Fundraising Panel at Female Founders Conference 2016

All right, I'm excited to have all four of you here. So I'd love for you to each introduce yourselves. If you could introduce yourself and your company and what it does, what batch you went through YC, and you know how much money you've raised or the stage.

My name is Talia Frankel, and the founder of LL. We make unquestionably safe and natural personal care products that give back. We were part of YC as 15. We raised our seed round shortly after, just over two and a half million dollars.

Um, was there another question in that? I know he's okay. I think I got him all. Yeah. All right, Caitlyn?

Um, hi, I'm Caitlin Gleason. I'm the founder and CEO of Eligible. We're a healthcare infrastructure company that processes medical eligibility and claims. I was a part of Summer 2012. At that time, I had raised about 1.6 million, grew the company to profitability, and have just raised a little over 20 million recently.

I’m Marty Ramamoorthy. I'm the founder and CEO of Lumoid. Lumoid is a try-before-you-buy service for gadgets and consumer electronics. We were YC Summer 13 batch. Since then, we've done a couple of rounds; we've raised about 3.5 million. We are going to be closing another round pretty soon, but not announced yet. So far, we've raised 3.5 million. Awesome!

Hi everyone, I'm Liz Wessel. I'm one of the co-founders and the CEO at a company called WayUp. WayUp is the largest marketplace for college students to find jobs and internships. So if anyone's looking for interns or new grads, check out wayup.com. We are a fairly new company; we were Winter 2015. We've been around for about a year and a half, and we've raised just over 9 million dollars.

So I'm going to start out with a question for each one of you, and then some more general questions that I think all of you could answer.

So Caitlin, you bootstrapped for the first year of your life, and so down the block from my Combinator exam, how did you make the decision to bootstrap, and what advice would you have for women in the audience today who are bootstrapping?

I had no choice; I started, so this was like their um, you know, I was optimizing for a really fast and efficient fundraising process. I had been warned repeatedly that a long drawn-out fundraising process can absolutely kill a company, and I was very afraid of that. I had seen a couple of companies do it and didn't want to repeat that problem. So I essentially had to focus on things that I knew I was good at.

I didn't go to school for engineering; I didn't have a technical co-founder, but I could sell. So I focused on, you know, building prototypes, getting some first deals, really making some money. And then once you're in a position where you're actually creating value and you've created a product, people are much more inclined to actually invest money in you.

We were just talking about it backstage, about how you got your company to profitability before you raised your first round.

Yeah, so I raised 1.6 million, and for three years, I took that 1.6 and obsessively built the company in a way that was probably not really healthy, right? Just all day long every day. I was telling the story of like 10 best girlfriends that I went to high school with, and I couldn't attend one of their weddings. I know, it's so sad, but like, it's just the reality of what the startup is; I had to sacrifice everything.

But in doing so, I was able to bring on what we do is we connect hospitals, radiology centers, laboratories with insurance companies. So I was able to land some really key large deals on that 1.6, and you know, I brought the company. We grew 8.4X in one year, or was it millions of dollars in annual recurring revenue? So when I sat down to raise money, I didn't need the money, right? I could walk away if it wasn't a deal that made sense to me. So that’s sort of the ideal scenario.

So our theorem member, you were saying once that you emailed 250 investors before you got your first check.

Oh yeah, so talk to us a little bit about what was your lowest point? What was it that gave you the faith to keep going?

Our first round straight out of YC took so long for us to raise. It was incredibly brutal on me, on everybody on the team. I have one other person; our head of operations is here. 70% of our team are women; I'm really proud of that. And it just took us a really long time to not just close the first check but close the first round.

I mailed about 250, maybe more, investors, just had this giant spreadsheet of life. This is the person, this is their background, here is what you need to focus on, first round of conversation, phone calls, second round, where did it go? And I think of all of these guys, I think I met 85 people, and yet ultimately we closed our first round, which is 1.2 million, about eight months later.

By that time, I basically—now if you bring an investor's name, I probably have spoken to them. But it was really tough back then. I think since then, it’s just given me a lot more confidence, where if I can do that, I can do anything. Like building the company is not such a big deal; it’s not daunting anymore.

What was it that made you certain that they liked that? Yes, like, we’ll be able to do this. What kept you going?

