Two Founders Share The Process They Took To Raise Funding For Their Apparel Business
It seems as though women-founded businesses have been underfunded since (what feels like) the beginning of time. According to Crunchbase, only 2.3 percent of venture capital went to women-led startups in 2020, a drop from previous years. For two women who started a braless clothing company, and where we mostly pitched to men, it was clear why the process was hard.
We’ve gone through the search for capital multiple times, throughout the lifecycle of our company. We had no choice but to start by self-funding our business, Frankly, out of our personal accounts. We then moved from bootstrapping to raising different forms of capital after about six months of being self-funded. Having broken the million dollar raised mark, and despite being in the “difficult to fund” apparel industry, our experiences gave us insight into the tricky world of business. Here's what we've learned along the way, and what has helped us raise funding and lead our brand to success.
1. Understand what you have working for and against you, and go for it anyway.
Starting a company is fundamentally contrarian. There will be people who think you or your idea is crazy, but a product would already exist if it were a universally good idea. Start by making sure you have a clear idea of what funding in your sector looks like for your company. Have some early revenue? Go on Crunchbase and see who has raised a pre-seed or seed recently, and see what type of traction those companies have.
Earlier rounds are less likely to be documented, but finding a network of entrepreneurs can help you get an idea of what the funding environment is like in your sector, or an adjacent sector. For the two of us, it was tapping into our business school and undergraduate networks. With one of us being Asian-American, we also found Gold House which has a community of founders willing to help one another. We knew that being an apparel company was working against us, so we had to get creative on funding.
2. Funding may look different depending on your vision and stage.
We figured out what we needed at every stage, to get to the next milestone, and we raised enough to get there. Kickstarter is non-dilutive, so when we were looking for proof that people wanted the product, we knew that was our best option. If it went well, the Kickstarter funds would cover the inventory. And if it went poorly, we would take it as a sign that the company would not be a full-time venture for us. Luckily it went really well and we were able to cover our first runs of inventory with it.
We then raised a friend and family round, and a year and a half later raised a pre-seed from two institutions. The friends and family round was raised to set up the company, run experiments, and figure out exactly who our customer was. The pre-seed was to refine our focus and take the business to the next level. We thought a lot on if institutional capital would be a fit, and the answer is that it depends on what type of business you want to build. There’s an argument to be made about bootstrapping to profitability, then raising an institutional round if needed for specific reasons. The question to ask yourself here is: are you willing to give up more of your company to someone else, to build a bigger business? That tradeoff makes institutional capital not worth it for some founders. There are also pitch competitions, grants, and other ways to find capital for your business.
3. Be able to point at concrete proof.
Lots of people raise ideas, but all of them have some sort of proof point that they gathered during needfinding. For every type of company, you need to have an indicator that people are going to pay for that product. Whether it’s crowdfunding, a social media proof point, or revenue, it’s much easier when you can point at concrete metrics.
For consumer businesses already bringing in revenue, metrics like repeat customer rate, returned item rate, and AOV is important. With a B2B company, you want some kind of pilot or letter of intent with your target type of consumer. As women raising for a women-centric product, we needed more proof for Frankly – especially when talking to male investors. We needed to show that bras were a pain point, so we asked investors to go home and ask the women in their lives if they hated their bras. They were often surprised by the answer, though we weren’t!
4. Practice pitching with a variety of personalities.
We practiced our pitch at least 15 times with different people (investor friends, friendly faces, and friends of friends). This helped us ensure our deck was telling the story we wanted to tell. There are friendlier investors, people who ask pointed questions, and others who are obsessed with numbers. You never really know who you’re going to get when pitching, so make sure you’re ready for every personality.
Some investors are just harder to read than others, and that’s okay. Everyone will have different reactions to your deck but you’ll start to see patterns, then you can adjust accordingly before you go out to the market. Docsend, which we used to send out our deck, has a piece on what every deck needs. Our advice from what we’ve seen is to keep your deck under 12 slides. People have short attention spans.
5. Know that it’s going to be an emotional process, even if it goes well.
Even the most successful businesses have had trouble raising in the beginning. The example that we always think about is John Foley, the founder of Peloton. "Foley raised $400k at a $2M post-money valuation from eight angels. From 2011 to 2014, he pitched to 3,000 angels and 400 firms. Almost everyone said no. Eventually, he raised $10M from 100 angels," Joe Vennare shares on Twitter.
Even if you raise successfully, you'll still likely have to hear at least 30-40 no’s through the process. There are a ton of reasons why people don’t invest, and it doesn’t mean your company won’t do well. The self-belief that you’re building a business that is going to make a difference in the world will keep you going throughout all of it.
About the Authors: Heather Eaton and Jane Dong are the co-founders of Frankly Apparel, an inclusive clothing brand that designs bra-less essentials for women of all sizes. Before starting Frankly, the two of them worked at Deloitte, Goldman Sachs, Uber, and Rothy’s. The duo met at Stanford Graduate School of Business, where most of their classmates were starting tech companies. They felt so strongly about making the bra-less trend more accessible to all cup sizes, that they started Frankly anyway.
How to Perfect Your Pitch and Attract Investors with Venture Capitalist Visionary Arlan Hamilton
The best storyteller wins.
Photo by RF._.studio from Pexels
In 2020, venture capital funding boomed—but women’s share shrank. Startups, overall, raised 13% more from venture capitalists in 2020 than in 2019, but female-founded companies raised a staggering $190M less in 2020 than in 2019.
As the founder and managing partner of Backstage Capital, Arlan Hamilton aims to turn these discouraging stats around. Her mission is to minimize venture capital funding disparities by investing in minority founders.
