by Y Combinator12/18/2019
00:15 – Intros
1:00 – Seed fundraising for Zyper and Tara
3:10 – Tara’s pivot
4:15 – Series A fundraising for Zyper and Tara
17:55 – Evaluating investors
23:30 – Meeting with associates and partners
30:20 – Raising a Series A as a female founder
39:15 – Fundraising psychology
41:30 – What not to do when fundraising
44:45 – Talking to portfolio companies about investors
46:05 – What it’s like to run a Series A stage company
1:00:25 – The most important piece of advice for fundraising
Craig Cannon [00:00:00] – Hey, how’s it going? This is Craig Cannon, and you’re listening to Y Combinators Podcast. Today’s episode is with Amber Atherton and Iba Masood. Amber is the founder and CEO of Zyper. Iba is the co-founder and CEO of Tara. You can find Amber on Twitter at @AmberAtherton and Iba is on Twitter at @IbaMasood. All right, here we go. Today we’re going to talk about fundraising. But before that, let’s talk about your companies. Iba, what do you do?
Iba Masood [00:00:31] – Craig, it’s great to be here. I’m Iba Masood, I’m the cofounder and CEO of Tara.AI. We’re building an end to end solution for product management. We help product managers, engineering managers spec out their products, gain insight into their development lifecycle, and essentially monitor progress within software development.
Amber Atherton [00:00:56] – Hello, so great to be here. Zyper helps brands connect to their super fans to build community. We work with a lot of big Fortune 500s, like a Kellogg’s or a Nike to help them really identify who their top 1% of fans are, and then bring them into a space to co-create product or to become brand ambassadors.
Craig Cannon [00:01:17] – Okay, and so both of you this year raised your Series A, but I think it’d be interesting to start from the beginning. Could you tell me your story of, did either of you raise pre-YC?
Amber Atherton [00:01:28] – Yes, I did.
Iba Masood [00:01:28] – No.
Craig Cannon [00:01:29] – Okay, so yeah, this will be good. So one in one, okay, so how did you do it?
Amber Atherton [00:01:33] – Okay, so it was 2017. I was in London, started a company in 2017. I raised 1.2 seed in London, from a VC in London and a lot of angels involved in that, great angels involved in that round two. And then I applied to YC and got in.
Craig Cannon [00:01:55] – Okay, and then you did YC. And you just applied to YC, but you applied a couple times, right?
Iba Masood [00:01:59] – Yeah, I did. Applied twice. At the time, it was a different idea, different company, different even market segment. We were focusing on the Middle East. It was basically a careers platform for fresh grads, and so entirely different company.
Craig Cannon [00:02:16] – Okay, and what did you get in with?
Iba Masood [00:02:18] – We got in with careers platform for grads in the US. That was the first, that was in 2015 when we first got in to YC and post-YC for that, we raised roughly around 200K or so. So it was–
Craig Cannon [00:02:33] – For that product specifically?
Iba Masood [00:02:34] – Yes, for that product specifically. And it was very difficult, the first 100K I remember was, it was a very difficult process to raise. Pre-YC, we had just gotten about 10K in a grant from MIT, because we were doing research into GitHub repos. We were looking into like programmers and their work on GitHub and just kind of analyzing the commits and how we could find patterns essentially, and also try to identify the best programmers out there based on their work in Git. And so that early research actually formed the thesis and the infrastructure for Tara as it stands today.
Craig Cannon [00:03:13] – Oh, interesting.
Iba Masood [00:03:14] – Tara, we officially launched in, and not even like the website or the product, but just launched with the idea in 2017.
Craig Cannon [00:03:22] – Okay, and how did the pivot go with your investors? How did you go about communicating that?
Iba Masood [00:03:27] – Our investors were very supportive. When they heard about the market that we were trying to tackle and the product that we were building, they were immediately like, “Oh, here’s more money.” What happened was about a fourth of our investors doubled down. From that 200K, when we pivoted, we raised 2.8 million. We had a three million, called it a three million seed.
Craig Cannon [00:03:52] – Wow, okay, so what would you attribute that up round to?
Iba Masood [00:03:56] – It was just the opportunity, the market segment, the early, early team that we had assembled. And then also the early traction that we were seeing from the early like ML models that we had applied, as well as early customer traction. So the seed was in 2018, the three million seed, that’s when we announced it, but it had really been a work in progress for a while before that.
Craig Cannon [00:04:24] – Okay, so you lumped all that money together and called it three million seed.
Iba Masood [00:04:25] – Yeah, we did.
Craig Cannon [00:04:26] – Okay, gotcha. Now having raised both of your Series A, can you walk me through the differences in the process related to it and how you communicated to your investors, how long it took, all that stuff?
Amber Atherton [00:04:38] – YWe did YC Winter ’18 and Forerunner our seed pre-Demo Day and that was exciting. So we raised four million, and we were just charging forward with the product like timing, fast to market. And we started having conversations at the end of last year around just raising an A. It was more rapid than I thought it was going to be. And then I had a conversation with Aaron about the Series A batch and thought this is probably a good idea. Aaron is a good, good guider so I should do that. Then we joined the Series A batch in January of this year. And that process was about, I think it was like two months that we were in that batch. Two-month process, just like heads down, super focused on building out our pipeline and just aiming to close the round in a short a time as possible.
Craig Cannon [00:05:36] – Walk me through the two months, because a lot of people aren’t fortunate enough to be a part of the Series A program.
Amber Atherton [00:05:42] – Yeah, yeah, can’t believe we got in. No, I’m joking so–
Craig Cannon [00:05:46] – But you can get into YC.
Amber Atherton [00:05:47] – Yes, yeah. What was the process like? I mean it was informal, but intense. As with YC, or anybody who’s going through the process of building something people want and getting that product to market that you have daily insane highs and lows. I guess what was great was just going into it with a structure of okay, let’s fill out this Excel sheet, let’s know every single fund that we want to speak to, let’s work the process and get the timing right. I think that was super helpful in in kind of catalyzing how quickly we could close something. It was the standard process of fundraising, of targeting the people that you know you want to work with that support your vision, and then going through that cycle of having conversations, second conversations. I think something we did that was really good though was writing that investment memo. And so what we did was kind of, do the VCs’ jobs for them and write a memo as to why you should invest in us. And that sort of went out with the deck after the first meeting. That’s a very chaotic answer to your question.
