Lunchclub co-founder Hayley Leibson shares the 6-step approach she used to raise a $4 million seed round led by Andreessen Horowitz
If you’re a professional living in one of these eight cities — San Francisco, Los Angeles, New York, Boston, Austin, Seattle, London or Toronto — you’ve likely heard of Lunchclub, an AI powered networking platform that has attracted droves of users.
Networking is an often frustrating and awkward experience: Cold Linkedin DM’s go unreturned, and casual conversations at industry events can be hard to turn into real connections. To change that, Lunchclub’s platform is built to facilitate one-on-one interaction. Users are matched based on their goals and professional aspirations, introduced over an email, and given a suggestion for a time and place to grab lunch.
Hayley Leibson, co-founder and COO of Lunchclub, first discovered the platform in May 2018, while speaking on a panel at the UC Berkeley Haas School of Business.
“Immediately after the panel, I signed up for Lunchclub with the goal of meeting other women entrepreneurs,” Leibson, who has a background as a founder, community builder and a product marketer, tells MarketFit @ Rho, the official blog of Rho Business Banking.
“I tried the product and I couldn’t believe how well it worked,” she says. “Lunchclub had been making a profound impact on the lives of the people I met. They just couldn’t believe the results of connections being made. I met women that were able to get their first angel and VC checks through Lunchclub, people who had found a technical co-founder through Lunchclub.”
Leibson soon met Vladimir Novakovski and Scott Wu, the creators of Lunchclub, and began working on the product with them at South Park Commons, the co-working space founded by Ruchi Sanghvi. Leibson officially joined as the third co-founder on January 1, 2019.
By that time, Lunchclub’s growth was undeniable: “We were having incredible growth, as well as fantastic metrics around retention and the quality of matches being made; We receive feedback from people after every interaction. So all of our metrics — traction and growth — were great,” Leibson says.
Lunchclub had raised a small amount of funding through friends, family, and South Park Commons, but the founders decided it was time to raise a seed round in the spring of 2019.
The fundraising efforts by Novakovski, Wu and Leibson were a success: In September, Lunchclub closed a $4 million seed round led by Andreessen Horowitz.
When approaching fundraising, Leibson adopted a simple mindset: Make a plan, and execute. In fact, she suggests all founders implement a systematic strategy when considering raising a seed round, and break the process down into six steps.
1. Evaluate your business
“The first step is deciding if raising money is right for you,” Leibson says. “Once you’ve raised capital there truly is no going back.”
Devoting significant time to the question of whether or not venture capital is a good fit for your business is the first priority, she says. To do that, she recommends thinking through this question: “How big is your idea?”
“You should really be putting this into perspective,” she says. “A great person who did this for me was Michael Seibel of Y Combinator. He laid it out in a way that I thought really makes sense.”
“Basically, he said if your company ends up making a billion dollars after eight years, the VC partner that has been with you for those eight years until your company actually makes that billion dollars, really only gets $5 to $10 million. And that’s for eight years of work. That’s not an outcome they really want. These VCs want a $10 to $100 billion dollar outcome. So that’s the most important thing: Do you believe your business could have that kind of outcome?”
The second question you should ask is, “Can you see yourself being 100 percent dedicated to this idea, and being obsessed with making your vision a reality for the next 10 years of your life?” Leibson says. “That’s just because starting a company is so extremely difficult.”
Leibson quotes Linkedin founder Reid Hoffman with a laugh: “Starting a company is like jumping off a cliff and assembling a plane on the way down.”
2. Make three lists
If you decide that raising capital is right for you, the next step is to get in touch with the people in your network who could help.
“How I did this, and how I would recommend other people do this, is to make three lists,” she says. “First, list people you currently know that you can turn to for advice and insight. These could be other founders, and usually founders have more founder friends. Second, make a list of dream investors. These could be dream angels or VCs you want to work with, and start heavily researching those people. Once you come up with that list, I would recommend you immediately start following and interacting with those people on Twitter. Third, make a list of the people who can introduce you to your dream list.”