Since she founded the firm in 2015, Backstage Capital has raised more than $15 million (!) and invested in more than 180 startup companies.
At our recent Money Moves Digital Summit, Salah Goss, SVP of Center for Inclusive Growth at Mastercard, sat down with Arlan to chat with her about her incredible career and gain her insights into how entrepreneurs can perfect their pitch, attract investors, and raise money for their businesses.
ICYMI, we’re sharing a few of the highlights from the conversation below.
Let’s start at the beginning – you have a very untraditional background compared to the traditional VC world–how did you break into the industry and set yourself up for success?
I think what actually helped me break into the industry was the fact that I was different. I'm a woman, a person of color, LGBTQ, I lived in Texas at the time, outside of the major markets, I did not go to college, I didn't have any sort of formal financial education, I did not have any contacts in Silicon Valley––and the list goes on and on. Often, I think the qualities that make us special or different that help us find success, but it takes curiosity and strength to actually lean into them.
I was interested in starting my own company at the time and excited about the prospect of fundraising until I came across some staggering statistics, including the fact that 90% of venture funding goes to white men. Demographically speaking, that means 90% of venture funding goes to a third of the country. It didn’t make sense to me. I began to ask, what if there were funds that did the opposite?
Over the next three and a half years, I had the patience to talk to people–founders, investors, etc. I received as many ‘no’s’ as one human can get in a lifetime but I kept digging into that question, ‘what if’? I began investing in women, people of color and LGBTQ because that's what I knew. Over time, we've expanded our reach, but there are millions and millions of potential people in this demographic alone.
How do you choose which businesses to fund? What do you look for in a business and/or an entrepreneur?
It's a bit of a moving target because I feel that I continue to evolve as a persona and as an investor, but the one thing that has remained the same–from the time I was homeless and on food stamps and had no money to invest, to investing in almost 200 companies later–is this spark when I look across the table and see someone who reminds me of myself. I look for an entrepreneur who is what I call hungry not thirsty: there’s a passion without desperation.
As far as the companies and ideas themselves go, if it's something that would take me a decade or more to even hope to accomplish then you have my attention.
It’s safe to say you have been privy to a lot of pitches and pitch decks—What are three crucial elements everyone should include in a pitch deck when raising money and why?
This may be different for different people, and it will be different for different investors. For me personally, it really comes down to authenticity. You do not have to be an extrovert or try to entertain me. It's not necessarily about having a talent for being an entertainer, but rather a combination of pragmatic and passionate, and being able to articulate their story in a way that allows me to dream with them. As Katy Perry says, the best storyteller wins.
I speak with thousands of companies and receive thousands of pitch decks a year. I better not know more about your company than you do–or about your competition. Before you go out and ask other people to invest in you, you better invest in yourself and look for the answers in all the different ways that you can. Learn and talk to your peers and talk to people who have been there before you. Talk to the CEOs of fortune 500 companies and find mentorship through other people who are maybe slightly ahead of you in the game or through people who are doing this all with you. There's something that they figured out, or that they learned, or that they heard about that can help you––and you’ll probably help them too!
I understand that for some, it’s not only pitching a business, it’s their livelihood. But when I continue to ask someone more questions, it means I’m interested, even if the questions are tough. Sometimes people will shut down, get defensive, or quick to end the conversation when they feel it’s too much work to find the answers. Remember that you're also asking people for tens of thousands, hundreds of thousands, maybe millions of dollars, so that's going to be part of the process and you have to be prepared to put in the work.
Black women are among the fastest-growing entrepreneurs in the U.S.—yet they only receive a fraction of venture capital funding. How can we turn this statistic around and ensure the small business community is actually representative of society as a whole?
That’s a lot of what we're doing at Backstage and hopefully we’re one of many. It has to start with a global conversation and understanding that when companies are backing black women, they're also backing a progressive infrastructure, they're backing healthcare, they're backing all sorts of innovation. It’s not just what the country can do for black women to repair damages, it's also what black women are going to do for the country–and what they have been doing.
8 Women in Venture Capital Share Their Best Fundraising Advice for Female Founders
From what you should (and shouldn’t) include in a pitch deck to how to identify the right investors for your business.
Statistically, women-led and owned businesses make more money but they’re still woefully underfunded, especially when it comes to venture capital. And, unfortunately, those stats aren’t improving year-over-year. A recent report published by Fortune discovered that companies founded by women received less VC investment in 2020 than in 2019. By the numbers, female-founded companies raised $3.31 billion in VC in 2020, or 2.2% of the year’s total sum, compared to $3.5 billion and 2.6% in 2019.
So, we reached out to eight women in the venture capital industry and asked them to share their best fundraising advice for female founders—and they didn’t hold back. From what you should (and shouldn’t) include in a pitch deck to how to identify the right investors for your business (spoiler alert: they need to bring more than just money to the table), scroll on for their words of wisdom, including insight into how they choose which companies to fund. Needless to say, if you’re an entrepreneur who’s thinking about bringing VC into your business, you’re going to want to heed their advice.
Sarah Kunst, Managing Director, Cleo Capital
“If the terms are clean and the money is green, they are most likely the right investors.”
—Sarah Kunst, Managing Director, Cleo Capital
How do you choose which businesses to fund? What do you look for in a business and/or an entrepreneur?
I look for founders with an incredible amount of grit, coachability, subject matter expertise, and resilience. I look for businesses in large markets that I'm excited about. If I can find all of those things in a pre-seed startup, I'm likely to invest.
What are three crucial elements everyone should include in a pitch deck when raising money and why?