Craig Cannon [00:07:01] – Yeah, so what was yours? Let’s get really specific.
Amber Atherton [00:07:04] – Okay, what was my investment memo?
Craig Cannon [00:07:07] – Rough, rough terms?
Amber Atherton [00:07:09] – Honestly, we looked at a lot of other memos that we could find out there. The YouTube memo, picked that up and really kind of spoke to other VCs that I know about, like their favorite memories or how they think about putting a memo together and then used that as a foundation to structure our memo as to, what is the point of Zyper? What problem are we solving? Obviously like how big can it get and kind of unpacking what the risks might be and why they weren’t really risks in our eyes.
Craig Cannon [00:07:44] – Okay, and how deep were you going into the financials in the beginning up there?
Amber Atherton [00:07:49] – Not massively deep, to be honest. In the memo, we weren’t, we were just giving high level, like this is our revenue so far, and this is the market we’re going after and how much we expect to grow in the next kind of 12 months. But obviously we then had a model to back that up that was significantly more in depth around the financials.
Craig Cannon [00:08:09] – Okay, and so Ibo, would you corroborate that? Is yours basically the same?
Iba Masood [00:08:12] – For us, and if you remember, Amber, what happened during that time it was, so what happened with us was, we spent about two weeks during the program just really trying to nail the pitch, make sure that we were talking about the product and the solution the right way. Just being able to really segment out the story and tell it in a very concise but in a much more in depth manner as well. What happened was, we spent about two weeks pre, during the program. And how I found out about the program was I contacted Aaron and I was like, “Aaron, our seed investors want to just pull in and do five million Series A.” They were like, “You don’t have to go out, you don’t have to raise and it’ll be done.” And he’s like, “think about it, you shouldn’t rush into these things and those seed investors can come into your Series A as well.” And so what ended up happening was our total fundraise process to go from first coffee meeting to term sheet was nine days.
Amber Atherton [00:09:16] – Which is insanely amazing. I mean, congratulations on that.
Iba Masood [00:09:19] – Well, the thing is that our seed process was so incredibly painful that this was, it was obviously very surprising. And our closing process took longer. That took about 60 days or so in terms of getting the legal process completed, and figuring out who we’re going to bring on board for that final one million in the overall round. But I think one of the things that I will say is, what we really tried to do is run a thoughtful process and really focus on the partner and people versus the fund. And so we were–
Amber Atherton [00:09:54] – I totally agree with that, by the way. It’s really about doing your research and finding the partners who’ve led rounds in other companies that you admire or that you know have the right profile for your company.
Iba Masood [00:10:06] – What happened with us was we were under quite a lot of pressure during that time, because we had offers on the table. There were people just kind of wining and dining us and really trying to get us to accept their offer. It got to a point where it was, people were literally calling up folks in our ops team to book meetings on my calendar. And it got fairly chaotic, I would say during that process of nine days. My co-founder, Syed, one of the things, I think he’s someone who’s really the Yin to my Yang, and for the most part, he was the one who was like, let’s really take our time and think through who do we want to work with, that are essentially just good people in terms of individuals, have a strong understanding of our market and of our customer, can be thoughtful because the product is fairly technical and we’re selling to a technical audience as well. And so having the ability to actually understand from the engineers point of view, that was something that we were really looking for.
Amber Atherton [00:11:16] – And I think what ended up happening in our case was we decided to work with a boutique fund, so Aspect Ventures, who are now ACrew capital. And Theresia Gouw, Lauren Kolodny, Asad Khaliq, for us, it was really about the team and very specifically the board member that would be coming onto the team. I also think you probably knew early on, like in all the conversations you were having, whether that person or that partner really understood what you were doing. I think looking back with hindsight, I wish I maybe kind of ended some of those conversations earlier, just with people that I was really trying to convince that this is why Zyper is amazing, and this is why it’s great when they were so not experts in this space–
Craig Cannon [00:12:01] – So you were just attracted to their brand or something like that?
Amber Atherton [00:12:04] – Yeah, I was attracted to their brand name. It’s always very exciting when a great brand name reaches out to you, and is– Especially, if they’re being aggressive about wanting to get a meeting and then you take the meeting and then you realize actually, you don’t really understand this space. I wish I’d kind of been more assertive with ending this conversation sooner and really doubling down on do these people actually have my values? You know what, there’s always somebody out there and I think this is, there was, I mean Iba’s process is amazing. Ours personally took about 60 days to go through and I was flying also back to London to meet other funds there, and we actually ended up raising from a London fund. Yeah, so we’re meeting people out here and so it was a, yeah, and then it was holidays and it just always drags on longer than well, for us than you think. It was that 60 day process and then longer to get the legals. I’m glad that we went through that because we did find a great partner. When you know, they immediately get the space. And that’s awesome.
Iba Masood [00:13:08] – I’ll just give you one example, right. We did three full partner meetings. That’s when all the partners at a fund ask you to come in and the partner that’s sponsoring the deal or sponsoring you as a founder is essentially the champion. They want you to come in and really present the story, the solution and the market and why this is going to be the next big thing to the full partnership. We had done three of those meetings, and so we had offers on the table. And what happened with Aspect was, they approached it from a very personal stance, which was to really get to know us as founders and really try to understand what makes us tick, and then also where this company could go. Even during those nine days, I had the opportunity to speak with founders of portfolio companies at those funds. But the other thing, I just remember this. We were at one of the final meetings and they found out that I love bubble tea and so they had–
Amber Atherton [00:14:12] – Oh, I remember this. They sent you all this bubble tea.
Iba Masood [00:14:14] – Yeah, they had like an array of boba just on the table, as soon as Syed and I walked into the final meeting where they had the term sheet. But yeah, it was fun.
Craig Cannon [00:14:30] – That was funny. Included in those nine days, are you meeting them the first time? Because oftentimes people start months and months and months before like grabbing a coffee with someone.
Iba Masood [00:14:39] – Yeah, first time. First time. From the first, in terms of for those few funds very specifically that got to the final part of the process, we met them for the first, so I mean, I don’t know when you can start the timer but it’s really like the day that we met them, from that date to term sheet closing. And by the way, a term sheet is not when your round closes. A term sheet is actually, a lot of founders don’t realize is that a term sheet, it can be considered an LOI. It’s really a letter of intent.
Craig Cannon [00:15:10] – It’s like we’re in.
