch them. We get in a room, and there’s no pretending; they’re an investor and we are pitching them.

We go for 20 minutes or whatever, and then we get feedback for whatever the rest of the time is, and they’re relentless, you know, which is exactly—it’s a gift. That feedback is a gift, so we did that, and in one day we pitched whatever for CEOs who had raised a ton of money and sold companies to Google. The value was so incredible, so find ways to do that. I would just highly recommend it, and then think about that feedback.

Once you start actually pitching investors, the best—you’re not going to get a yes on your first pitch, but you are going to get feedback. So that’s your goal. Your goal is to get that feedback, and when you call them, you don’t say, “Are you going to invest?” You say, “I really want your feedback,” and they’ll actually respond better to that. You really want to write it down and think about it, and ask people if it seems like good feedback and weigh against the feedback you get next time, which is completely the opposite of what they said.

But really, I mean keep really notes on your feedback because some people don’t learn as they go through the process, and each round is a learning process even though you’ve raised before. So you have to just really think of yourself as a beginner all the time.

Okay, well, I can actually talk about this for hours, but sadly we've run out of time. So thank you very much to the three of you for sharing that knowledge and giving that advice, and I'm hoping that for you now who are thinking about starting startups and going out and raising, that you have some really helpful information there.

So, yeah, thank you again.
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