Make sure you explain the problem you're solving (and the solution you're building!), why your team is the right team to solve the problem, and why the market is large enough to build a billion-dollar company.
What are some of the most common mistakes people make when raising money and how can others avoid these mistakes?
Mistakes to avoid are bad decks and pitches. There are tons of resources available from simple searches about what a good pitch deck looks like and how to pitch angel and pre-seed investors effectively. Make sure you're putting your best foot forward by preparing both your pitch deck and pitch meeting speech.
What advice can you share for entrepreneurs on partnering with the right investors?
If the terms are clean and the money is green, they are most likely the right investors. At the earliest stages, most founders won't have a surplus of options so making sure you can live with the investment terms is very important so you can raise money and keep growing your business. Resources like CooleyGO and YC have great examples of boilerplate investment terms.
What is your #1 piece of financial advice for new entrepreneurs?
Save money on things that don't matter. Fancy offices or expensive business cards likely don't matter, great employees do.
Jaime Schmidt, Co-Founder, Color
“Fundraising means giving up equity in your business, so the earlier you raise money, ultimately, the more it will cost you.”
—Jaime Schmidt, Co-Founder, Color
How do you choose which businesses to fund? What do you look for in a business and/or an entrepreneur?
My fund Color invests in things people buy, and the places people buy them. This includes personal care, food and beverage, retail, publishers, tech-enabled marketplaces, and e-commerce platforms.
To make an attractive investment, first and foremost the product must offer a clear solution to a problem, and provide for a timeless need versus a fleeting trend. I look for brands that start out catering to a niche customer base, but that can show a clear path to reaching the masses. I’m excited about founders with an authentic passion for what they are building and who can make a case for why they are the right person to be building it.
What are three crucial elements everyone should include in a pitch deck when raising money and why?
It’s important to show a clear understanding of the competitive landscape and how your product and brand will add value to the category as a whole. Show who the existing competitors are, those on the rise, and where your brand fits amongst them. The best pitches focus not on how a product is better, but on how it is different.
Investors will also want to see your distribution strategy. Lay out your plans for where the products will be sold, whether that’s through your website only or across different retail channels. This requires knowing what customer demographics you are targeting, too. I’m personally drawn to brands with an openness to exploring sales channels otherwise overlooked by competitors in their space. For example, when I was building Schmidt’s Naturals, I wanted my products available to the mainstream consumer, where most of my competitors in the naturals space catered to a more niche market.
Show images of the standalone product, plus pictures of it being used. This might sound obvious, but so many decks are lacking bold, high-quality photos. These are especially important in the earliest slides, so the investor has a clear understanding right away of what you are selling. The deck should include colors and design elements of the brand, too. This shows that you care about how your brand is represented and that you understand its unique positioning in the category. Make it pretty!
What are some of the most common mistakes people make when raising money and how can others avoid these mistakes?
The biggest mistake I see is founders raising too early. Fundraising means giving up equity in your business, so the earlier you raise money, ultimately the more it will cost you.
Media often paints a picture that landing investor money means a brand is positioned for guaranteed success. But this isn’t necessarily true, and founders don’t always spend investor money wisely. I like to encourage founders to bootstrap for as long as possible—this teaches you how to be scrappy and intentional with your spending, which will serve as a valuable skill throughout the growth of your business.
What advice can you share for entrepreneurs on partnering with the right investors?
The right investor will ask smart, relevant questions and show real enthusiasm for you and your brand. Be wary of those you suspect might have different goals for your company. Listen to your gut, and don’t settle for partners you aren’t excited about working with.
Not everyone will get what you’re trying to do, and that’s okay. Be patient, and believe in yourself. I recently tweeted: “10 yrs ago I started a business that, as a VC, I probably wouldn’t have invested in. As a founder, I was all in, but as an outsider, there was good reason to be skeptical. 7 yrs later the company sold for $100M+. The rejection you might see today is no indicator of your potential.”
What is your #1 piece of financial advice for new entrepreneurs?
Allow yourself to be simultaneously frugal and willing to spend by knowing where to cut corners to invest in things that matter most. This takes some of the rigidity out of financial management, while still providing boundaries for responsible spending.
Sydney Sykes, Co-Founder and Co-CEO, BLCK VC
“Look for someone who answers your calls and texts. You should feel comfortable asking them questions and reaching out to them, even if they may not have the answer to your problem.”
—Sydney Sykes, Co-Founder and Co-CEO, BLCK VC
How do you choose which businesses to fund? What do you look for in a business and/or an entrepreneur?
I look for a combination of two things: vision and numbers. If an entrepreneur has an incredible vision for her company and she's been able to motivate others to believe in her but the numbers aren't incredible, I may be willing to invest. On the other hand, if an entrepreneur has incredible numbers, but the vision of what the business will be in the future is still developing I may also be willing to take a chance. Ideally, she has the perfect combination: an incredibly strong vision with economics or growth that is starting to show traction.
What are three crucial elements everyone should include in a pitch deck when raising money and why?
1. Why your problem is important? Why should you/I/the customer/the employees care about this? You should be able to easily convince me about this. It means this is an important issue that needs to be solved and you're the person who understands that best.
2. Any traction. This comes back to the numbers. What indications are there from the market/customers that this will be successful? It could be sales, but it could also be customer conversations, conversion rates, or engagement.
3. Growth projections. How do you predict sales to grow and how many customers will it take to get you there? This helps me (and you) understand if these assumptions are reasonable. It also helps me understand if this is a long or a short run investment? Some companies need a little bit of money to go really far, and others need a lot more. Neither is right or wrong, but I need to know if your expectations for the business align.
