Fundraising Is a Four-Letter Word
Mar 18, 2018
This is the second post in a series about how we’re building our company.
When raising money for your company, it’s a good idea to know what kind of investment you want.
This hit me one day when I was talking rapidly about financing options to serial entrepreneur Danny Shader. He gently interrupted me with, “Jaleh, what do you want?”
Silence. How did I know?
Neither Kimberly nor I had actively raised money before, so we constantly found ourselves one Google search away from the next step.
Should we issue a convertible note or do a priced round? Google those terms. What’s the definition of a seed round? Do we need to give away a board seat? How do you come up with a valuation for two women with an idea? Google, Google, Google.
Online research only goes so far. It was time for face-to-face advice.
There’s a saying that if you ask for money, you get advice – and if you ask for advice, you get money. For us, this was unexpectedly true, although not because we were savvy enough to adopt it as a strategy.
We sought advice from people we thought would never invest in a clean beauty company anyway. (Think: male friends who didn’t know bronzer from mascara.) “Let’s ask our naïve questions and make our mistakes in front of them,” we reasoned.
One of the earliest of these people was Danny (he didn’t invest in our business). He had grown multiple companies, and was now CEO of Handle Financial. We made the trek to his Sunnyvale offices to extract his wisdom. The first thing he said was that he had literally zero affiliation with clean beauty or anything related to our idea.
This was fine with us.
We emerged that day with a spectacularly useful insight: a four-letter word that Danny’s mentor, the late Bill Campbell, had taught him and that had governed his fundraising for the past 20 years.
GTFM. Get The Fucking Money.
Us: “Danny, is [xyz] venture capital firm a good one to have?”
Us: “What if the valuation is iffy?”
Danny: “GTFM! If you succeed, everyone makes money. If you fail, nobody makes money anyway. Just GTFM and build a great business.
Us: “Should we do a convertible note or a priced round?”
Danny: “However you can best GTFM!”
(To be fair, he did say he prefers a priced round with institutional venture capitalists. This is because he believes that institutional money begets more institutional money in the future when the business needs more capital.)
Us: “How much should we raise?”
This one left no doubt.
Danny: “G as much FM as you can! You always need more than you think.”
Then he shared his view that there are two ways businesses fail. You either run out of money or you run out of heart.
With GTFM in mind, we drove off to get more advice. About two thirds of the funds we ended up raising came from people whose advice (not money) we had sought.
Meanwhile, the day our bank account swelled from $9 (yes, nine dollars) to a healthy balance with many zeros, Kimberly and I did not celebrate. We reminded each other that we are now two women + two laptops + an idea + a freshly opened bank account.
It was time to get down to business.
And what about Danny? After we’d firmly closed our seed fundraising round – with legal t’s crossed and i’s dotted – he dropped me an email.
Was it too late for him to invest?
Unfortunately for us, it was.