Yeah, I—you don’t have a choice. You just have to go do it. Like, there is no, you can't take no for an answer. You just have to go do it, and they say no, and you find another person. And it's just investment, you know? It's not personal. Whatever they say, it depends on that time of day, what their beliefs are; they have a very valid point from their perspective, and you just have to go talk to more people and raise.

Tahlia, so there are a lot of interesting elements about LL and what you're building. You're building, you know, it's a consumer packaged goods company; it's a social good company; it's, you know, your first product was condoms. What were they? What was that conversation like?

Yeah, so our first product is condoms and our second product is 100% organic tampons and pads. So whether it is talking about sex or menstruation, right it's two topics that are shrouded in mystery for most investors. So no—there’s I mean, there's awkward laughter here, you know, in the audience, and it was a little awkward at first.

I think that what's really important is bringing it back, like kind of changing the tone of the conversation into, "Hey, there are some serious pain points; this is a huge market opportunity." You know, 50% of the population menstruates, and you know condoms are the most popular form of birth control. So you know, it’s about speaking to investors in the language they understand: growth, traction, market opportunity.

We talked about our profit margins. I think on demo day was, you know, the joke was, a, you know, ninety-four percent profit margins. You thought only software could do that? They just, you know, now we get it, right? And so it's about doing all of those things.

And then in terms of social impact, I think it's really important when you have a social enterprise or B Corp, it's important to talk about your social strategy, or that bottom line is a business strategy and something that really inspires your consumers. It inspires the talent and, you know, that you can attract for your team; it inspires partners, so that bottom line really kind of contributes to your financial bottom line.

Liz, and you among your batch were one of the most successful at fundraising. What were things that you specifically did to prepare for the process? What did you do? How did you prepare?

Yeah, so I would say we were working with a product that dealt with responding to a problem that no one would disagree with. Like, no investor, unlike what you just heard about, no investor doesn't understand how hard it is to get internships as a student. Either they have kids or a little brother or a little sister or something like that; it's something that they've dealt with personally.

I would say I was able to talk about the story and tell the story really well in a way that could be personal to them. I always did my research on where they went to school, could talk about the problems at their school, etc. But I would say overall the number one thing that I think I prepared what that helped was just knowing our numbers like down pat.

Um, I would go to a meeting, and any question they ask—so first of all, I made a role. I felt like making a deck would be a big waste of my time, and I thought I knew every single number anyway. So I'm not going to make a deck, and I'm just going to show up. And if they don't want to talk to me because I don't have a deck, then so be it. And there were a few investors who were like, "Please send me the deck ahead of time; it's our fund's policy." And I would say, "Okay, then I'm really sorry; just like we don't have to meet." And then they always reverted back to okay.

And so I would say overall it was just like knowing my numbers down pat, and when I walked into that room, they could throw any question at me, and I knew exactly the number and would talk to them about the three numbers they should be asking about that they weren't. So I think that really helped. Nice!

So a lot of women in the audience have, you know, not raised yet, and a lot of questions that I get from very early-stage founders is how did you get your very first introduction to an investor? Especially if you raised anything before YC, how did you get those kind of introductions?

So I can start, and we had raised a million before YC, and my very first—I used to work at Google, and I worked in India, and I worked somewhat closely with the VP of Google India, and his wife was an LP in actually it's relevant to this—I'm the female founders fund based out of New York City.

So he and his wife introduced me to her, and then I almost worked at a venture capital fund, and a woman there actually ended up—but before Google, a woman there ended up introducing me to BoxGroup, which was David Titian Adam Rothenberg. The second we met with Box, they said, "Like, we're really interested; come back." We went back two days later; they pretty much gave us an offer on the spot, and after that, they said, "We'll do the rest of your round for you; like, we'll help you with this." And they to this day still help us with a lot.

So it was a mix of personal connections, but it wasn't like I knew any of the investors ever before. YC was my first. I think the demo date really, really helped. When we got off stage, we had a few investors who were interested. We didn't get any checks on that day, but we followed up, and we kept at it, and three weeks down the road we got our first check. And then that investor introduced us to his set of friends, and it just like—once I got the first check, it got a lot easier, where I could then go talk to their friends, and their friends in the network just kept expanding. It got a lot simpler then, but the first check was a lot harder; like it was the hardest of the whole lot.

