Four successful female startup founders share stories and advice about the fundraising process.
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Last month, Y Combinator hosted its third annual Female Founders Conference, which brought together more than 800 women building women-led startups.
Here on the Macro, we're sharing full videos of the onstage talks from YC alumni and distinguished guests who shared stories and practical advice on building companies. Check out the previously published talks by Gobble's Ooshma Garg here, and the Muse's Kathryn Minshew here.
In this video, four founders from startups at different stages and sizes (L. founder and CEO Talia Frenkel, Eligible founder and CEO Katelyn Gleason, Lumoid founder and CEO Aarthi Ramamurthy, and WayUp co-founder Liz Wessel) took the stage for an in-depth discussion moderated by YC partner Kat Manalac on the realities of raising funding -- and provide advice for navigating through the good and the bad.
A full transcript of their conversation is below the video.
Kat Manalac : All right. I'm excited to have all four of you here. I'd love for you to each introduce yourselves, and if you could, introduce yourself and your company and what it does, what batch you went through YC, and how much money you've raised or the stage.
Talia Frenkel : My name's Talia Frenkel. I'm the founder of L. L makes unquestionably safe and natural personal care products that give back. We were part of YC Summer 15. We raised our seed round shortly after, just over $2.5 million.
Kat : All right, Katelyn.
Katelyn Gleason : Hi, I'm Katelyn 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 the Summer 2012 batch. At that time, I had raised about $1.6 million, grew the company to profitability, and I have just raised a little over $20 million, recently.
Aarthi Ramamurthy : I'm Aarthi Ramamurthy. I'm the founder and CEO of Lumoid. Lumoid is a try-before-you-buy service for gadgets, 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.
Liz Wessel : 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. And we are a fairly new company. We were YC Winter 2015. We've been around for about a year and a half, and we've raised just over $9 million.
Kat : 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, Katelyn, you bootstrapped for the first year of your college life.
Katelyn : Yeah, down the block from Y Combinator.
Kat : Awesome. So how did you make the decision to bootstrap, and what advice would you have for women in the audience today who are bootstrapping?
Katelyn : I had no choice. 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 building prototype, 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.
Kat : And we were just talking backstage about how you got your company to profitability before you raised all that round.
Katelyn : Yeah, I raised $1.6 million. And for three years, I took that $1.6 million and obsessively built the company in a way that was probably not really healthy, right? Just all day long, every day. I always tell the story, I have 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 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 million.
And I brought the company...we grew 8.4x in one year. It was millions of dollars in annually 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 make sense to me.
Kat : And that's sort of the ideal scenario. So Aarthi, I remember you saying once that you emailed 250 investors before you got your first check.
Aarthi : Oh, yeah.
Kat : So talk to us a little bit about, what was your lowest point, and what was it that gave you the faith to keep going?
Aarthi : 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. Seventy percent of our team are women. I'm really proud of that. It just took us a really long time to not just close the first check, but close the first round. I had mailed about 250, maybe more, investors. Just had this giant spreadsheet of like, this is the person, this is their background, here is what you need to focus on. First round was conversation, phone calls. Second round, where did it go?
And I think, of all of these guys, I think I met 85 people. And, ultimately, we closed our first round, which was $1.2 million about eight months later, and by that time, I basically, now, if you bring an investor's name, I probably have spoken to them. You know how it is. 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.
Kat : So what was it that made you certain that, "Yes, we will be able to do this"? What kept you going?
Aarthi : You don't have a choice. Just go do it. You can't take no for an answer, you just have to go do it. And they say no, and you find another person. It's just investment. It's not personal, it's whatever they say. It depends on the time of day what their beliefs are. They have a very valid point, from their perspective, and you do too. You're building the company. So you just have to go talk to more people and raise.
Kat : Talia, there are a lot of interesting elements about L and what you're building. It's a consumer packaged goods company, it's a social good company. Your first product was condoms. What was that conversation with investors like?
Talia : Yeah, our first product is condoms, and our second product is 100% organic tampons and pads. So whether it was talking about sex or menstruation, right? It's two topics that are shrouded in mystery for most investors. And so there's awkward laughter here, in the audience, and it was a little awkward, at first. I think that what's really important is bringing it back, kind of changing the tone of the conversation into, "Hey, there's some serious pain points. This is a huge market opportunity. Fifty percent of the population menstruates, and condoms are the most popular form of birth control."
It's about speaking to investors in a language they understand: Growth, traction, market opportunity. We talked about our profit margins. I think, on demo day, the joke was, "94% profit margins. You thought only software could do that." And they just, "Now we get it." Right? 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 a B Corp, it's important to talk about your social strategy or that bottom line as a business strategy. And something that really inspires your consumers, it inspires the talent that you can attract for your team, it inspires partners. So that bottom line really contributes to your financial bottom line.