Iba Masood [00:15:11] – Exactly, it’s kind of like that first part of the process. You can’t even consider it an offer in some cases. So people renege on term sheets all the time. And so when we got the term sheet, I wasn’t celebrating whatsoever. I remember we got our first one–
Amber Atherton [00:15:27] – Agree, cash in bank–
Iba Masood [00:15:29] – Exactly, exactly. Getting the term sheet was just the first part of the process where, and for us, we’re like okay, we have a few offers on the table. And actually, we ended up taking a lower offer, only because one of the things I always tell founders and I just think, I personally believe that you shouldn’t maximize for valuation. Because the thing is that if you maximize for valuation, then incentives aren’t necessarily aligned. What you really want to maximize for is, are we getting to work with the right people?
Amber Atherton [00:16:00] – And also, it’s a long term partnership, right? It really isn’t just a quick thing, you are in it together.
Iba Masood [00:16:07] – Exactly, and one of the investors that we had literally put a blank term sheet. The idea was that we would put in the valuation. It’s a tactic, right? I saw that and I was like, “Okay, that’s a tactic.” You don’t want to play these games, like at the end of the day, you’re building a long, exactly, long term relationship. And so for us, we’re just like okay, we’re just… What we want to do is just work with human beings. And so–
Amber Atherton [00:16:44] – That’s what I loved about Talus who led our round. It was from the get-go, I was doing conversations with them at like midnight out here because they’re based in London. But you know, there you go. You persevere, you get that term sheet and the money. You do realize when you click with someone and they have that great personality and that they are, they really aren’t pushing like weird games with you, weird tactics. But also, I think this goes back to the founder pressure to build momentum and urgency in your process. How do you do that? Many founders asked me that as well, like, how do I create this optics, this sense of urgency? And it’s dangerous, because you can be tempted to say, “Oh well, we have this other term sheet, we have this other offer, blah, blah, blah.” Just don’t ever do that, because it’s so small as a community and just be honest.
Iba Masood [00:17:36] – Exactly, I hate it. I can’t agree more on that point. I think one of the things that happens is, founders tend to, exactly what you said, right? They have a lot of pressure and one of the things people try to do is they try to be slick about it when you don’t need to. At the end of the day, whether your round takes nine days or nine months, it’s really about just finding the right person and the right partner.
Craig Cannon [00:18:04] – That’s what I want to jump in on. It’s not that different from just interviewing someone to work in your company, right? You kind of need a little bit of a culture fit. What are the questions you’re asking? What are the things you’re looking for, whether it’s body language or vibe, or whatever it might be, to signal to you that, “Okay, this is working. I think I want to work with them.”
Iba Masood [00:18:22] – For us, it was really just how they handled some of the early customer calls. Were they even finding out things that we didn’t know? Were they so in insightful in their question and answer process, that they were wheeling back information to us that could potentially help in growing the team size at that company in terms of platform usage. There was that piece. There was also, what I was looking for in particular was, do they really understand how we’re trying to build a data layer. One of the things with Tara is that we integrate with JIRA, with GitHub, and so the idea is to go from spec to issue, so your issue tracking software, which resides in JIRA, and then also go all the way to commit. Where your version control and source control in terms of the actual code commits. One of the things we were really looking for was do they actually understand how important integrations are going to be in our play, and also the value that we’re providing. And one of the other pieces was, everybody was saying this was category creation. But we really wanted to work with someone that had done category creation before in particular, and understood what it took to march forward and specifically really try to own the category from the get-go. So there were certain things that we were looking for, and I think, even if I look at it in hindsight, I think we were able to run a thoughtful process in those nine days. What I found really fascinating was post term sheet, as you go through the closing process,
Iba Masood [00:20:02] – and the level of documentation in your data room and what you need to have prepared and ready, at that stage, it’s really important to work with a good law firm. One of the things that, I mean I honestly discounted was I was like, okay, I think the most important thing is to find the right partner, and then the legal stuff, it’s basically something that a good reputable law firm will be able to figure out. Turns out the amount of follow-up that they required, that the legal firm required after, I mean it was just, it was really like, we didn’t celebrate until the cash was in the bank which was a good 60 days after signing the term sheet.
Amber Atherton [00:20:41] – Also some good advice we got was, negotiate a cap with your law firm to do the legals because it will go over and it will end up being 30 days or maybe even 60 days. That was a good bit of advice. I think some of the questions that I asked the fund in that process, and it’s really important that you do ask questions back because you are going into relationships. You don’t just want to not ask anything about who they are and what they care. Some early indicators saying, there is like, okay, how do they handle their customer calls? And are they coming up with feature suggestions for the product? You can tell early on if they’re obsessed with the product and what you’re building, because they will give you features suggestions. I would then follow up with the customer call, say how did it go? What did they think? And so often there would be this kind of joyous enthusiasm. They were so excited about the space. I think that’s a very early indicator, do they really care about the product? And ask questions back like what do you understand about it? What do you think we should be building in it because then they’re building a vested interest in the company from a very early stage, which I think can help push the process along quicker. Definitely asking key questions like that.
Craig Cannon [00:21:51] – Related to that, what about the people that you kind of should have said no to and kept taking meetings with, what were the signals you saw there you’re like, “They’re probably going to say no anyway, I’m wasting my time.” Or would you have still taken those meetings and gone all the way through with it?
Amber Atherton [00:22:08] – It’s tricky. You don’t know I think a lot of the time where something is going to lead. And I think that is the classic, like the Vegas of VC, the sort of unwillingness to say yes or no and just, you kind of can get lost in that like gray area for a while and you’re kind of hoping that something might happen. Actually that’s probably a telling point is that funds can operate quickly. You can move fast with paperwork. It is a hot deals, very difficult to artificially create a hot deal. If you are hot deal and you’ve got a great product, you’ve got great revenue and product-market fit at this stage, funds will move quickly and they can give you a term sheet. However, I do think that one question I asked early on was what is your process? Tell me how does this work for you, because whilst they can move fast they still, they have to present the partner meeting and being mindful that they also almost are entrepreneurs themselves, they have to validate it to their LPs and they have to get buy in. Working together on how to move that forward and really understanding from their perspective what it’s going to take to get this signed off I think was helpful for me.