So my first checks were actually from women who really cared about women's reproductive rights, and I got connected to them by basically talking about all of the time to everyone I met. Love that additive. And eventually, people were like, "Well, you should really meet; you should really meet." And then, you know, eventually I spoke to these women because at the time it wasn't—you didn't have a product; you didn't have revenue; we didn't have the partnerships we have today.

So it's really about them wanting to see something that exists in the world, and so they took that leap with me, and I felt really fortunate. So Liz, and you already talked a little bit about what you did to prepare for fundraising. Is there anything you guys— the rest of you specifically did to help you get ready for the fundraising process?

I took a lot of learning; I think that that's important to talk about. I think like we don't talk about it too much, but I think that there's a lot more to fundraising than like valuation, you know? And I think there's a lot of terms and deal terms that like I think guys kind of like shoot the—on and like girls don't.

So all things about like just understanding that, you know, when you raise a large round you're likely going to give upward control, and like that’s going to change the trajectory of how you make decisions in your company, right? Like, it’s gonna affect the types of equity you grant to folks, and it’s going to affect how much money you can raise in the future; it’s just things too.

Or if you’re considering an acquisition, it may affect that. So I think that it's just something I did a lot of learning. I did a lot of reading, a lot of talking to people who have raised capital before successfully.

Were there specific resources you used?

Uh, yeah, I see you right. I really like— it’s like the endless amazing group of the smartest people at this time, right? Like especially, like in our generation, and just asking questions. I feel like everyone’s so willing to help, right? Like because they've either gone through it or like maybe they've had a great experience or had a bad experience, but like we want to learn, right? So I think asking questions is scary sometimes, but I think it actually gets you the farthest.

I think it's really helpful to talk to people who've gone through the process to ask them for their, you know, tips and feedback and advice and what went wrong. I also loved reading. For a while, I think Fred Wilson had an MBA Mondays. Every Monday he’d put out a blog post that went over one specific term or one specific concept, so that's something that I personally—I wouldn't check that.

I've never seen that! It does look so bad, by the way, when you go into a meeting with an investor and they start negotiating a specific term and you don't know what it means, and, you know, it’s just a tricky situation because you don’t want to say you don’t know but, like, a negotiator. Yeah, that's really bad. Don't do that!

I remember during my seed round, and I actually said to him, "Um, I’m a first-time founder and I’m going to admit right now that I don't know what that is. I don’t know enough about that to be able to speak eloquently about it, but like let me talk to my co-founder." I always blame it on. If I can’t know the answer, I'm like, "Let me talk to my co-founder; he feels really passionately about this." But usually, he doesn’t know what if either, so...

Google this may be counterintuitive given what we’re talking about, but tips for fundraising. One thing I do want to point out is, not everybody needs to fundraise. It's something that everyone gets pushed into, especially in the Valley where it's like, "How much have you raised? What valuation?" and it's this buzzword that everyone loves to throw around. You don’t—if you don’t need to raise, don’t raise.

Not all businesses need to raise; not all businesses need to raise right now or whatever stage you are in, or right at the beginning or halfway through. If you don’t need to raise and you can get to that answer by looking at the metrics, by figuring out what the bottom line is, don’t raise! There are plenty of really, really successful businesses that haven't had to raise money and have built it out into profitability, have either been acquired, have gone public; you don’t need to do it just because everyone else is doing it.

You can be your own yardstick; you don’t have to, you know, fundraise just because all of us here are talking about it. It doesn't mean you have to go back home tonight and start fundraising. It doesn't work that way; you don't need to.

The other thing I wanted to bring up, which was misadvised, was when you talk to investors, be graceful about them saying no. I think this is something I learned much later. We've had investors who said no in the beginning, and I’m like, "I'm going to say I'm going to prove it to these guys, and I'm going to come back, and this is going to be so successful that you're gonna regret this."

And it doesn’t really help being so angry and upset all the time. A lot of these guys, like, what happened was initially they didn't see the traction; you know, we didn't have the traction. We were very young, very early.

And then, month over month, we were growing, you know, whatever percent, and then eight months later, ten months later, we'd meet them somewhere, and they’d be like, "So how's it going?" And we showed them the numbers, and then they'd be like, "Oh, do you still have some allocation left?" Allocation is a key word!

