Navigating the Fundraising Process

Cloudflare Co-Founder Michelle Zatlyn shares
experiences and advice

Sep 25, 2014 · 3 min read

By Matylda Czarnecka

Cloudflare Co-Founder Michelle Zatlyn has raised $72M for her startup in the course of three fundraising rounds. In a conversation with one of her investors, Brad Burnham of Union Square Ventures, Zatlyn shared stories and advice at the Women, Inspiration and Enterprise Symposium.

“You start small, and as you gain momentum it gets easier, but not easy,” Zatlyn said about fundraising.

In the early days when the company is unproven, “It’s much more about crafting the story of the vision of what you’re trying to do.” In subsequent rounds, most investors look at of what’s been done with previously raised money and metrics of the company’s trajectory, she said.

When asked if there’s a difference between male and female entrepreneurs, Burnham said he didn’t think there’s a significant difference, except that many women undersell themselves and many men oversell themselves.
“I would say underselling yourself is a tough way to raise money,” he said.

Zatlyn discovered many investors were concerned she and her male co-founder were dating when they began fundraising, which was not the case. “Early on, when you’re unproven and unknown, people ask questions and you have to have answers,” she said. A strong founding team helped her get through the challenges and frustrations.

Both Zatlyn and Burnham agreed fundraising shouldn’t be considered a goal in itself, nor definition of success.

“If you treat it as an end, you’re not going to be successful,” Zatlyn said, “If you focus on a product that delivers value, fundraising might happen.”

Zatlyn cautioned that only certain kinds of companies should raise money — specifically companies looking to scale to a very large size. For consumer-facing companies, Zatlyn said 10 million users was once considered a lot, but now the expectation is 100 million. For enterprise companies, she said investors look for businesses that can grow to at least $100 million revenue.

“We spend a lot of time convincing people not to take venture capital,” Burnham said, “A VC can push you to go big and do unnatural things with your business.” He cautioned entrepreneurs to make sure investors understand their business and only accept money from those who do.

Zatlyn advised first-time fundraisers to find mentors who’ve been through the process before. “After a few conversations you’ll begin to pattern-match and start to navigate it more easily.” She stressed the importance of finding a warm introduction from a mutual contact when asking to meet with an investor. In her case, Cloudflare launched at TechCrunch Disrupt, “and all the VCs came to us.”

Burnham said entrepreneurs should focus on putting themselves in a position where VCs are coming to them. “If your business is growing, they’re going to come to you,” he said.

Moderator Cindy Gallop said she sees more men than women pursue they don’t feel 100% qualified for and suggested women could benefit from diving in more often.

“In any given situation, ask yourself WWASWGD,” she said,
“What Would a Straight White Guy Do?”

Burnham reiterated Zatlyn’s point of the importance of storytelling in pitching. “Don’t go to the dry statistics too early,” he said.

“If the statistics are so compelling you completely stand out from anyone in your space, use them, but usually with an early stage company you don’t have those stats — so use the stories.”

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