Iba Masood [00:23:20] – If we look at it as a process and we want to present an overview, the first meeting is usually the single partner meeting, which is the coffee meeting. At that stage, and for some founders, it may happen with an associate or a senior associate or a principal. What you want to do is make sure that you’re meeting with an investing partner. And so they would usually have general partner in their job title. Very simply. What do you think about this whole question that gets asked so many times about whether you should take a meeting with a principal or an associate? Because I think it’s important because they can be great advocates for you. Yes, and so I don’t have a black and white answer to that because the thing is that at Aspect, we met with a senior associate and that’s how the… It was still a short process in terms of like getting the deal move forward. The most important thing is to meet with senior associates that have influence. How you can figure that out is really just go on to their LinkedIn and see how long they’ve been at the firm? Are they someone who’s really an analyst, but has the associate title
Iba Masood [00:24:25] – because sometimes you can have inflated titles at VC firms. And so if they’ve been there for a few years, and even better, they’re sitting on a board, like let’s say they’re a board observer, then you know that this is someone who has influence at the firm. And so that was just my very quick vet, in terms of deciding. It was just such a short process, but that would be the advice I would give. Now, if you look at the actual process. The first piece is the coffee meeting, right? And that’s when you meet with the, ideally the GP and sometimes it’s a senior associate and you get pushed forward to the GP. If the senior associate is serious enough, they will bring the GP into that coffee meeting. In our case, what happened was some of our early, from those three funds, one of them in the first meeting itself, pretty much they had like four people there, and it ended up being a lunch meeting. It can be a coffee meeting or a lunch meeting in terms of that first meeting. And then if that goes well enough, they’ll pull you into a Monday or Tuesday full partner meeting. And so let’s say if you have lunch or coffee on a Wednesday or Thursday, by Monday or Tuesday, you could be presenting to the full partnership. What happened in our case was we had back to back full partner meetings, it was on Monday and Tuesday. And so that weekend was when we spent really prepping the pitch. And if the GP really wants you to present your best foot forward in front of the full partner meeting, they will work through that weekend
Iba Masood [00:25:55] – or whatever that date period is to make sure that your presentation is as good as it can be.
Amber Atherton [00:26:00] – I think it’s so important just to focus on that because as you’re left as an entrepreneur in this gray area, not getting really direct clear signals as to whether a fund wants to do this or not, it’s being mindful that yes, a fund, a partner will work on a Sunday or Saturday to move this deal forward, and they will do that.
Iba Masood [00:26:17] – And they’ll do the customer calls, they’ll do the reference calls as well. They’ll put the power of the partnership behind this so that they’re able to do adequate and enough research on the company. And I think for us, the other piece was YC and the Series A program really honed in on the fact that you should have your data rooms ready and prepped. So we did, and I think that was also what set us as Series A companies apart, from even other people that were raising was we really had our documentation in order.
Amber Atherton [00:26:45] – That was… Thank you so much Aaron Harris. We definitely got the data room together and it was very organized like week one, that was our goal.
Iba Masood [00:26:55] – It still took us 60 days to close even with the organized data room.
Amber Atherton [00:26:58] – But good point. Also just want to say on the like transparency, telling the funds that you’re speaking to as you’re managing this pipeline and you’re having multiple conversations, it is really difficult to juggle all of these things and kind of calibrate at what speed different people are moving at. So something we would say a lot is just okay, we just want to be mindful about other people who are in the process. Like you really, you want a yes or no. And I think it’s fine to push for that. You need to get an answer, do you want to do this or not? And if you have multiple people saying yes, then you’re in the position of saying, okay, let me decide and what my values are and how I want to move this forward and this long term partnership. But I think, be assertive with asking for a yes or no.
Craig Cannon [00:27:43] – They’re just trying to preserve optionality and you’re going to get some clarity here.
Iba Masood [00:27:47] – Another signal I think, if we can boil it down to signals is that the fund will work to take like four or five hours of your day. They will literally, so in those nine days, I’d be up by 4:15am. I’d start, because meetings sometimes would be in SF or they’d be in Menlo Park. The two weeks prior, during Series A program, and then for those nine days, I was pretty much full time on fundraising.
Amber Atherton [00:28:18] – That is so important to know it as well is that being able to be in a mindset where you are locked in on fundraising, and this is what’s so great about when you’re doing YC. It’s like, what’s your M&A goal? Does it fit your goal? Don’t do it. That is the process that you need to be thinking of when you’re fundraising. It’s full focus on that as much as you can, because that’s how you’re going to get to close in nine days, or in our case, 60 days.
Craig Cannon [00:28:43] – It’s still pretty good. The thing that’s not obvious, in my experience interacting with founders is that it just takes up all the time anyway, because it’s in your head. So all of a sudden, the coffee meetings maybe 20 minutes and say you spend an hour getting there, an hour getting home, whatever. But then you’re reading blog posts, you’re talking to other founders, you’re doing all this other stuff. So that’s why you really have to time box it because it will just get into everything. I will say we were grateful and lucky that even though the process, it was nine days but we did get to spend approximately I want to say seven hours, approximately seven hours with each partner.
Iba Masood [00:29:18] – It’s interesting, I feel like that’s also almost become a gauge for us even as we go through hiring and recruiting process for candidates, we like to spend a good seven to eight hours. I feel like, I think that’s a good gauge.
Amber Atherton [00:29:34] – I will say that we actually had conversations move pretty quickly to WhatsApp, to chat. I was already building like a lot of rapport, like back and forth on WhatsApp and keeping it top of mind and just that helped definitely with the speed.
Iba Masood [00:29:53] – And texting Aaron at like 11:30pm.
Amber Atherton [00:29:54] – Oh yes, yes. A friend of mine’s going, raising his Series A at the moment, and it’s just so useful to have other founders around you who you can just riff with. Because there’s this whole new lexus that you need to learn of how you’re communicating, like what the process is, what the optics are, everything, and just being able to have a sounding board. I definitely texted there multiple times saying, oh my God, how do I do this? And you need to have that, that space to just have a sounding board to talk things through. I didn’t have a co founder, so I think, thanks for responding to my text.
Craig Cannon [00:30:34] – One thing we wanted to talk about was what this was like being a female founder. Obviously, you’ve only done this one time, you haven’t been a male in another life and reincarnated but you know other founders who have raised Series A. This is kind of interesting to talk about. In your experience, how do you feel like it differed for you personally?