Kat : And Liz, 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?
Liz : Yeah, I would say we were working with a product that dealt with responding to a problem that no one would disagree with. 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, like it's something that they've dealt with personally. So 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 where they went to school. I could talk about the problems at their school, etc.
But I would say, overall, the number one thing that I think I prepared with that helped was just knowing our numbers down pat. I would go to a meeting, and any question they asked...first of all, I made a rule. I felt like making a deck would be a big waste of my time, and I thought knew every single number anyway, so I'm not going to make a deck, and I'm just going to show. 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 funds policy," and I would say "Okay, then I'm really sorry. We don't have to meet," then they always reverted back to, "Okay." So I would just say, overall, it was just, 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.
Kat : Nice. A lot of women in the audience have not raised yet, and so a lot of questions that I get from very early stage founders is, "How did you get your very first introduction to an investor?" And especially if you raise anything before YC, how did you get those kind of introductions?
Liz : I can start. We had raised $1 million before YC. 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, the Female Founder's 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...before Google, a woman there ended up introducing me to BoxGroup, which was David Tisch and Adam Rothenberg.
The second we met with Box, they said, "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.
Aarthi : YC was my first, and I think the demo day 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 once I got the first check in, it got a lot easier where I could then go talk to their friends and their friends, and the network just kept expanding. It got a lot simpler then, but the first check was a lot harder, was the hardest of the whole lot.
Talia : 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 L all of the time to everyone I met, you know?
Kat : I love that, that's a great tip.
Talia : And eventually people were like, "Well, you should really meet and you should really meet," and then, eventually, I spoke to these women. Because, at the time, we didn't have a product, we didn't have a revenue, we didn't have the partnerships we have today. So it was 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.
Kat : Liz, 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?
Liz : I did a lot of learning. I think that that's important to talk about. I think we don't talk about it too much, but I think that there's a lot more to fundraising than valuation, and I think there's a lot of terms and deal terms that I think guys kind of like shoot the shit on and girls don't. So all things about just understanding that, when you raise in large rounds, you're likely going to give up more control, and that's going to change the trajectory of how you make decisions in your company, right?
It's going to affect types of equity you grant to folks, and it's going to affect how much money you can raise in the future. Or if you're considering 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.
Kat : Were there specific resources you used?
Liz : Yeah, YC. It's like the endless, amazing group of the smartest people at this time, especially in our generation. Just asking questions, I feel like everyone's so willing to help, because they've either gone through it or, maybe they've had a great experience, maybe they've had a bad experience, but we want to learn, right? So I think asking questions is scary sometimes, but I think it actually gets you the farthest.
Kat : I think it's really helpful to talk to people who have gone through the process and ask them for their 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...
Katelyn : I'm going to check that, I've never seen that.
Liz : 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're negotiating, because you don't want to say you don't know. But the negotiators...
Katelyn : And that's good to learn, because you're like...
Liz : Yeah, that's really bad. Don't do that. I did that once. It's bad.
Katelyn : Yeah, we all do that.
Kat : So, wait, what did you do? Did you say like, "One second, I just need to Google this"?
Katelyn : Hold on, I'll sleep on that.
Kat : Go to the restroom.
Liz : It was my seed round, and I actually said to him, "I'm a first-time founder, and I'm going to admit right now that I don't know enough about that to be able to speak eloquently about it, but let me talk to my co-founder." I always blame it on, if I can't find the answer, I'll say, "Let me talk to my co-founder. He feels really passionately about this." But usually, he doesn't know what it means either -- so we Google.
Aarthi : This may be counter-intuitive, given what we're talking about, but tips for fundraising, one thing I do want to point out is, not everybody needs to fund-raise. 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. 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, you can be your own yardstick. You don't have to fund-raise. Just because all of us here are talking about 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 Ooshma said, 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 am 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 going to regret this." It doesn't really help, being so angry and upset all the time.
And a lot of these guys, what happened was, initially, they didn't see the traction. We didn't have the traction, we were very young, very early. And then month over month, we were growing whatever percent, and then eight months later, ten months later, we'd meet them somewhere, and they'd be like "So, how is it going?" and we'd show them the numbers, and then they'd be like "Oh, do you still have some allocation left?" Allocation is the keyword, learn that, you guys. Sound smart, allocation. You just need to know that. It solves everything.
But they would come in and be like "Can we then invest?" 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'm going to be an idiot to not invest, I have to put in some money." 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 too.
Liz : Can I counter that with...
Aarthi : Of course.
Liz : I agree with everything you said, but on top of that, most smart investors will not say no, but they mean no. I've been rejected a bunch of times, but I don't think I've ever been told no.
Aarthi : If it's not a yes, it's a no.