Learn that, you guys. If you're sound smart on allocation, you just need to know that. That really solves everything. But they would come in and be like, "Can we then invest?" And, you know, we’ve had a lot of... we’ve had at least three investors who said no once, we've had one investor who said no like three times, and then the fourth time, they were like, "I am going to be an idiot to not invest. I have to put in some money," and I’m like, "Great, okay."

So be graceful about them saying no, the first no doesn’t always mean a no forever. You can always go back, and it's a business. It's a transaction; they understand it.

You should do—can I counter that with—? A lot of work, like I agree with everything you said, but on top of that, most smart investors will not say no, but they mean no. So a lot of the time, they're gonna say—I've been rejected a bunch of times, but I don't think I've ever been told no.

Yeah, and so that I got a yes, I know exactly. Instead, I've been told, "This is really interesting; can you come back to me when you have someone else leading it?" "This is really interesting; like let me get back to you in a month," and "I really will have to talk to my partners about this," and then they don't get back to you. Like any of those things, mean no.

And don't wait for them to switch just like alien dating. Yeah, exactly. Dating like someone who's flaky and scared of rejection.

Yeah, and I’ll say don’t get nasty. Sorry, I got really nasty, like in the beginning, and I really had like a real journey learning that that’s not the way to go, because this is a really small world.

So I remember like four years ago, I was like, "You’re wrong!" Right? Like, are you on that front? Yeah, it’s really combat. Like I would go at it like, "This is my baby, and you were telling me that it wasn't like a big enough market."

Right? So I think just remember that, like I think you both said this wonderfully, like it’s, they’re gonna say that they’ll say, "Yeah," said, you’re from now, right? Keep these good relationships. You have a lot to learn from these people. They're amazingly smart, right? Just try to not get nasty.

But yeah, this is going to also add that I think confidence is really important, and people talk about confidence a lot, especially in the context of being a female investor walking into a room, and it's really confusing—or I think it was really confusing for me at least—what that means or how to embody confidence.

Um, and some things that confidence means is just, you know, talking about your accomplishments, not wasting anyone's time, knowing when to negotiate and when not to, knowing when to say no, knowing how to leave gracefully, you know?

Um, so I think also maybe preparing yourself for how you want that meeting to go before going into it. Were there specific things you did to prepare yourself, or did you have to sort of learn on the fly like you'll sort of learn from experience?

One thing that really helps because you have to speak really succinctly when speaking to an investor, and you're really passionate about your company. You want to tell them everything that's amazing about it because you want them to feel the same way that you do, but it's a conversation; it's not you talking to yourself, and they get pitched all the time.

So I think it's really important to know what your key performance indicators are, get to them quickly, you know, make sure that they’re absorbed and that, you know, as the conversation shifts in other directions, you know, be prepared.

I think one other way to get prepared that I don’t think enough people do and I felt that way, especially about my batch, when we were practicing fundraising pitches on each other. I felt like all of us struggled with this.

Is being able to tell the story of how you're going to build a multi-billion dollar company. So it’s one thing to talk about like, "Here is how I’m going to hit this KPI within the next year,” but talking about how you are going to—and you don’t have to necessarily be the next Google—but how you’re going to be a billion dollar company, that's important for if you're pitching any institutional fund.

I remember one fund, one of the top funds in the country, said to me, "We love your business, but we don't know if this could be a billion dollar company; like, come back to us once you can say that." And so I actually went back, as this was during YC, to one of the partners, who is like one of the smartest people I've ever met in my life, Ali Roy Bonnie, and I sat down with Ali and I was like, "Help me figure out how to pitch this as a multi-billion dollar company."

And he asked me, "Well, what do you think?" and I laid it all out and he helped me tell that story, and that was when my pitch suddenly went from like fine to you’re not going to walk away without giving me a term sheet.

So what during your process was there anything that went really wrong? Like what is the craziest story that you guys have that you can tell?

Everything! I was talking—Jessica backstage, and I find me offline, I have crazy stories. Just tell one of them.

We had this one investor; this was like the first time we met one of the other people in his company. It went great; they were like, "This is amazing! So, so great. You get your deck together; come show up. You know, we just want to like do this last round of diligence."