Amber Atherton [00:30:54] – Yeah, I think from my personal experience, I mean we were so lucky to have a Forerunner, a female founded VC to lead our seed. So I had the experience of what it was like to sit with partners, like female partners and it’d be a very comfortable kind of open conversation. What I hear from like other female peers and in my own experience is that often you’re walking into a boardroom partner meeting where there’s not a lot of diverse representation and you therefore feel pressured to take on more male characteristics, like just being more aggressive or you know, just…
Iba Masood [00:31:36] – Did you feel pressure to wear a hoodie?
Amber Atherton [00:31:38] – Do you know what– I just had an outfit that I would wear like, I did and I don’t want to think about this. So I would wear, actually I think I might have worn this. Trouser suit, corporate streetwear is the, I had a little trainer, little trouser suit on and then, I do think it is, that is signaling in a way so I didn’t ever wear the hoodie because I was like it’s just not my personal brand.
Iba Masood [00:32:03] – I did the hoodie during our seed. So post-YC, I was just constantly trying to look like a programmer. Yeah, I mean, it’s sad honestly.
Amber Atherton [00:32:13] – No, but it’s also that that is what the valley has been conditioned to see and interact with. And I think that the style of communication that is familiar and it has pervaded the space.
Iba Masood [00:32:26] – But doesn’t feel so good to be able to wear whatever you want.
Amber Atherton [00:32:28] – Oh, absolutely.
Craig Cannon [00:32:28] – Yeah, of course.
Iba Masood [00:32:30] – You should be able to be yourself. I think that was something that I had to learn and I had to grow up really, to be able to just be myself. You face so much pressure to act a certain way, to be a certain way, to look a certain way. But then one of the things I’ve actually been been doing is listening to analyst calls for public companies.
Amber Atherton [00:32:58] – I love listening to earnings calls. This is my new favorite thing other than podcasts is just straight up earnings calls.
Iba Masood [00:33:03] – Especially if you listen to earnings calls by like minority CEOs or female CEOs. Bottom line, what I’ve had to kind of train myself to do is, bottom line is that it’s really going to be about the traction and the team that you put together, to go after a problem. One of the things that I also think, even since we did YC, things have changed since that time drastically. And I think it’s, you’re seeing, you’re definitely, like we at least I mean for our Series A we saw more representation in terms of the team structure, so the senior partner, principal and analysts. We definitely saw more representation in the funds that we were talking to. And I think also people are more, are more I would say, they’re more used to listening to the fact that founders don’t necessarily come from Ivy League backgrounds or are of a certain race. And I think, or understands sports references. So I think for me, I was like okay, I don’t need to learn the lexicon behind American football. I’m someone who understands soccer as its known here.
Iba Masood [00:34:23] – And so I think that was something that, I had to learn.
Craig Cannon [00:34:28] – But you had way more to show too and the confidence behind that.
Amber Atherton [00:34:33] – That’s what it is, right? It’s that you can’t, there’s nothing to lean on. I didn’t think you can use being female or minority as like a crutch. If you have a great product and great traction, then you are a hot deal. And any other kind of justification as to why you’re not getting a term sheet is you can’t really say that, like you need to have product market fit and a hot deal and that’s in my opinion. But I do think it is full circle. And there are great organizations always pushing to have more female partners and also more female LPs. It’s not just us going out there, it’s like there’s not a lot of female entrepreneurs who are walking into these VC offices anyway. And that is A problem that we need to solve is that we need to bring that education and positive role models earlier on into the education system.
Iba Masood [00:35:22] – Amber, what do you think of this notion? So I’ve been hearing from a couple of female founders that one thing that’s been worrying them is that whenever they get introduced into a VC firm, the automatic assumption is that they would want to talk to a female partner. And so then they get introduced to the female partner who’s actually only been at the firm or fund for, in some cases lesser time, and may not have as much influence as someone who’s a much more senior partner. Have you heard of this?
Amber Atherton [00:35:50] – Yes, I definitely, I experienced this actually. Fascinating stuff. I will say that, I think that funds are grappling with how to deal with this in the most sensitive way.
Iba Masood [00:36:03] – I think the way it needs to happen is that, founders should be able to talk to the partner at the fund that understands their industry and their business. It’s that simple. They shouldn’t automatically assume that because this person is a female founder or a minority founder, that they should talk to the female or the minority partner. It should really just be fundamentally about–
Amber Atherton [00:36:26] – Expertise in the sector.
Iba Masood [00:36:27] – Exactly.
Craig Cannon [00:36:28] – Okay, so were all of your, were there just warm intros for both of the funds in intro that led your Series A?
Iba Masood [00:36:36] – Yes, yes.
Amber Atherton [00:36:38] – I, was this quite cold intro.
Craig Cannon [00:36:41] – Really? It was an intro.
Amber Atherton [00:36:46] – It was an intro, but it wasn’t a warm one. I took a lot of time to get to know them, and I think I actually underestimated how awesome they are early on, because we had so much interest when we started raising out here. It was overwhelming. And I kind of kept it more on the back then also because we were out here and not in Europe, and then investing the time to get to know them more and more was interesting. But yeah, it was more cold then.
Craig Cannon [00:37:20] – You are in control of that to a certain extent. You’re like, “I’m trying to meet this person who knows them,” right?
Iba Masood [00:37:28] – You would think so, but I feel like in some cases, with some founders, with some situations, it might be that oh, I’m finally getting to meet this firm. And so you just kind of take whatever meeting is, it comes your way and it may not be the right person.
Amber Atherton [00:37:43] – Actually, did you know, I think I made that mistake. I think we definitely did that. There was funds that I was excited about and I didn’t really, I was just like oh great, I’m getting in and as opposed to being like, hold on, I really need to speak to this person because they understand community and SaaS companies. So yes, I could have done a better job there. But I do think that, there’s a great like always statistic that 2009, 410 companies who had female founders got VC funding. Whereas 2019, 2700 companies got VC funding. There is a massive, like the positive increase that we should be talking about, that there are more diverse founders, and there are more diverse partners and therefore we’re getting more funding. So I think in general, we are moving to a much more positive, like balanced ecosystem.
Craig Cannon [00:38:35] – Absolutely. I mean it’s why I love being out here, because the default mentality is optimism.
Iba Masood [00:38:41] – Oh, 100%.
Craig Cannon [00:38:42] – And the agency too.
Amber Atherton [00:38:43] – Yes, and you can meet anyone, Twitter DM, sure. I think I had a couple of partner meetings actually, just from a Twitter DM.