What are some of the most common mistakes people make when raising money and how can others avoid these mistakes?
A lack of focus on the target customer. Especially when seeking venture capital investments, entrepreneurs frequently aim to have the largest TAM possibly and therefore try to expand who their target customer is. However, these two things aren't inherently linked. There can be a large total addressable market, but your product needs to appeal to individuals -- and you need to know exactly who those individuals are.
What advice can you share for entrepreneurs on partnering with the right investors?
Look for someone who answers your calls and texts. You should feel comfortable asking them questions and reaching out to them, even if they may not have the answer to your problem. This free communication can set the tone for the relationship.
What is your #1 piece of financial advice for new entrepreneurs?
Make sure the unit economics makes sense. Especially with consumer companies, there needs to be an understanding of how each customer could be profitable. Ultimately, incredible growth is unsustainable without strong unit economics.
Jesse Draper, Founding Partner, Halogen Ventures
“Remember one thing, not all money is good money. This is a long-term relationship. A marriage you cannot get out of. It will be a 10-year partnership. Do your research.”
—Jesse Draper, Founding Partner, Halogen Ventures
How do you choose which businesses to fund? What do you look for in a business and/or an entrepreneur?
We invest in consumer technology so I start there. The three main things I look for in an entrepreneur are:
1. Founder, founder, founder. Why are you the best person to run this company? Are you going to take it all the way? Are you in it for the quick exit or the 10-year marathon? Do you know your strengths and weaknesses? And mostly, is this someone I want to get into business with?
2. Product. How is your product a unique offering? Is it defensible? If it's a busy space, why is yours the one that will stand out?
3. Traction. This could mean $1 million in revenue, 100,000 users but don't let those numbers dissuade you, many people especially in hardware need to raise capital to get their product to market. If that is the case, show me some research or data that there is a need for this.
What are three crucial elements everyone should include in a pitch deck when raising money and why?
A. Know your market size. Make sure you are going after a billion-dollar market. As a venture capitalist, my business only works if you sell your company for a billion dollars, I have many investors who I need to pay back. If you are going after a $50 million dollar market, my business model doesn't work. I often have to say to founders, go find the bigger market here and come back to me.
B. What problem are you solving? The best businesses are built out of a need. Be clear about what your solution is and why you are building this company.
C. The ask! I am always perplexed when this isn't in the deck. What are you looking for? $1 million? Advisors? Put the ask in the deck and it's much easier to ASK for an investment, etc.
What are some of the most common mistakes people make when raising money and how can others avoid these mistakes?
Founders who think they have all the answers. I certainly don't have all the answers and I don't believe anyone should ever think they are the smartest person in the room. Whenever I see a founder who tells me, “This is the only way it will work.” that is a big red flag and I usually run in the opposite direction. The best companies are able to pivot and evolve when needed. It's never a straight line up a mountain, there are ups and downs, and who knows, we may end up in an international pandemic!
What advice can you share for entrepreneurs on partnering with the right investors?
Remember one thing, not all money is good money. This is a long-term relationship. A marriage you cannot get out of. It will be a 10-year partnership. Do your research. Call their other portfolio companies to see that what their work ethic is like, how they partner with founders, are they in the trenches with you, or hands-off. One bad investor can poison the well. You will find the right capital for your company even if it takes a little longer because you have to turn some down. Be diligent and selective.
What is your #1 piece of financial advice for new entrepreneurs?
Fundraising is a grind. Don't get discouraged by the “no’s.” I often have founders say, “Well, everyone said ‘no.’” And I say, “Who is everyone?” And they respond with, “Well, I talked to eight investors!” That is NOT a lot. Plan on having 100 meetings because you have to cast a much wider net to find your investors. If you plan on having 100 meetings, you will be pleasantly surprised because it probably won't take 100. Also, ask for more. Get clear on the number you think you need and double it. It is what I like to call a "misc" category. If your goal is to raise 1 million, go for 2 million instead. It always takes more money and more time than you think. Set yourself up for success.
Arielle Loren, Founder, 100k Incubator
“Not every business can start small, but the vast majority can. Get a small amount of capital, start testing, collect your data, know your conversion rates, and then think about an investor.”
—Arielle Loren, Founder, 100k Incubator
How do you choose which businesses to fund? What do you look for in a business and/or an entrepreneur?
The most successful and scalable businesses place a heavy focus on their analytics and numbers. They pay attention to their mistakes, learn fast, and are quick to pivot to where they’re seeing traction, whether that’s an increase in their user base, higher revenue, or increased profitability. We love women entrepreneurs who are obsessed with those details, and who aren’t afraid to get creative to reach their growth goals. We don’t expect things to go smoothly, but we do expect for the bumps to be measured.
What are three crucial elements everyone should include in a pitch deck when raising money and why?
Know your conversion rates before going after large amounts of capital. If I give you something small like $10,000, could you take 10% of that ($1,000), invest it in an ad campaign, and turn it into $2,000 in sales? Can you go granular and know how much it costs you in ad spend just to get one customer? Could you measure and see how quickly a first-time customer makes their second purchase? Too many entrepreneurs get caught up in creating a perfectly branded pitch deck when really the decision comes down to proof of concept and real-time data. Gary Vee posted a great quote recently that said, “When you overthink, you slow down and you get passed.” Not every business can start small, but the vast majority can. Get a small amount of capital, start testing, collect your data, know your conversion rates, and then think about an investor (if that’s really what you want to do).
What are some of the most common mistakes people make when raising money and how can others avoid these mistakes?