I’m so amazing, and I’m like excited, visibly excited. I show up, and there’s this other guy sitting in the office, and I start the presentation, and he’s just quietly listening.

And I’m just five minutes in, he puts his hand down on the table, and he’s like, "You know, you’re such a scam." And I’m thinking this guy has a really weird sense of humor, and I’m just like laughing a little bit, haha, okay, let's just keep going.

And he's like, “You guys should finish fundraising before anyone figures out what a scam you guys are.” And at this point, it kind of—there’s this thing that goes away like, oh, it’s not a joke! Okay, and you’re still like pitching, you’re still talking to him five minutes in, three slides, and he’s like, “Oh my god, you guys—how do you, how do you do the same pitch to everyone?”

And I'm like, "Yeah, why?" He’s like, "This is a scam! Yes, this is the business ever!" And by this time, he’s just upset; he’s angry; his face is red, pounding his fists on the table, and I’m like, “Ah, you asked me to come here; you knew what I was building. Like this is my second meeting here,” and he was like, “Don’t ever come here again; this is terrible; this is kind of a scam!”

And he kept saying the word scam over and over again, and I’m like, "Ah, how do I counter this?" It’s not an intelligent conversation; it’s like talking to a five-year-old, and I finished the whole thing, and I walk out to the elevator, and the associate follows me, and he’s like in the elevator, and he’s like, “I’m gonna show you out.” I’m like, “I know the way out, thanks.”

And at this point, I'm like, I want to end it with like some curse words, and I’m like, “Okay, I just have to like get out of here, be civil about the whole thing,” and I get down, and he’s like, “I’m so sorry; I’m so sorry for the whole experience.” And I’m like, “Why do you even bring me here? This is crazy.”

And now it's kind of a joke, like you guys laugh, and I’m laughing with you. At that point, it was so emotional. I’m like, "How does—how do you counter anyone calling your year-old business into a slick scam?" And you're making money, you're close to being profitable, you're doing really well, and the guy is like, just that moment is just the point when I just lost all the confidence.

And I went next door and there was a Starbucks, and I went right in there, and it was like whatever, just give me whatever, the double shot, whatever. I didn’t just look at the nervousness or outlet. Anyway, and I’m like wearing my sunglasses so no one can see that I’m actually crying.

A double shot? Something, anything! Yeah, of espresso! And then I come back, and I’m like, “You know what? It’s okay; it’s fine. They keep—somebody having a bad day; this is not gonna define what I’m building; it’s okay.” But these are the kind of stories I have; you guys, just me and good—ever raising from this person, I will warn you, don’t go there.

Okay, so I got the time handwave, but one quick last thing for anyone; just advice that you wish you’d known when you were starting the process, really lightning-round advice that you wish you’d known.

Um, I wish that I’d known that when an investor doesn’t know a lot about your business or market, but that's an opportunity to teach them something, and that providing insight into something that they— they may have a little bad is actually a great opportunity.

Sorry to piggyback on that, but definitely not taking it personal. I think was the biggest thing for me because it was so close; it’s my baby, right? Like you guys understand, it’s your baby; your life’s in it! So I had a tendency when I sat down with investors to maybe take things a bit personal and get too passionate instead of talking about what you said before and staying really logical and just, you know, stick with the numbers.

So don’t give up; I mean that’s the one thing that I would tell you. Everyone there will be points in your life that people will be like, "Why are you still doing this? This just looks so hard; why are you still here?" Like my parents would be like, "Why do you have such—like you have a great education; why are you doing this?"

As if that fixed anything! But just don’t give up; like just listen to yourself. It’s very easy to look at somebody else and look at the whole lifestyle marketing and go with that, like look at their lives kind of thing. No one's going through the struggle that you are, but stick with it; don’t give up.

My piece of advice would be that you are 100, maybe 1,000 times smarter about your business than anyone you're going to pitch to, ever. And so you should remember that. And while you should take their feedback and like maybe even implement it into your own business if you think it's good feedback, just know that if they tell you your market isn't big enough or your competitor is doing something better, whatever it might be, if you disagree, you're probably way more right than they'll ever be. So just be confident in yourself. Awesome! Thank you guys so much!