Latest / Imagine If with Doone Roisin | Health, Wealth & Wisdom for Women (formerly Female Startup Club Podcast) / GEMS: Raising Venture Capital Funding with Three Ships co-founder Connie Lo

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GEMS: Raising Venture Capital Funding with Three Ships co-founder Connie Lo · Imagine If with Doone Roisin | Health, Wealth & Wisdom for Women (formerly Female Startup Club Podcast)

• 0:08
  I'd love to start with the funding piece because I guess you just mentioned, you know, you raised and you were kind of going for aggressive growth and you were obviously experiencing what to do when it comes to that sort of playbook, I guess. So what's your biggest lesson when you think about the fundraising process and raising capital and bringing on investors?
• 0:30
  Oh, so many lessons around fundraising. Okay. So before we raised our pre-seed round in like 2020, we also raised like a friends and family equivalent round. It wasn't actually friends and family in it. It was more angel investors that were like third party, but it was like a small round of this 135K. So in that round, we made all the mistakes. We didn't have a firm like close date. We didn't even have like a minimum check size. We didn't know what that was.
• 0:53
  We also asked for really crazy amounts and things from our investors. We didn't know who to go to. We weren't super organized. We thought we had to go to VCs right away instead of Angels, which wasted a lot of time. So for any of you startups listening to your podcast or people very early in their journey,
• 1:11
  Don't be sucked into like the enchantment and like all the glitter of some of these headlines that you see like, oh, this company raised 15 million from this crazy VC. If you're early in your career as a startup founder, I actually think it's better to go for angel investors. Ideally, someone who is a former founder, because then they can actually help you through a lot of the early journeys that you're going through. Like, for example, I know you interviewed Tara Bosch from SmartSweets. She's one of our investors.
• 1:39
  And having people like that who have gone through it are much more value add for you as a small company as opposed to some of these venture capital firms. And also, I think like from the perspective of connecting dots, someone who can be like, yes, like I can give you advice and the pitfalls to avoid and things like that. But like I can also introduce you to, you know, this distributor or this person who did my legal side of things, like whatever it might be. You can get really great referrals and recommendations from someone who's like actively invested in your company.
• 2:10
  A hundred percent. And, you know, on that topic, we actually send out a quarterly investor update to all of our investors. And the first section of the email is where we can use help. And the people that usually reply to our emails are the founders that have done it before versus someone like now our bigger angel investors, like, you know, CEOs of companies and stuff. They don't really have that much tangible, like skill to contribute. So they read through like the investor update. They're like, okay, this company is doing well, but the ones that actually take the time to offer help,
• 2:39
  A, have been through it and B, like their founder empathetic because they know what it's like. So they're more willing to be like, you know what? Like I remember what it was like when I was 27 and starting a company, like I want to help them. So I think we've learned a lot, like setting a minimum check size, setting a firm end date, also not raising too much for the size of company you are for two reasons. One is you don't want to overly dilute yourself. Yeah.
• 3:01
  And second, if you think about it, if you're raising a larger amount, then when you're trying to drum up FOMO from these investors that you're getting on pitch calls with, they'll usually ask you like, what percent subscribed are you? If you're like, of this total amount, how much have you raised so far? And if you're a tiny company, you're trying to raise like $10 million and you've only
• 3:19
  actually raise like $50,000 from someone, the percent subscribed is going to look so tiny compared to someone who is more realistic and says, okay, I think right now I probably only need $500,000 for the next maybe 18 months of runway, given that my expenses are pretty
• 3:35
  tiny as an early company. So I'm only going to raise top under K and it makes a lot of conversations a lot easier to drum up FOMO because you have to close that round faster. So those are like little tips and tricks that people don't really talk about when they're starting to raise. So I would probably say those would be the biggest ones when it comes to fundraising.