There are so many entrepreneurs not taking the time to get educated on all of their funding options, and part of that is because angel investors and venture capital have become so popular in the media, that entrepreneurs jump to make that their desired funding vehicle. The vast majority of entrepreneurs do not need venture capital; we teach and help entrepreneurs access 11 other types of funding. When our members first enter the 100K Incubator app, they're asked to take our 50-video boot camp on how to prepare for funding, what their funding options are, and how to use funding to scale to their first $100,000 in annual sales. And for the entrepreneurs who are already earning over $100,000 in annual sales, they still find extreme value in the boot camp, because it breaks down funding and scaling in a way that most of them have never heard. Getting the funding is the easy part, they actually have a lot of options, but learning what drives and scales their business, getting into the data, that’s where their true talent, grit, and creativity is tested as a business owner.
What advice can you share for entrepreneurs on partnering with the right investors?
When partnering with the right investor, it’s more about having an honest conversation about what they expect in terms of a return on their investment, how fast they want it, and how much control they expect to have in the business. Then it’s making sure that you have a skilled lawyer to put those terms into contracts so that there’s little misunderstanding down the road. Most small businesses don’t need investors. What they really need is access to capital, customer acquisition and retention process, a deep understanding of how it works for their own business, and how to scale that into a six and seven-figure in sales with a healthy profit. The TV and social media world have made angel investors and venture capital funding sexy without telling how much stress it puts on founders, and how much it costs financially. At a minimum, make sure your investor is bringing something to the table other than money because if your company is successful, that investor capital you took in exchange for your equity will end up being the most expensive type of capital you’ve ever taken.
What is your #1 piece of financial advice for new entrepreneurs?
Make your move, learn from your mistakes, and trust the process. How much you raise in funding is nowhere near as valuable as what you learn along the way. And while helping women get access to funding is rewarding and an accomplishment in itself, it’s far more exciting to help them use that capital to create real sustainable six-to-seven-figure businesses that change their lives, their families’ lives, and their futures. We love to be the catalyst and support system for more women understanding the complete cycle of entrepreneurship. Getting funding is truly just the first step.
Elizabeth Edwards, Managing Partner, H Venture Partners
“Make a big list and do your research. You should be putting a list of 100 investors together based on stage, sector, and geography focus.”
—Elizabeth Edwards, Managing Partner, H Venture Partners
How do you choose which businesses to fund? What do you look for in a business and/or an entrepreneur?
We're looking for next-generation, iconic consumer brands that we can help scale from $0 or $5 million in revenue to $10 or $50 million in revenue within a handful of years. These are products in your home that you use every day, like your Peloton bike, baby food, or skincare. We look for brands that are fundamental to life, better for human health, and better for the environment, and we like to support underrepresented founders and consumer groups of all kinds.
In particular, we also like businesses that have one or more of the following in the business model: superior products, scientifically-proven claims, intellectual property, network effect, owned channels, the convergence of media/retail/brand. We tend to lean towards inclusive brands vs. exclusive, and we're particularly strong with omnichannel brands that are going to ultimately scale in retail.
What are three crucial elements everyone should include in a pitch deck when raising money and why?
The pitch uses a combination of stats, calculations, product photos, and charts to tell the following story:
We know this consumer inside and out - and they have a big problem that we deeply understand.
We have a unique way to solve that problem, sell the solution, or make the solution because we have a lot of domain expertise and credibility in this particular space.
This problem represents a huge market, our approach has compelling unit economics, and this brand has clear exit opportunities — strategic and otherwise. If you invest X dollars with this round, we’ll spend the money in these ways to turn it into Y revenue over Z timeframe
What are some of the most common mistakes people make when raising money and how can others avoid these mistakes?
Not using DocSend is a common mistake; it's industry standard in venture capital, and anyone who tells you otherwise is suspect. There was a Twitter controversy over this not long ago, but as Ronald Regan said, "Trust but verify." There are a lot of thoughtless (or bad) actors out there, who will forward your deck on without thinking - because it's not their business, it's yours. If you're sending your business plan to strangers, DocSend is a good way to track and control it. If you are sending it to a current investor in your company, go ahead and bury them in PDFs of decks and attachments. But there's no reason to do that with strangers.
What advice can you share for entrepreneurs on partnering with the right investors?
Make a big list and do your research. You should be putting a list of 100 investors together based on stage, sector, and geography focus. Crunchbase Pro is relatively cheap, and you can get access to thousands of VCs this way. Then, put together a "Perfect Triumvirate" of three venture investors that complement the weaknesses of your management team; those that can help you with strategy and open their network. It's important to have three deep pockets in any deal. It's tough for the entrepreneur, and the investors, if there's only one set of deep pockets when times get tough — as they invariably do.
What is your #1 piece of financial advice for new entrepreneurs?
Cash is king. Spend your venture capital money like you don't have any money. Growth hack, test, iterate, and once you figure out a way to get a 7x LTV/CAC, go for it. Raise more money, hire the absolute best talent money can buy and your cap table can bear, and then change the world.
Maria Salamanca, Investor, Unshackled Ventures
“The right investor will be a combination of ‘they get what I am trying to do’ and ‘they push me to think deeper about the problem.’”
—Maria Salamanca, Investor, Unshackled Ventures
How do you choose which businesses to fund? What do you look for in a business and/or an entrepreneur?
We are sector agnostic. We know founders see the world differently than everyone else so we are open to all sectors. Like most VCs, we look to invest in companies that can grow at “venture scale” in large market opportunities.
What are three crucial elements everyone should include in a pitch deck when raising money and why?
