Venture Forward Series — Austin
The Riveter x Christina Vuleta presented Venture Forward, a conversation series focused on helping women entrepreneurs take their next step forward. The panel discussions, held live in LA, Austin, and Seattle, featured three funders answering questions from three early-stage founders with a focus on overcoming the challenges of scaling a startup (reposted from The Riveter blog).
You Can’t Fly A Broken Plane: Startup Leaders Share Their Best Advice With Early Stage Founders
June 12, 2019
It’s tough to fly a plane when you are trying to fix a plane. That’s the challenge three early-stage founders in Austin are facing as they launch and scale their companies. From raising money to building new products or developing a tech stack, these founders, like many others, feel as if every decision is make or break. Three advisors from the Austin startup ecosystem — a VC, an angel investor and a CMO of a tech startup — recently shared their advice with the founders and audience at the Riveter Austin.
Funder Panel: Sara T. Brand, founding general partner of True Wealth Ventures; Claire England, Executive Director of the Central Texas Angel Network (CTAN); Mary Ellen Dugan, CMO, WP Engine
Issue 1: Balancing revenue growth with business model validation when the hypothesis shifts.
Gloria Chan is the founder and CEO of Recalibrate, a startup offering science-based corporate services for mental wellness. The idea was born of Chan’s own debilitating medical battle with chronic migraines. When her neurologist told her that stress related to her fast-paced lifestyle and 24/7 management consulting job was causing the migraines, she dismissed it. But after six months of trying to find an answer, Chan realized she was addicted to stress. She decided that she had to make a change and went on short-term disability.
“As someone who was really clinging to my identity as a young female executive in the corporate world, it was crushing”
But out of the experience came a newfound respect for mental wellbeing.
“When push came to shove, I geeked out on body-mind science. So much is known about the science behind it, that I decided to take the jump and share this knowledge with others.”
Chan started Recalibrate a year ago, selling education, personal coaching and group classes to companies as a means to prove demand for a physical space. Over the year Recalibrate became consistently revenue generating. Proof-of-concept in hand, Chan raised a $150K friends and family funding round and started looking at leases. But her gut instinct told her to re-evaluate.
Looking at the bigger picture, Chan saw that product success did not necessarily indicate that physical space was the right way to go. She refocused on identifying the sustainable competitive advantage that could exist without investment in a physical space.
She’s digging into customer insight work to learn what’s working, what’s not and exploring avenues for new growth, while still running the company.
Chan’s Question: While I have some financial stability, I don’t have the resources to hire help and now it’s my job to keep my plane flying while also trying to figure out how to fix it. What advice do you have on how to do both?
The Answers
Sara T. Brand, a founding general partner of True Wealth Ventures, an early-stage VC fund investing in women-led businesses, validated Chan’s move away from a physical space
“VCs, particularly in Austin, tend to see brick and mortar as hard to scale.”
She encouraged Chan to find ways to stay flexible so she can find out what’s truly resonating with customers and what she can build on before she invests.
“I’m a believer in getting product-market fit and getting profitable before you pour fuel on the fire.You don’t want to continue to build the plane and trick it out while it’s tanking.”
Claire England, Executive Director of the Central Texas Angel Network (CTAN) recommended exploring new products beyond a pure service play.
“Angel investors want to see revenue that’s going to multiply 10X. With service companies that usually doesn’t happen, and it ends up an acqui-hire.”
She advised Chan to make it turnkey.
“If you want to go big, consider a SAAS tool for employers and evaluate product-brand fit to automate as much as you can.”
England also suggested programs like the Texas Venture Lab that work with grad students to solve startup challenges as a way to stay lean while learning.
Mary Ellen Dugan, CMO of WP Engine, the WordPress hosting platform )and most well-funded tech start-up in Texas), told Chan to stay focused on what people are coming to Recalibrate for.
“You have to recognize what customers want to buy and what you are really good at. Then you can introduce that you have something else.”
She warned that excitement about the “new carrot” sometimes gets in the way of growth.
“Make sure you don’t take the foot off the gas of what is working because you are only a year in and you have to consider how much energy can you expend.
Dugan further encouraged Chan to do more analysis.
“Looking at the resources you have now, how much are you willing to put at risk either with the funds or the time that you have? Can you do the research yourself? Can you hire a freelancer? You already have a growing business, so keep that going. The more market share and visibility you gain, the better position you will be in a year from now.”
