Women 2.0 loves the Build web show hosted by Poornima Vijayashanker, the founder of Femgineer, an education company dedicated to serving innovators in tech. In this episode, she and guest Erica Brescia, COO and Co-Founder of Bitnami and Investment Partner at XFactor Ventures, lay out some startup fundraising wisdom.
Debunking some startup fundraising myths
It’s still early days in this new year, which is an exciting time all around. You’re probably excited about new opportunities, starting a company, or building product in 2018!
While I’m all for optimism, I’ve also gotta stay true to the theme of Build: debunking myths and misconceptions when it comes to building tech product, companies and your career in tech 😉
So we’re going to spend the next four episodes of Build debunking themes around fundraising for startups.
I know what you’re thinking: “Poornima, is this really necessary?! Can’t we just focus on product and engineering? How about some Build Tips with those friendly product managers, designers, and engineers from Pivotal Labs?”
Don’t worry we’ve got plenty of those in store for you! Before we dive back into the fun and friendly banter of Ronan and his team, I thought it was necessary to start 2018 debunking myths around fundraising.
Here are my reasons for doing this:
Reason #1: If you want to be a founder and start a startup in 2018, you need to know how to control your own destiny.
Gone are the days of a quick and easy seed deal. If you don’t believe me, then here are two posts from very active investors Fred Wilson and Jason Calacanis with compelling data spanning the past 5 years. They show you that investment in early-stage companies is indeed slowing down, and why the trend is going to continue. #byebyebubble
Reason #2: If you want to be a founder and fundraise, you need to know what it’s really going to take to get the first check that gives you the freedom to quit your day job.
I know I previously explored what it takes to raise capital from investors and how investors add value beyond the check. But times are changin’! As I went back and reviewed the episodes I realized that while much of the advice still applies, there are new challenges founders, especially first-time founders face.
If you’re going to be one of them, then you need to be aware of them as you build your startup. There are also going to be a lot of sacrifices that you will need to consider making. As you’re faced with them, you might feel like you’re doing things wrong, when others have had an easier time. But you cannot compare when the market is in flux.
Reason #3: Don’t want to be a founder? Even if being a founder is the furthest thing from your mind, you might be thinking about joining a startup as an employee at any stage — garage to growth.
Well, you need to be able to tell fact from fiction. You don’t want to get lured into visions of billion-dollar exits, only to discover that they are going to be cutting health care benefits, won’t be able to make payroll next month, or all that equity won’t help you buy my 2005 Honda Civic!
You need to be able to ask tough questions to understand the real health of the company, and market opportunity, so that you can decide if it’s worth taking the risk.
Reason #4: As an employee at a startup, every quarter you are going to be tasked with challenging milestones.
Metrics matter more and more these days, and every department has a funnel.
For engineering, it’s making sure the team is continuing to build and ship a quality product, balancing out features with infrastructure and keeping an eye out for that pesky tech debt to avoid slowdowns.
For product, it’s making sure there is a good balance of attracting new customers while engaging and monetizing existing ones. And holding the engineering team accountable to spending time on paying down product debt.
While marketing has to keep growing traffic no matter what!
Teams are also staying lean longer, and founders are looking for employees with generalist backgrounds who can #GSD.
Everyone’s contribution matters to achieving metrics, which makes you feel wanted as an employee. But it also means that you need to be good at prioritizing, understanding tradeoffs, and a fast learner!
At the end of the day, you need to know and understand that what you are doing is actually moving the needle and going to help attract investment and customers.
There is no point in building product or marketing just for the sake of it.
Hopefully, my reasons have convinced you why learning about fundraising is integral to your own success at a startup, and we can move on to the first episode of the year! In it, we’re going to tackle the first misconception a lot of first-time founders fall prey: thinking they need to reach out to investors the moment they have an idea.
It turns out you actually don’t need to reach out to investors and you can get started by funding your idea on your own. You’ve probably heard this a lot already…
Quite frankly, investors won’t even take meetings if you do reach out. I can count on two hands the number of investors who I had successfully raised from in previous years that wouldn’t even return my emails recently! Why? Because it’s getting really competitive out there and they want to make sure startups have substantial progress before they are willing to take time to meet.
To help us out, I’ve invited Erica Brescia, who is the COO and co-founder of Bitnami. Erica has also recently joined XFactor as an investment partner. XFactor is an early-stage investment firm that’s looking to fund female founders as well as mix-gendered teams.
I choose Erica and her peers to come on the show because they are ALL founders first and investors second. Meaning they have sat on both sides of the table.
As you watch today’s episode you’ll learn:
- Why investment may not be applicable to the type of business you are building and alternate approaches to funding your startup
- The questions investors ask themselves before they will respond to a meeting request or write a startup a check
- When startups are “too early” to fundraise and why the definition of “too early” is inconsistent — who really gets funded early and why
- The work that startup founders and teams must do, if they are keen on attracting investment