Answering the question: what is new about your solution that others haven't tried before (what’s your secret sauce/unique insights), why is this the right team to tackle this, and why is this a massive opportunity?
What are some of the most common mistakes people make when raising money and how can others avoid these mistakes?
Founders don't always do their homework on the competitive landscape, many times only focus on big older companies but the real competition is often from peers only a few steps ahead or behind.
What advice can you share for entrepreneurs on partnering with the right investors?
The right investor will be a combination of "they get what I am trying to do" and "they push me to think deeper about the problem"
What is your #1 piece of financial advice for new entrepreneurs?
Figure out what is the best form of capital that will help you scale and why (VC, loans, bootstrapping, PE, etc) because this impacts how you think about company building. There are many ways to build a profitable business and venture is not always the right capital to get you there.
Maya Baratz Jordan, CEO and Founding Partner, Founders Factory New York
“Partner with investors who can help you beyond writing you a check and help in the areas you actually need help in.”
—Maya Baratz Jordan, CEO and Founding Partner, Founders Factory New York
How do you choose which businesses to fund? What do you look for in a business and/or an entrepreneur?
As an early-stage investor, I always weigh the team’s DNA heavily when considering an investment. A business at the startup stage will go through many changes—and will look and be as different two years in as a newborn is from a toddler. It takes a lot to keep a business not only alive but thriving. That's why over 90% of startups fail. The consistent piece is the team. Does the founding team have the unique superpowers required to get their specific company off the ground, along with the experience to allow them to stay the course and attract the best talent and returning customers as they grow?
The second piece that's important is the market: Is the ultimate market this business is targeting large enough to be investible? For a business to be investible, it needs to generate returns for investors that make it well worth the risk and opportunity cost. There are a lot of great examples of successful businesses that are not investible, but still wonderful businesses. For an investor, the potential reward needs to be multiples higher than the risk—which often means that the company can serve a very large group of people.
The third piece that's important is the problem that's being solved and how it's being solved; this is the glue that bridges together the first two pieces (i.e., the founders and the market); it's what dictates whether or not the business is truly fitting the needs of the market it is targeting.
What are three crucial elements everyone should include in a pitch deck when raising money and why?
What you put in your pitch deck will depend on the stage of the company. The general areas you'll want to cover include, but aren't limited to, the problem you are solving, how big that problem is (market), and what it is about your company that puts you in a position to win. You'll want to weave them all into a story with a natural arc; it needs to flow in a way that would answer someone's questions as they listen to your pitch.
If you're an early-stage business with little or no traction to show, you'll want to highlight what it is about your business that will defend it over time and help you win the market over, despite current or future competitors who enter that market. Sometimes that defensibility relies on the experience of the founding team, if relevant. For instance, if you know that the CEO of a wildly successful venture is now starting a new company in a related space, their experience and learnings from running their previous business will likely help them in their new venture. You ideally want to focus on the things that differentiate your company from competitors, specifically zeroing in on the aspects that can't be easily replicated by others and that are necessary for the business to grow and be successful.
If you're a company with traction that shows you're growing quickly, a so-called hockey stick growth chart can help tell the story of why you are already running a rocket ship. Every company should have its own way to express its ultimate "right to win."
What are some of the most common mistakes people make when raising money and how can others avoid these mistakes?
One of the mistakes I've seen founders make when pitching is speaking but not truly listening. Partnering with investors is a two-way street. The questions and feedback you will get will help guide you to refine your pitch as you go, and perhaps even help your business. And you never know when you may get a "no" from an investor now and perhaps that turns into a "yes" in a later stage of your company. Relationships matter and you can use the fundraising process to grow relationships, even with investors who say no. It's likely that, especially if this is your first time fundraising, most of your pitches will end up with rejections, so you may as well use each interaction as an opportunity to learn. You also want to know your pitch like you know your business; don't memorize it or it will feel unnatural. The best pitches feel like conversations.
What advice can you share for entrepreneurs on partnering with the right investors?
Partner with investors who can help you beyond writing you a check and help in the areas you actually need help in. Try to avoid bringing on partners who either don't know your market or haven't invested in companies that are in the same stage your company is in. You'll want to partner with investors who are empathetic to the journey you're on and can be helpful in the right ways when you need help, whether that means giving you the right advice or making the right introductions. This is why former founders or operators within startups make great angel investors; they understand the challenges of building a business and know the importance of helping a company beyond the capital they put in. You'll also want to partner with investors who generally agree with the path you're going on so they can best support it.
What is your #1 piece of financial advice for new entrepreneurs?
Your biggest financial job will be ensuring there is ultimately more money coming into the company versus out. It sounds simple, but if you have this mandate in mind, you'll be protective of your runway when you need to be and push your company to grow in a long-term, sustainable way so you can ultimately be independently profitable. You don't want to spend money on frivolous, performative things upfront. Think about your runway as fuel; if you're close to running out of it, the company can quickly grind to a halt. Spend money where it's truly needed and understand exactly how every dollar you spend will ultimately get your company to your long-term goals. Most people in successful early-stage companies wear multiple hats and have the urgency/scrappiness to pull things off with limited resources for this reason.
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Show Me the Money: How to Get Funding and Scale Your Creative Business
From understanding capital to the prerequisites for funding.
Arielle Loren is the founder of 100K Incubator—the first business funding mobile app for women in both Apple and Google’s app stores. The story was part of her “Show Me the Money” workshop held at the Create & Cultivate Vision Summit in Miami.
Photo: Courtesy of Arielle Loren.
UNDERSTANDING CAPITAL AND HOW IT WORKS
(aka why your creative business needs money to scale!)
