What's the hardest part of raising a seed round?

The hardest part is often the length and difficulty of securing the first check and closing the entire round, which can take many months and require contacting hundreds of investors. It's a brutal process that tests resilience.

How do you pitch sensitive products like condoms to investors?

Focus on the market opportunity, pain points, and financial metrics (growth, traction, profit margins) rather than the sensitive nature. Frame social impact as a business strategy that resonates with consumers and talent.

What's the best way to get an initial introduction to an investor?

Leverage existing professional networks (like former employers), personal connections, or investor introduction platforms. Demo days and follow-ups after initial interest can also be effective.

How important is understanding deal terms during fundraising?

It's crucial. Understanding terms like control, equity, and future fundraising implications prevents bad deals. Utilize resources like 'MBA Mondays' and conversations with experienced founders to learn.

Should you take it personally if an investor says no?

No, it's rarely personal. Investors have different criteria, market views, and timing. Maintain professionalism, learn from feedback, and understand that a 'no' now might be a 'yes' later if traction improves.

What's the most important trait for a founder during fundraising?

Confidence is key. It means knowing your business, articulating your vision, negotiating effectively, saying 'no' when needed, and handling rejection gracefully. It's about believing in your company's potential.

What is the 'billion dollar company' pitch and why is it important?

Investors, especially institutional ones, want to see the potential for massive scale. You need to articulate a compelling story about how your business can reach a billion dollars in valuation, even if it's not a guarantee.

Key Moments

Fundraising Panel at Female Founders Conference 2016

Y Combinator

Science & Technology4 min read28 min video

May 20, 2016|10,257 views|77

YC Y Combinator femalefoundersconference

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Key Moments

TL;DR

Female founders share fundraising advice: bootstrapping, tough investor interactions, and staying confident.

Key Insights

Bootstrapping requires focusing on sales and revenue generation to prove value before seeking investment, as demonstrated by Eligible's early success.

Raising capital can be a long and challenging process, requiring persistence, meticulous tracking of investor conversations, and resilience through rejections.

For companies in sensitive or taboo industries like personal care (condoms, menstruation), it's crucial to frame the discussion around market opportunity, pain points, and financial metrics rather than societal awkwardness.

Thorough preparation is key: knowing your numbers inside out, researching potential investors, and understanding deal terms are essential for effective fundraising.

Building relationships with investors is important; a 'no' initially doesn't always mean a permanent rejection, and maintaining professionalism is vital as the industry is small.

Founders should be confident in their deep understanding of their business and market, even when facing skeptical investors, and remember that their insights are often more accurate.

BOOTSTRAPPING AND EARLY TRACTION

Kaitlyn Gleason of Eligible shared her experience with bootstrapping for the first year, emphasizing that it was a necessity driven by a desire for an efficient fundraising process. She focused on her strengths in sales, building a prototype, and securing initial deals to generate revenue. This approach allowed her to bring the company to profitability before raising a significant seed round, creating a strong position where investors were more inclined to invest due to demonstrated value and market traction. This strategy highlights the importance of proving product-market fit and revenue generation before external funding.

THE GRUELING FUNDRAISING JOURNEY

The panel collectively discussed the immense challenges and emotional toll of fundraising. Talia Frankel of L. recounted emailing over 250 investors and meeting with 85 before closing her first round of $1.2 million after eight months. This extended, arduous process tested her resilience. Liz Wessel of WayUp also noted that while they raised significantly, the initial path to securing the first check was the hardest. The consensus was that persistence, a refusal to accept 'no' as a final answer, and viewing investor feedback as business decisions rather than personal rejections are critical for navigating this difficult phase.

NAVIGATING INVESTOR CONVERSATIONS AND MARKET PERCEPTION

Participants shared strategies for effective investor communication, especially when dealing with non-traditional or sensitive industries. For L., whose products include condoms and menstrual care, the key was shifting the conversation from societal taboo to significant market opportunity, growth metrics, and profit margins, speaking investors' language. WayUp's success was attributed to addressing a universally understood problem (student internships) and personalizing the pitch, coupled with a deep knowledge of their numbers. This underscores the need to tailor the narrative to resonate with investors' interests and understanding.