Craig Cannon [00:38:52] – If you make great stuff, people recognize you.
Amber Atherton [00:38:54] – I think that’s such a great point, and that really is what it comes back to, is if you make something great, make a great product, have great traction, you’re going to get the meetings and don’t go into a fundraising process too early, because it will just kill your soul. Just wait until you have really built the great company and maybe you’d want to be profitable. That’s a–
Craig Cannon [00:39:16] – Well, well, okay. We’re going to change the subject now. I do want to talk about kind of the psychology you have to get into to fundraise. One thing that we were talking about before the podcast was addressing like how-big-can-it-be type questions. How do you go about getting in the mindset to answer that?
Amber Atherton [00:39:37] – I think having an executive coach was something I should have done earlier. In YC, there’s actually a company in our batch, Torch, who do executive coaching. And I got on that and we started focusing my sessions on that. It’s like getting powered up, getting ready. And also you probably have these traits innately as a founder anyway, if you’re going out there and you’re pitching your business to customers all day. So it’s really like leaning into that and just having a coach who can help bring that out in you, and maybe listening to that Goggins book, just getting that mentality of winning is great. Because I think that, maybe this is controversial to say that I feel like the appetite for risk, for a lot of female founders to really answer that question, how big can this be, it’s more realistic perhaps but okay, well we have product market fit, the product is going to change a bit. So realistically, we’re going to IPO here. So there’s more of a like, there’s a less aggressive approach I think, to the answer of how big this can be than I think, I’ve definitely seen some of my male peers take, they’ve got some $20 billion next year. I think it’s balancing that, right? You want to be completely convincing and have of course, your own conviction and how big your company is going to be. You’re not doing this for any other reason.
Craig Cannon [00:41:07] – And you’re not also a sociopath who’s just lying to people.
Amber Atherton [00:41:10] – And you cannot be that either, you don’t have five term sheets, just be real with yourself.
Craig Cannon [00:41:14] – Yeah, that’s a really bad thing to do.
Amber Atherton [00:41:15] – And it is, it’s a balance of yes, you’re not a sociopath, psycho. But you also need to just really believe in yourself. That is so authentic when you see that in conversations when people have true conviction and in that. You need to convince the person sitting on the other side of the table, that they are backing the right horse and you will win.
Craig Cannon [00:41:39] – It’s important, so in addition to listening to the David Goggins book or whatever, what are the things to not do that might negatively affect your personal confidence?
Iba Masood [00:41:51] – We even touched upon some of those things during this conversation, which was, just be true to yourself. You don’t have to make it seem like, like it’s a hot deal. I’ve seen some founders do that and it’s deceptive. And the thing is that deception only works to a certain extent. Like you said, right, the valley’s a small place. What you want to do is be true to yourself because, and be true to the partner you’re going to work with. Because that person is really becoming a part of your team and a part of your company. And in some cases, really I would say part of your founding team, because if you’re under 20 people, when you’re raising your Series A, then this partner is going to become a key part of, of even day to day operations. I would say probably some things that founders negatively optimized for, number one would be valuation, so I don’t recommend optimizing for valuation. I think then you have to work up to that valuation. And obviously, we’ve seen nowadays, right, the challenges that are happening in the IPO market. It’s very important to come together and really come up with a valuation that is optimistic, but realistically optimistic.
Amber Atherton [00:43:12] – And there’s a lot of data out there that you can use to make this decision, right? Like it’s a three X multiple from your last round or whatever data points you’re going to use. So it is a conversation, right? You both have interests, but you need to align them and make your conversation not a kind of aggressive territory marking situation.
Iba Masood [00:43:30] – Second thing I would also say is that, investors and partners have been doing this for a long time. They understand founder psychology mentality, they really understand and know what pressure tactics could and should look like. Founders really need to understand and be true to themselves in terms of, building a company is a long term game at the end of the day. And so what that means is, you want to ensure that you’re finding the best partner for your company or your business, and really take the fund out of the equation. We had instances where, I remember one of the funds was introducing us to like, celebrities, where it’s like, oh, this person sits on this board, they’re so incredibly influential, imagine what they can do for your business.
Craig Cannon [00:44:13] – You mean literal celebrities or Silicon Valley–
Iba Masood [00:44:16] – Celebrities in the business world, yeah. Not Ashton Kutcher–
Craig Cannon [00:44:19] – Well, I mean just to be clear, that happens too.
Iba Masood [00:44:24] – I think they really, they read the room. So they’re like, okay, that’s what these founders would appreciate, and so that’s what happened. I’m so glad we really didn’t get pulled into the glitz and glam of the whole thing if we can even call it that. But I think just being, staying true to yourself and really being heads down, I think that’s what’s really key here.
Amber Atherton [00:44:51] – What do you think is the, you say look for partners who share your long term view, its long term building a company but how are you getting the evidence of that?
Iba Masood [00:45:01] – Okay, so what I did was I asked pointed questions to the founders, and honestly, I’m really grateful that those founders were truthful, because… I specifically asked pointed questions, I really tried to get to the bottom of things. And you know what you can do is you can set up a question, it’s fascinating, right? You can really set up a Q&A process where you’re really getting to where the rubber meets the road. And so for me, that’s what I wanted to do, and I think it’s, I would probably even say made me a better interviewer, even in our recruiting process, in our candidate recruiting process. And so that I think, and you can, I got to a point where I could really tell where founders were not being necessarily truthful and were just kind of really trying to get us to say yes to the deal. And so I think that is, that’s what’s really key, like do your homework, but then come armed with very specific questions and really try to ask about what did that partner do when things went south?
Amber Atherton [00:46:05] – That’s exactly what I was about to say is that I like speaking to founders who maybe yeah, it went south.
Iba Masood [00:46:12] – So you back channel, exactly. So you also need to back channel and talk to founders that they didn’t–
Craig Cannon [00:46:16] – Intro you to. Let’s talk about what it’s like to now run a Series A company. So for both of you, what has been the biggest shift?
Amber Atherton [00:46:27] – I will say, so we moved our headquarters out here to San Francisco after our Series A.
Craig Cannon [00:46:33] – Okay, you were previously in?