There are three categories of funding: grants, equity-based investments (what most investors require), and debt-based funding (business loans, lines of credit, etc.)
Let’s talk about debt though… there’s a difference between consumer debt for vacations and clothes—and strategically using a business loan as working capital for your business.
For example, if you charge a bunch of clothes on your credit card, those clothes can’t make you money and help you pay that back. You have to go to work and actually do that.
But if you invest the $5,000 you received from a business loan and turn it into $15,000 in sales, that means there’s a $10,000 gross profit. Now that’s worth considering a business loan, and it’s that mindset that you need to have when considering all funding options for your business.
PREREQUISITES FOR FUNDING
(aka what you need to get your money!)
Funding Budget
50-70% Advertising or Direct Revenue Generating Activities
30-50% Infrastructure—Sales Funnels, Photo and Video Shoots, Websites, Consultants, etc.
Average Personal Credit Score
Minimum 620 and up
Register Your Business Entity With Your State Government
LLC, S-Corp, C-Corp
Save money by registering directly on your state government’s website
Register Your Business for an Employer Identification Number (EIN) with the IRS
This is 100% FREE at irs.gov
Open Your Business Bank Account
Your Personal Finances and Business Finances Cannot Be Co-Mingled
File Your Taxes and Annual Report
THE 3 LEVELS OF FUNDING
(aka figure out where your business stands for the highest approval rates!)
Level 1: Zero (aka pre-revenue) to $3,000 per month in sales
Business Credit Cards
Personal Loans
Home Equity Loans or Lines of Credit
Crowdfunding
Level 2: $3,000 or more per month in sales
Pitch Competitions
Business Grants and Government Contracts
Government Small Business Loans
Payment Processor Loans
Private Business Loans
Business Lines of Credit
Level 3: $9,000 or more per month in sales
Angel Investing
Venture Capital
About the Author
Arielle Loren is the founder of 100K Incubator, the first business funding mobile app for women in both Apple and Google’s app stores. She’s helping 100,000 early-stage women entrepreneurs get funding for their businesses and scale to 100K+ in yearly sales. She is also a graduate of Harvard University, where she holds a master’s degree in Management and graduate certificate in Strategic Management. Additionally, she also holds a graduate certificate in International Business Management from Georgetown University and a bachelor’s degree in Social and Cultural Analysis and a certificate in Producing from New York University.
Visit 100kincubator.com for more information, download the app, and start your free trial.
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What I Learned About Success From Women Who Have Raised $1 Million+ for Their Businesses
Lesson 1: Personal wealth is a non-factor.
Photo: Godisable Jacob from Pexels
The connotation around the word success doesn’t mean what it once meant to me. Growing up I can remember thinking that success equated to wealth, status and excellence. Honestly, to be successful felt intimidating and unattainable. The intimidation around success was one of the main reasons that I felt it necessary to explore the idea.
I was recently asked to run down a list of accomplishments, and I had at least 10 things that I rattled off, but does that mean that I’m successful? Being the host of the personal development podcast Switch, Pivot or Quit, I wanted to take the opportunity to consult with other women about their thoughts on success.
In the last year and a half, I’ve interviewed more than 75 women in business and more recently, through producing the new Mayzie Media podcast A Milli, I’ve had in-depth conversations with a variety of stellar women who have amassed one million-plus in business.
When asked: what does success mean or look like for you? I discovered an honesty that was refreshing among the women interviewed for A Milli, despite collectively having $60 million in annual revenue, 5 million in social followers, and more than 116 million in funding.
“I'm not sure what success means to me,” said Abyah Wynn, a 29-year-old Vice President of Business Development at Trimantium Capital. “I think that giving back in a big way and being able to use my talents and everything I’m learning and doing now to help others would be my definition of success.”
Ahead, my takeaways on success.
Personal Wealth Is a Non-factor
Not only has our idea of success as a society began to shift, but we are also seeing an evolution in how we allow success to play a role in our lives day-to-day. Many of us are realizing that there's more to life than the flashy outward perception of success, especially from an emotional perspective. Abyah also said, “I could drive the car and buy the house and wear the shoes and the designer labels, and that's great, but that is absolutely not my definition of success.”
Definitions Are Changing
Pre-social media many of us had this fairytale idea of what success looked like, but now we see that success can come in different ways, take different forms and evoke different feelings and that’s okay.
“I think success, in general, is very personal,” said Christina Stembel, Founder and CEO of Farmgirl Flowers. “I think for myself it means building Farmgirl into a company that I'm really proud of, meaning that I did it the right way. I didn't do it the way that just maximizes profits in order to get the highest sale amount. It's building a company that I'd want to buy from, sell to and work at.”
Success Is in the Little Things
Daily, we have the ability to feel successful in the most routine ways. We can also help inspire those around us to feel a sense of accomplishment and success as well. Speaking on her feelings regarding success Drybar founder, Alli Webb immediately defaulted to the emotion that her business draws out of women. “We’re doing over a million blowouts a year, which means we're making a lot of women happy and I very quickly learned, which I don't think I completely realized when we first started Drybar, how incredible Drybar and a great blowout makes a woman feel.”
Happiness Means the Most
A common theme that surfaced during my interviews was happiness. We all just want to be happy, and we are starting to realize that we have to prioritize our happy. “I think success is just being happy with myself wherever I am and with whatever I'm doing,” says Nicole Gibbons, Founder, and CEO of Clare. “I think when it comes to family and my personal relationships I think having those relationships be healthy and happy is also what makes me feel really accomplished and successful because when you're running a big company having a support system is really, really important. My measure of success is not tied to any one accomplishment it’s more tied to my own personal sense of contentment and happiness, and that's really how I look at the idea of success and how I define it.”