• 3:52
  I also think it's really important to always ask anyone you chat with, whether it's a yes or a no from them to invest for three more introductions at least. So you don't need to say like, give me three intros. We could be like, hey, is there anyone else you think we can talk to? Usually people give three to five. And we had this database in our Google Sheets that would just be like, contact who referred us, who between my co-founder and I was managing that relationship, percent probability of closing.
• 4:18
  what the likely check size would be. And then we would multiply those two columns to say like, okay, this is how much we think we're going to raise. So those are some of many lessons. I'm sure you have so many more in the bank. If you were thinking about, you know, if you were going to start a new business tomorrow and you were going to raise from kind of the early days,
• 4:37
  Is there sort of a formula or something that you could give as advice for another sort of early stage founder listening who might want to start exploring that kind of like angel round? You know, you just said 500,000, but like, how would you get to 500,000 as a number? Would it be like, this is how much product I kind of estimate that I need to buy, like inventory wise, or what would you be kind of like basing those early numbers off on?
• 5:02
  Yeah, that's a very good question. It's probably a hard question. But if there's some kind of like, what would you do if you were, yeah, early stage that you could share as advice for someone else listening in?
• 5:14
  Yeah. So the first thing I would do is think about what you can fund realistically yourself versus what you actually need to fundraise externally. And what you can fund yourself isn't just the cash that you have. It can also be loans. So debt funding is really big. And a lot of people don't talk about that because it's not as sexy as getting like an actual investor, even though it's an amazing option.
• 5:35
  And then also like grants. Grants is another thing. We really lean into grants, especially when we're starting off. There's a lot of money out there that the government offers that you just need to take the time to research to be able to find. So those are two things. Also, we did a lot of pitch competitions, doing like Dragon Center, for example. Like there's many ways that you can find capital without storing the fundraising process. That's the first thing I'll say.
• 5:58
  Then look at that capital that you already have and see what you can do with that. So what I mean by that is, let's just say you are a newer brand and you want to launch four new products next year because the industry standard within your industry is maybe one a quarter and you budget out. You're like, okay, for every new product I launch, I need probably...
• 6:17
  $15,000 in the initial R&D, the minimum order quantity from my manufacturer. I need to factor in like shipping, like whatever your expenses are. Then you say, okay, then to market that. So I kind of think through like the buckets of a P&L that came marketing. So there's like marketing to D2C, there's marketing to your retailers. If you have any headcount at that stage, like many startups don't, but if you do have like fixed costs that you need to think about. And then once you think through all those expenses, then what I would do is I would
• 6:47
  There's so much money I have. This is how much cash flow I think I'm going to generate from just like business as usual, because that's incremental. And then you compare your future state expenses to what you already have. And then on top of that, what I would do is I would ask myself, okay, so let's just say I need to raise $200 to cover these additional products on the marketing that I think I'll need for the next 12 to 18 months is usually what people try to fundraise.
• 7:10
  Then I would also think in an ideal world, if I had more money, what are some like bigger risks that I would take that I wouldn't have taken if I didn't have the money? So for example, maybe you have never, ever tested an influencer partnership and you're like, okay, from researching online, it's like $5,000 or maybe $10,000 for an influencer paid post. And I've never tried it before. So I don't know what the ROI would be. Like I would add that to the tally of what I want to fundraise. Maybe I want to test apply.
• 7:38
  guest ad, maybe I want to test like influencer seating, I'm just making these up, then I would have some of those or maybe a higher that you're like, okay, if I had 40 grand to bring on this marketing coordinator, I actually think it would drive this much more time for me. And with that time, I could secure this many more accounts. So like that, those are some of the questions you should be asking yourself. And then that's, that's how I would get to the total of what I would fundraise.
• 8:02
  Yeah, I love that. That's so interesting. And I think I really love your point around, you know, don't just lean straight into raising capital from investors. And it's something that I say all the time. I'm like, you need to first identify, do you even need to raise? What are the other options you have? Yeah.
• 8:20
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• 8:44
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• 9:07
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