For introductions, look for founders in your dream investors’ portfolio, she advises: “Introductions from founders are the best way to get a call or a meeting with an angel or VC.”
But if you don’t know anyone, don’t let it stop you.
“I wouldn’t be discouraged if you don’t know anybody that can introduce you. If you can’t get a warm introduction, then definitely send cold outreach,” she says. “You’d be really surprised by how many people will respond, especially in Silicon Valley. Michael Seibel will respond to every email he receives from a founder.”
3. Hone your pitch
Next, you need to get your pitch in top-notch shape.
“I would suggest meeting with a bunch of founders or VC’s that know you, but that you wouldn’t actually approach for money. Ask for their perspective, input, and advice on your pitch,” Leibson says. “And maybe these people can make introductions for you.”
“Really ask for critical feedback, and then just keep practicing, and practicing, and practicing with these folks.”
(If you’re curious about Lunchclub’s pitch, Leibson shared the deck her team used with Business Insider.)
4. Schedule the meetings
“I recommend contacting everybody on your list who can make introductions for you, and then do the work for them. Write a blurb about who you are and the company you’re building, and ask for an introduction to be sent by a specific date and time,” Leibson says.
You want to make it as easy as possible to pass on your information, she explains. “I receive a lot of inbound emails from founders that are like, ‘Hey, can you make this intro for me?’ But they don’t include more than that. Then I have to do a bunch of work to write a blurb about who they are, and their company. It makes people much more willing and excited to introduce you when you’ve done that work.”
Remember to include a deadline, because founders are busy people, she adds. And, think about the timing when you’re arranging introductions.
“I would highly recommend making sure all introductions go out at the same time and schedule all of your meetings within a short time period,” she says. “I recommend carving out a few weeks where you’re going to schedule all your meetings.”
If investors ask for your deck during this process, Leibson suggests sending a redacted version. “The goal of every interaction, whether it be email or phone, is to get to that next step, the in-person meeting. That’s where you can really show your excitement for what you’re building, and get them excited to join,” she says.
5. Have the meetings and follow up
It’s time to shine. The fifth step is to have the meetings with potential investors, and follow up.
“At this point you’ve practiced a million times, you’re solid,” Leibson says. “So you have the pitch meetings, and then if there is anything that comes out of those — if they want more information or data on certain things — you follow up super quickly and and try to get to that next step with them. Or, quickly find out if they’re not interested, and then move on to someone else.”
6. Close the deal
“If you’re lucky maybe you’ve gotten more than one term sheet from investors, or maybe one term sheet,” Leibson says. “Now it’s time to do due diligence, so calling founders who’ve worked with them before. I would say talk to two different types of people in their portfolio: People that have companies that failed or have had a really difficult time, and ask, ‘What was it like to work with those VCs or angels during that time?’ And also talking to people that had success, and see what that experience was like.”
You’ll also need to do your homework, and research the details in the term sheet. Run it by fellow founders, friends, legal counsel, and company advisors to make sure you understand the full agreement.
When it comes to choosing an investor, Leibson’s advice is to consider the nature of your business, and look for an investor with core competencies in that area. “I think it totally depends on your company and what you’re trying to build,” she says.
For Lunchclub, the strategy worked. In addition to Andreessen Horowitz, Lunchclub investors include Quora’s co-founder, the Robinhood co-founders, and Flexport’s co-founders, according to TechCrunch.
A last tip from Leibson? Women entrepreneurs should not be daunted by this process.
“I hear this a lot from women, that they’re just so discouraged,” she says. While dismal statistics like this one — only 2 percent of venture capital went to women last year — are often touted in the media, “it seems very obvious and clear that women have more than two percent of good ideas,” she adds.
“Ignoring and not focusing at all on those statistics” is Leibson’s №1 piece of advice for women fundraising. “Just be laser focused on what you’re building, and how that will make the world a better place.”