PREPARATION AND KNOWLEDGE IS POWER

Deep preparation emerged as a recurring theme. Liz Wessel emphasized knowing company numbers 'down pat,' to the extent of being willing to forgo a traditional pitch deck if it meant showcasing fundamental knowledge. She highlighted the importance of understanding deal terms and proactively identifying the key metrics investors should focus on, even if they don't ask. Learning about terms, reading resources like Fred Wilson's 'MBA Mondays,' and talking to experienced founders were recommended methods for gaining this crucial knowledge and avoiding missteps during negotiations.

SEEKING INTRODUCTIONS AND BUILDING RELATIONSHIPS

Securing initial investor introductions often relies on a mix of personal connections and leveraging existing networks. Examples included leveraging past professional relationships, introductions from acquaintances, and even connections through VC LP networks. The Y Combinator demo day also proved valuable for Lumoid in generating initial investor interest. Crucially, the advice was to maintain positive relationships even after initial rejections, as investors who initially said 'no' might circle back once the company demonstrates further traction and growth.

CONFIDENCE, RESILIENCE, AND WHEN NOT TO FUNDRAISE

The panel stressed the importance of confidence, especially for female founders, defining it as knowing when to negotiate, when to say no, and clearly articulating accomplishments. They also advised against taking rejection personally, as investors often have valid reasons from their perspective. Importantly, the founders also cautioned that not all businesses require fundraising. Founders should assess their needs based on metrics and profitability, emphasizing that building a successful business doesn't always necessitate external capital, and they should trust their own judgment regarding their company's path.

UNEXPECTED CHALLENGES AND CRAZY STORIES

One particularly jarring experience shared involved an investor who not only refused to invest but aggressively called the company a 'scam' multiple times during a pitch meeting. This was emotionally devastating for the founder, highlighting how personal and aggressive investor interactions can be. The advice stemming from such experiences is to seek support, take a moment to recover (even a double espresso!), and reaffirm belief in one's vision, understanding that not every investor interaction reflects the true potential of the business or the founder's capabilities.

THE VALUE OF TEACHING INVESTORS AND STICKING TO YOUR VISION

An important piece of advice was to view investors' lack of knowledge about a specific business or market as an opportunity to educate them, potentially turning a weakness into a strength for the pitch. Complementing this, founders were urged not to give up, even when faced with doubt from family or peers. The ultimate message was to trust one's own deep understanding of the business, acknowledging that founders are often far more informed than potential investors. While feedback is valuable, founders should remain confident in their strategic direction and market assessments.

Mentioned in This Episode

●Companies

●Organizations

●People Referenced

Common Questions

Bootstrapping is viable if you can achieve profitability and don't immediately need external capital. Fundraise when you have a clear value proposition, traction, and a defined need for growth capital that bootstrapping cannot fulfill.

Topics

Business & Entrepreneurship Startup Finance Venture Capital Investor Relations Founder Advice Seed Funding Career & Skills Fundraising Strategies

Mentioned in this video

People

Talia Frankel

Founder of L, a company producing personal care products that give back. L participated in YC S15 and raised a seed round of over $2.5 million.

Marty Ramamoorthy

Founder and CEO of Lumoid, a try-before-you-buy service for consumer electronics and gadgets. Lumoid was part of the YC Summer 2013 batch and has raised approximately $3.5 million.

Fred Wilson

A venture capitalist known for his 'MBA Mondays' blog series, which was a resource for learning about fundraising terms and concepts.

Liz Wessel

Co-founder and CEO of WayUp, the largest marketplace for college students to find jobs and internships. WayUp was in the Winter 2015 batch and has raised over $9 million.

Caitlin Gleason

Founder and CEO of Eligible, a healthcare infrastructure company. She participated in YC Summer 2012, bootstrapped for the first year, raised $1.6 million initially, and later raised over $20 million.

Companies

WayUp

The largest marketplace for college students to find jobs and internships. Founded by Liz Wessel and others, WayUp was in the Winter 2015 YC batch and has raised over $9 million.

Box Group

An investment firm that provided an early offer and significant support to WayUp, helping them close their seed round.

Google

Mentioned by Liz Wessel as her former employer, where she worked in India and had connections that indirectly led to an investor introduction.

Lumoid

A try-before-you-buy service for gadgets and consumer electronics. Lumoid participated in the YC Summer 2013 batch and has raised around $3.5 million.

Eligible

A healthcare infrastructure company that processes medical eligibility and claims. Founded by Caitlin Gleason, it participated in YC Summer 2012 and achieved profitability before raising a significant round of over $20 million.

Organizations

Female Founders Fund

A venture capital fund based in New York City, mentioned as an early investor through a personal connection.