Amber Atherton [00:46:34] – We were in London and we had a New York office and then I just decided let’s consolidate this, we need to all be under one roof early. We’ll get to the distributed team phase a little later. But one thing I started to prioritize was culture really was what are the values that this company is going to stand for? And prior to raising the Series A, I was just heads down on revenue. I was like get revenue, we’ve got to get these numbers. And I kind of didn’t really put enough time into thinking, okay, what is this culture? Who are the talent that we’re attracting? And what are the values that they care about? And I think spending the time to really come up with that. So I spoke to some of my early founding team, I was like, what are the values that we care about in each other? Why has this worked so well for the last couple of years and we came up with those things, and then I was like a tech recruiting day and it made me laugh at how many companies are coming up and having like acronyms for what their values are. It’s like our values are CAKE, community, assertion, and it just made me laugh. And so I then, I was, could we come up with some, could we make this an acronym? And we ended up making it the tricep flex, which is like an old school exercise poster. And it was kind of eccentric and definitely brings out attributes in our character and it’s really helped with recruiting because it’s given us a way to school people, to who we’re bringing into the team. So I think that, something I’ve focused on since raising
Amber Atherton [00:48:07] – is like really spending the time to think about what is the culture that we’re building?
Iba Masood [00:48:15] – I think for us really post fundraise, one of the things we really focused on was people and that was building the right founding and leadership team at the company. So when we did our Series A, we were about five people full time at the company. Everyone else was part time, and so, now by end of this year, we’re going to be about 21 people full time. And so growing 4X, I mean, we’re still pretty small, we’re still early stage. But that being said, growing 4X is very difficult. And what we did was we really didn’t want to compromise on the people that were coming, were joining the team because we know that they’re going to be leading their own departments over time. One of the things we did, Syed was someone who really was like, we absolutely have to make sure that we’re bringing on the best people possible. So now our founding team consists of early software engineers from Nest, Google, Apple, Atlassian. And we’ve really brought people together that have this common mission, common vision, where everyone says, okay, we know software product management is broken, the tooling you use today is fragmented. And at any point of time, whenever you’re going through this development lifecycle, you really can’t understand what is really going on whether you’re starting from the initiative at the VP level, all the way down to the issues and then even tickets that are being generated in your existing project management software. So one of the things we really did was we tried to find our tribe. And I think–
Amber Atherton [00:49:53] – Did you write down the companies that you wanted to recruit from?
Iba Masood [00:49:58] – Interestingly enough, well besides, just the adjacent companies, 80% of the companies that we ended up, in terms of from the founding team perspective, were not the companies that we had written down. It’s because you assume a certain, like for example, one of the things we knew was CI/CD, hiring from CI/CD tooling would be would be interesting because the messaging is very similar where they’re focusing on product delivery. Because that’s what our product does. And then we very quickly found out that hiring people that have been late stage at these companies is very different to really hiring people that were the first 20 in.
Amber Atherton [00:50:40] – Totally agree, and other founders in our batch who have closed the Series A and now building this team, it’s funny how a few of us have made this textbook mistake of maybe bringing in like senior people just too early. And everyone makes it. Exactly. It’s so funny because you read about it in every single book, and don’t bring in executives too early. And you a lot of the time end up making those mistakes.
Iba Masood [00:51:07] – I think the key is to bring in executives that have been early enough. Some people say they’ve been early but then when you again go down the path of questioning and it’s like no, were you really there when it was a garage? Or were you really there when, post Series A, and then was even the post Series A considered early enough at that time?
Amber Atherton [00:51:28] – And why do you think it’s important to like get those people who were so early?
Iba Masood [00:51:32] – It’s because they understand the level of hustle that’s required, very simply. That there’s processes that have not been put into place that they’re going to have to come in and put in the processes, but then it’s also by the way–
Amber Atherton [00:51:43] – We’re about to have a pen wall.
Iba Masood [00:51:47] – That would be fun. But the other thing is that, it’s only very few founders that can also do this only because it means you have to be willing to give up ownership and control.
Amber Atherton [00:51:59] – Which is very hard to do actually.
Iba Masood [00:52:02] – Yes, and so when you’re bringing in people that are much smarter than you in that area or domain, and are essentially just really understand that specific domain, you need to be willing to take a step back and being like, let them own their domain, let them hire their people, let them run their department. And so we’re at that stage where we don’t, I mean everybody’s in engineering at this stage. We haven’t started building out a sales team as of yet. And so, but at least for these first 20 people in we knew that this is going to be the founding team. And so each of these individuals will have their own departments over time.
Craig Cannon [00:52:40] – And how do you recruit from people who have offers at big companies?
Iba Masood [00:52:45] – It’s easier said than done. I remember, when we first brought David Keith on board, who is our lead engineer, he was very intensely, he was someone who felt very strongly about the mission and vision. And then as we started building out the early engineering team, what happened was people had offers from Google, Amazon, PayPal. And in some cases especially when you’re hiring early stage, like people have been there early stage, what usually ends up happening is then those larger companies just give another bonus package of let’s say, another 250 to 400K in stock. And so you really have to find people that believe in the mission and the vision, and you as a founder have to be able to actually paint that picture. That’s what’s most important. It needs to fundamentally come from the fact that are you building a category creating product? And is this something, are you really taking on a giant incumbent? And is this also a daily frustration that that person has faced? So one other pieces that we were lucky as well, that in the founding team that we’ve built, every single person has faced the frustrations that we’re trying to solve. So that did make it easier for us.
Amber Atherton [00:53:58] – People need to be educated on what it actually means when you’re a Series A company, because I think that it possibly can look that you’re farther along than you are. Series A is still so early, and yeah, you’ve got a market fit but it’s still a little chaotic and scrappy and things are going to change and–
Iba Masood [00:54:17] – And product market fit is a step ladder. So you’re going to have it for a little bit and then you’re going to suddenly lose it and then you have to change your product again. And so that’s really how it is. And I think one of the things it’s really important to understand and even as a, so one of the things I had to grapple and come to terms with was I had a lot of growing up to do personally as well at post, and again, I know we’re still early stage. But even then as a founder, I think for me, like board meetings were just this giant thing that you see and you hear and you talk about, but I had never conducted a board meeting. Conducting my first board meeting was definitely a task and an experience on its own. I can’t wait until YC has like a dedicated part of the Series A program where you specifically teach because closing the A is just the first part of the ballgame. I think even learning how to run and conduct productive board meetings was something I only learned over time. Our first one was–
Amber Atherton [00:55:22] – We just had our first one and I, I did a bit of prep, I think. I sent out a board memo before, it should have been a week before, it was like midnight. And then I think it’s so helpful for it to be a discussion and yes, we’re giving an update on performance and where things are going. But it’s equally an amazing opportunity for you to leverage the insight of your board members to discuss what you should be focusing on. You don’t have to be an expert in round one and everybody knows that. So I actually didn’t put a ton of time into learning about this. I was like, you know what, learn from experience. I’ll ask a few founders how I should run my board meeting and like just dive in. And then I asked for feedback afterwards. I was like how could have I made this better? They were like maybe could have said the board memo like a week before, I was like good point.