We Can All Be Successful
Determining whether or not you have been successful in your life can only be made by you. Your interpretation of self and your accomplishments dictate whether you choose to believe that you are successful or not. One definition of success points to it being the accomplishment of one's goals, and you can do that right! Think about it, something as simple as establishing that you want to begin a routine of morning meditation for ninety days straight is a goal. If you follow your plan and achieve that goal for the next ninety days, then you were successful. Success can be accomplished daily, and we are the ones that complicate it with expectations.
ABOUT THE AUTHOR
Ahyiana Angel is the Founder of Mayzie Media, a podcast network with content curated for women, and host of the Switch, Pivot or Quit podcast. A traditionally published author, Ahyiana is a seasoned executor who eventually blocked out the world’s ideas of success, quit her highly coveted position at the NBA, moved to London and traveled the world for a stint, then followed her passion in writing to find her purpose in encouragement through podcasting.
Mastering the art of note-worthy ideation, Ahyiana taps into her more than 12 years of professional business marketing experience to lend her thoughts on professional development, digital marketing, contemporary brand styling and more. However, Ahyiana enters her zone of genius when speaking to audiences about her 4 Ps: publicity, publishing, personal development and podcasting.
This post was originally published on October 25, 2018, and has since been updated.
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WTF Is a Cap Table and How Do I Read One?
Raisin’ funds and takin’ names.
Photo: Pexels
When you start a new business from scratch, the amount of knowledge you have to acquire can be overwhelming. There is so much to learn and often it’s on the job. And you might be thinking, ain’t nobody got time for that, but even if you plan on hiring someone to handle the paperwork and the financials, as the business owner you should always have your eye across every aspect of the company and know your numbers.
You will come across terms and acronyms you don’t understand but don’t be shy to ask questions or Google them, then take action. If you’re an entrepreneur then it’s likely you’ve already heard about CAP tables, also known as capitalization tables. But for others, you might just be thinking what is a cap table and how do I read one? And if you’re entering the funding stages of your venture, it’s really time to step that knowledge up.
Below, we’re talking more about what a cap table actually shows and how to read, create, and use one in your business.
The basics
First things first: What does capitalization even mean? Capitalization is just a formal way of saying ownership shares (i.e., who owns capital) and includes all of your company’s securities: stocks, preferred shares, options, etc. A capitalization table, then, is a chart that shows who owns how much of each asset type.
In essence, the point of a cap table is to give a quick overview of ownership. When you’re first creating your company, this step is essential to make note of what everyone in the business owns, but it becomes even more important when you’re bringing investors into the mix. They need a clear picture of what they’re buying, and shareholders need to be able to keep track of their stakes in your company.
The nitty-gritty
In the example from Hyde Park Angels below, you’ll see the table includes both a pre-money valuation and a post-money valuation—this just means how much the company was agreed to be valued at before investment, and how much it’ll be worth afterward.
The third column shows shareholder names—early on, this list will be short, but it can get lengthy as the business grows. In the next column, pre-money ownership percentage is denoted. Because Investor A and Investor B are just now buying into the company, their pre-money ownership is listed at zero percent.
The price-per-share noted on the left is determined by taking the pre-money valuation and dividing it by the number of pre-money shares (here, $4 million ÷ 8 million shares = $0.50 per share).
Now that we know how much each share is worth, we can calculate the number of shares each investor is purchasing. Investor A is putting in $750,000, so her post-money shares equal $1.5 million (because $750,000 ÷ $0.50 = $1.5 million). Thus, her post-money ownership percentage is 15% of the new business valuation. Because Investor B put in $250,000, she owns 500,000 shares and 5% of the company. The founders, who just sold 20% of their shares, now own 80% of their business.
Scaling up
As your company continues to scale, your cap table will become more complicated. Not only will the list grow in length, but your level of ownership and control will likely change, too. It’s important to keep your cap table updated and buttoned up—you never know when new funding opportunities will arise, and if you ever sell the company, your cap table will spell out who gets what in the deal.
While the idea of raising money for your business can be daunting, having a well-documented cap table in your pocket will make the process simpler for both you and your investors. Happy funding!
This post was published on February 2, 2019, and has since been updated.
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Making Moves: Award Noms, New Funding, & Netflix Pickups
These ladies are makin’ moves!
This week was a doozy for women in business! Below, we’re sharing big deals, award noms, and pre-seed funding secured by badass ladies who know what they want and aren’t afraid to go for it. Check ‘em out below!
Girls’ Night In, our favorite self-care newsletter by #createcultivate100 alum Alisha Ramos, has raised a pre-seed round of $500,000!
Netflix has picked up the “momedy” sitcom Workin' Moms by Black-ish star Catherine Reitman. The series, which has aired on the CBC network in Canada since Jan. 2017, follows four 30-something women in a mommies' group as they juggle work, home, and love.
CEO Katrina Lake’s wildly-successful personal styling box Stitch Fix was featured in the #5 spot on Fast Company’s Most Innovative Companies list this week. The company generated $1.2 billion in its fiscal 2018.
Li Li Leung, currently vice president of the NBA, has been named president and CEO of USA Gymnastics. Formerly a college gymnast at the University of Michigan, and the sport’s crisis with Larry Nassar compelled her to step into the role.
Minyon Moore, Donna Brazile, Yolanda Caraway, and Leah Daughtry, authors of For Colored Girls Who Have Considered Politics, have been nominated for an NAACP Image Award. The book gives a behind-the-scenes look at the authors’ 30+ years working in politics.
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