Liz : 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. Let me get back to you in a month." "I really will have to talk to my partners about this," and then they don't get back to you. Any of those things mean no, and don't wait for them to switch.
Katelyn : It's like dating.
Liz : Yeah, exactly. Dating someone who's flaky and scared of rejecting you.
Katelyn : And I'll say don't get nasty. Sorry, I got really nasty in the beginning, and I really had like a real journey in 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? I literally would go crazy on them.
Kat : You'd confront?
Katelyn : Yeah, I was like really combative, I would go at it, because this is my baby, and you were telling me that it wasn't a big enough market. Right? So just remember that, I think you both said this wonderfully. They'll say yes a year from now, right? Keep these good relationships. You have a lot to learn from these people, they're amazingly smart. Just try to not get nasty.
Talia : Yeah, I was just 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 you embody confidence. And some things that confidence means is just 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. So I think, also, maybe preparing yourself for how you want that meeting to go before going into it.
Kat : Were there specific things you did to prepare yourself? Or did you have to sort of learn on the fly? Like you learned from experience?
Talia : 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, and 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 of the time, so I think it's really important to know what your key performance indicators are. Get to them quickly. Make sure that they're absorbed. And then the conversation shifts in other directions. Be prepared.
Liz : 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, "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. Come back to us once you can say that." And so I actually went back, this was during YC, to one of the partners who was like one of the smartest people I've ever met in my life, Ali Rowghani. 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."
Kat : Nice. So during your processes, was there anything that went really wrong? Like, what is the craziest story that you guys have that you can tell?
Talia : Everything.
Aarthi : I was talking to Jessica backstage...and find me offline, I have crazy stories.
Kat : Tell one of them.
Aarthi : We had this one investor, the first time we met one of the other people in this company, it went great. They were like, "This is amazing, this is so great, get your deck together, come show up. We just want to do this last round of diligence. It's so amazing." And I'm 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 fucking scam." And I'm thinking, "This guy has a really weird sense of humor," and I'm just like laughing a little bit like, "Ha ha, okay. Let's just keep going."
And he's like, "You guys should finish fundraising before anyone figures out what a fucking scam you guys are." And, at this point, there is this thing that goes over like, "Oh, it's not a joke, okay." And you're still pitching. You're still talking to him. Five minutes in, three slides in, he's like, "Oh, my god. You guys, do you do the same pitch to everyone?" And I'm like, "Yeah, why?" He's like, "This is the scammiest business ever."
And by this time, he's just upset. He's angry. His face is red, he's pounding his fist on the table. And I'm like, "You asked me to come here. You knew what I was building. 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, "How do I counter...this is 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 in the elevator, and he's like, "I'm going to show you out." I'm like, "I know the way out, thanks." And at this point, I want to end it with some curse words, and I'm like, okay, I just have to get out of here and be civil about the whole thing. And I get out, and he's like, "I'm so sorry, I'm so sorry for the whole experience," and I'm like, "Why did you even bring me here? This is crazy."
Now it's kind of a joke. You guys laugh, and I'm laughing with you. At that point, it was so emotional. How do you counter to anyone calling your whole business a scam? 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 I was like, "Whatever, just give me whatever. Double shot whatever." And I'm just yelling at the person.
Talia : [inaudible 00:24:49]. Starbucks is her outlet.
Aarthi : And at this point, tears are like flowing through my...and I'm wearing my sunglasses, so no one can see that I'm actually crying. And I'm like, "Double shot something, anything, just..."
Liz : An espresso.
Aarthi : And I come back, and I'm like, "You know what? It's okay, it's fine. He's probably having a bad day. This is not going to define what I'm building. It's okay." But these are the kind of stories I have, you guys. Just find me. And if you're ever raising from this person, I will warn you, don't go there, just stay away.
Kat : Okay, I got the time hand-wave. But one quick last thing, for anyone, just advice that you wish you'd known when you were starting the process, really...lightning round.
Talia : Advice that I wish I'd known. I wish that I'd known that when an investor doesn't know a lot about your business or market, that that's an opportunity to teach them something and that providing insight into something that they may know little about is actually a great opportunity.
Katelyn : Sorry to piggyback on that, but definitely, not taking it personal, I think, was the biggest thing for me. Because it's my baby, right? You guys understand. It's your baby. You're giving your life to 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 sticking with the numbers.
Aarthi : Don't give up. I mean, that's the one thing that I would tell you. There will be points in your life when people will be like, "Why are you still doing this? This just looks so hard? Why are you still here?" My parents would be like, "Why? You have a great education. Why are you doing this?" As if that fixed anything. But just don't give up. 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.
Liz : My piece of advice would be that you are 100, maybe 1000 times smarter about your business than anyone you're going to pitch to, ever. So you should remember that. And while you should take their feedback and 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.