Iba Masood [00:56:16] – Two days is usually typical, two days is a good amount. You don’t have to do it a week before, two days is usually good. So we do board meetings every eight weeks.
Amber Atherton [00:56:25] – Every eight weeks, okay, wow.
Iba Masood [00:56:30] – It’s a significant undertaking, but that being said, it enables a forcing function.
Amber Atherton [00:56:35] – Oh, it’s so good. And also, I think going back to the whole earnings call thing was really, that was actually the only prep that I really focused in on was okay, how are these people running their earnings calls? Because I can take learnings from this and I can probably run a relatively successful first board meeting. But also I shared my board deck with the team. So they felt buy in what we’re doing and kind of in the loop just to build that, again transparent, candid culture of this is what the feedback was. How do you follow up with the–
Iba Masood [00:57:10] – One of the things that now happens, at least for the last two board meetings that we’ve had, our leadership team kind of comes together and they have their own domain areas. And so, for example, at our last board meeting, we had our team leads present as part of the board meeting as well.
Amber Atherton [00:57:27] – Oh yes, I also did that.
Iba Masood [00:57:29] – And so they’ve kind of talked about what areas they were owning, but then also what are OKRs that we’re aiming for for the quarter, and then how those OKRs translate into monthly milestones. And we actually just, so one of the things we did post Series A was we instituted OKRs for the first time. And I think, it’s–
Amber Atherton [00:57:50] – What are the top three takeaways from that?
Iba Masood [00:57:52] – Top three, okay. Number one is don’t make your OKRs too vague. Number two, ensure they’re measurable. It needs to be a certain number that you can hang your hat on and be like, okay, did we meet this? Yes or no? And then, that’s a function, you can even put it as a, and then you can also put it as a percentage in some cases, but I always like the yes or no. And then number three is ensure that there is team buy in. So one of the most important things, I believe, is that the team needs to come up with the OKRs together. And so we as team leads, we get together and we really define like, what is, what’s important for us for the quarter, and then what are the monthly milestones that we want to set? I think the other pieces, I think one piece of advice I would also give to Series A companies is initially, I thought a lot about how often we should have our board meetings. So the typical cadence is usually quarterly, but I think that if you want to continue being at the same pace that you’ve been working at in terms of, from a workload standpoint, I think having them more often is better than having them less often.
Amber Atherton [00:58:59] – I actually disagree with that statement.
Iba Masood [00:59:01] – There we go, it’s our first disagreement.
Amber Atherton [00:59:04] – I think that we have, our cadence currently is twice a year. But I’ll probably raise another round before we continue with that. We’ve had one and then we’re having another one in March. However, I am in on our monthly updates. I’m doing our monthly investor updates, like I’ll have calls. But I guess my concern with having them too often is I don’t want to spend all of my time, and I’m sure you are not doing this and I need to quiz you on how you are being optimized about it. I didn’t want to spend too much of my time preparing a board deck, I want to just execute.
Iba Masood [00:59:39] – You know what you do? Take your all hands updates, and have them in your board. So that’s the thing, because we do weekly all hands and we asked we’re also doing monthly investor updates as well in terms of calls. But the easiest way to do this is to literally take a lot of the components and pieces of the all hands update and translate it into the board deck so that you’re not spending a significant amount of time building the deck. And once you’ve done your first board meeting, you have the format and template down, then it just gets easier to build the next one anyway. And and I think, for the most part, what we optimize our board meetings for and I mean, I think we’ll only improve over time is to really enable decision making. And so if there’s any kind of specific decision that we’d want to talk through, or have working sessions on specific areas that we need to delve deeper into, that’s really what we’re using the deck for.
Amber Atherton [01:00:34] – I think Sequoia has a great post on this as well, just how to effectively–
Craig Cannon [01:00:37] – There’s a lot online. So okay, so just to wrap this up, last question. For founders raising their seed or Series A, what would be the single most important thing you would tell them?
Iba Masood [01:00:51] – Focus on the partner. To really focus on the person that you’re going to be working with. I used to laugh when people would tell me it’s a marriage. And it’s really, that is absolutely true. So, really focus on finding out everything you possibly can about that individual. And don’t just read press or read the Forbes Midas list to figure out how many times they’ve been on the Midas list before. I think go a step further and really, really do your reference checking, your back channeling on the specific partner because, because at the end of the day, it may be that the fund is choosing you but you’re choosing the fund and you’re choosing the partner and it’s really not about the fund, it’s about the person. So I think singlehandedly that’s the most important thing you can do.
Amber Atherton [01:01:41] – I would say two things. One, have a process, get an Excel, get it color coded, know where everybody is in your funnel at any one time and just lock in on that process. Pommel sheet, update it, get organized with it. And then two I would say is to do this executive coaching session, or do whatever you need to do to make you feel confident and invincible and have high conviction, because it’s not going to be nice. It’s going to be hard, and you need to persevere and just remember, there’s always going to be a yes out there. And it may take you 30 days, 60 days, 90 days, there’s definitely people on about that took even longer than that, but they still got great deals at the end. And don’t judge yourself by your peers. Just keep persevering with it, because somebody will say yes, and somebody will find the resonance in what you’re doing and just, you want to keep that inner belief.
Craig Cannon [01:02:38] – Awesome, all right, thanks so much for coming in.
Amber Atherton [01:02:40] – Thank you.
Iba Masood [01:02:40] – Thank you, great being here.
Craig Cannon [01:02:44] – All right, thanks for listening. As always, you can find the transcript and video at blog.ycombinator.com. If you have a second, it would be awesome to give us a rating and review wherever you find your podcasts. See you next time.
Y Combinator created a new model for funding early stage startups. Twice a year we invest a small amount of money ($150k) in a large number of startups (recently 200). The startups move to Silicon