Issue 2: Where To Begin Fundraising as a Ed-Tech Company
Gina Morales is founder and CEO of A Mana Project, a startup focused on unlocking the potential of STEM education for preschool students. As the founder of the Austin STEM Academy, Morales saw a gap in STEM resources for preschool teachers. That inspired her to build an online application to provide creative STEM curriculum, crowdsourced lesson plans, and a marketplace for the exchange of ideas and community.
Morales started the company in January after graduating from the Founder Institute accelerator program. Now Morales is focused on initiating her marketing efforts, building the audience and gaining traction. Currently they have signed up one school district client.
Morales’ next stage is raising money for building out the online platform.
Morales’ Question: Since we are so early stage, what is the best avenue for raising? Would it be crowdfunding with something like IFundWomen or angel investors, or should I go straight for VC?
The Answers
England acknowledged that if your goal is to build something big, VCs can help you get there faster and with more money. But she warned that it’s a challenge to get funding pre-revenue so a funder has to think hard about whether it is really the route they want. She shared that at Central Texas Angel Network (CTAN) only 25% of the portfolio has VC money.
“Many companies don’t need the dry powder of VC funding to reach sustainability and have a good acquisition. For an angel it’s a great run if the lifetime raise of the company is $5 million and they can exit for 75 to 100 million.”
She advised Morales to stretch her resources before she raises through bootstrapping or a “friends and family” round.
“Spend time doing office hours with investors and build relationships before you are ready to raise. It will save you time in the long run because you can say I’m not looking to raise now but I want your advice on when we will be ready to raise.”
Brand pushed Morales to explore other ways to position and fund her company.
“Ed-tech is a hard sell for venture capital. If you have a startup focused on teachers and schools, corporate sponsors may be a better route as they understand the importance of building a STEM pipeline.”
She also suggested exploring a philanthropic route.
“There is a study that I don’t like, but it shows that when women entrepreneurs switch from pitching for-profit entities to nonprofit organizations, people throw more money at it.”
Lastly, Brand recommended talking to angels and VCs to get the “good, bad and the ugly” about crowdfunding.
“Find out if they have funded companies who crowdfunded. It’s important to understand what that cap table looks like because cap table is a big deal to early-stage VCs.”
Dugan offered up a pivot in business model from B2B TO B2C, noting there is more money there.
“I was intrigued. If I had a preschooler this might be something I would like to do.”
Issue 3: When is the right time to build a custom tech platform vs outsource.
Allegra Moet Brantly is the founder and CEO of Factora, a wealth building community for women.
A second time founder who spent time in the fashion, tech and finance industries, Brantly has been on both sides of the financial equation.
“I started out in New York City making no money and ended up making plenty of money but having nothing to show for it.”
Her experiences took her on a personal finance journey, not only for herself but for others.
“I realized there was a really big mismatch with the women I knew that are resourceful, powerful, incredibly talented and yet not confident about personal financial or investment decisions.”
Her solution is to get personal.
“What we are all missing in this online tech world is that human touch. Money is personal and there’s a lot of fear, sometimes shame, and even intimidation about what to do with it.”
Brantly believes that if women can tackle the barriers to wealth together it can be an empowering experience. Her unique Factora Circles format convenes women for a series of four sessions and provides access to a private network of female investors for sharing and evaluating opportunities.
As the next step Brantly is evaluating outside learning management systems (LMS) to take the Circles online as Factora doesn’t yet have the resources to build a custom platform. The challenge is that the existing platforms don’t have the community element that she feels is necessary for people to learn.
“Women need to see other people doing it to feel comfortable. I can’t expect people to do 16 hours of financial programming and homework on their own.”
Brantly’s Question. I’m putting a tech stack together and wondering how to navigate the path between using an outside learning management system platform and investing in building the technology on my own.
The Answers
Dugan suggested taking advantage of the tech platform hosting expertise in Austin to get advice on the red flags or trigger points to consider.
“I would use this as an opportunity to reach out to chief architects in town. Ask them about what happens when they have triple the amount of customers, or ten times the amount. What are the longer-term implications of incorporating the billing system? Assuming it is cloud based, what is the right provider? What is the point where you often see that homegrown isn’t enough?”
Dugan believes they would be flattered to share their experience and that it just may lead her to finding a CTO or advisors as well.
England advised Brantly to place high priority on finding an LMS platform that could grow with Factora’s vision and consider white-labeling options.
“Make sure the platform you go with is a sustainable and has staying power, especially as your needs around billing or a subscription model expand. If you have to build your company on it, you want it to last.”
By Christina Vuleta
Christina Vuleta hosts Venture Forward events to help founders move their ventures forward, Mentor Accelerators to foster unstructured mentorship within organizations, and Venture Salons to accelerate innovation through wisdom exchange.
