Female Founders and Raising Money

by Kirsty Nathoo

During the Seattle Female Founders Conference we hosted a panel where Kristen Hamilton (Koru), Beth Kolko (Shift Labs) and Amy Nelson (The Riveter) spoke with YC CFO and Partner Kirsty Nathoo about their fundraising experiences.

If you'd like to read more, Kirsty spoke with Aileen Lee of Cowboy Ventures at a previous Female Founders Conference.


Kirsty Nathoo - Okay. Hi, everyone. The next part of the session is going to be a fundraising panel where we have three ladies from the Seattle scene who are going to impart some advice on how they've approached fundraising and some of the lessons that they've learned. My name is Kirsty Nathoo, I'm one of the partners at YCombinator. I'm the CFO there so I look after all of the finance for both YC internally, and also helping founders with raising money, looking at cap tables, understanding dilution, so I've seen a lot of things happen during fundraising.

Just to give you a couple of stats. In 2017, only 2% of the VC funding went to all-female founding teams, and only 12% went to mixed gender teams. So there's a lot of work to be down there and we hope that you ladies in the audience can help to change that trend and really get those numbers up in the future.

So I'm going to pass over to the ladies now. They'll do a much better job of introducing themselves. So each of you, if you want to just explain a little bit about your company, who you are, and how much you've raised so far.

Beth Kolko - Hi. Thanks, Kirsty. So I'm Beth Kolko and I am a co-founder of Shift Labs which is a medical device company here in Seattle, and I started the company after being a professor for many years, including at UoW. And we have raised a total of, well, $1.7 of diluted, and then a $300,000 grant, so just about $2 million, which for a med tech company is not a lot, and we have a product that's on the market and approved in the US as well as Europe and a few other places.

So that's what I do, that's what I have been doing, and fundraising is...well, I will just say this, when I told my partner what I was doing he said, "You know, don't take this the wrong way, honey, but, you know, you've done a lot of things really well but they do know that fundraising has been the hardest thing for you, right?" I was like, "Yeah, it has been," so maybe that's why I'm here.

Amy Nelson - My name is Amy Nelson and I'm the founder and CEO of the Riveter. We're really excited to host the conference today and to have all of you here. We launched this space, our first space in May. The Riveter is female-forward work spaces and community for business and impact. We launched our second space in September and we have raised a pre-seed last spring of $720,000 and then we're about halfway through a seed round right now, and so in an interesting position to be on this panel in the middle of everything. But fundraising is hard but it's necessary and it's important to learn how to do it and how to do it well, and so I'm happy that we can all be up here to tell our stories in that small piece of that.

Kristen Hamilton - Hi, everybody. I just want to say that I've never seen this space look more beautiful than today, and I've seen it before, but it looks amazing. You're all incredibly beautiful. How many people here are in the process of starting a company or have started a company? Awesome. Congrats and we're here for you and each other.

My name is Kristen Hamilton. I am the CEO and co-founder of Koru. We do predictive hiring, so we're helping employers choose the right talent using machine learning and AI and ultimately leveling the playing field to provide access to opportunity for people based on things like what they can do instead of where they went to school.

We've raised $15,000...$15 million, sorry. Fifteen thousand dollars. We raised $15 million in the three rounds in this company. There's a story in each round but I'm guessing we're going to get to that. One stat I'd like to share that someone shared with me that was daunting but interesting, they said, "You're more likely to get struck by lightning than to raise...for then to get a term sheet from a Silicon Valley venture investor." So he told me that when I was in the process of fundraising. So I just want to be here to say that it's all possible despite the odds and getting more and more possible.

Kirsty Nathoo - So this is gonna be good, we have a lot of different perspectives here. So first of all, let's talk a little bit about where the money came from. Did you raise money from people here in Seattle or did you have to go further afield? And if you did go further afield, did you see any real differences in the different geographic locations that made you have to change your approach?

Beth Kolko - So we went through YC in the winter '15, and before that we had done a small incubator here in Seattle for a kind of social conscious company called Fledge. We did a kind of small...we raised a little bit of money, mostly friends and family kind of stuff before we got into YC. Most of our money was raised as a result of YCs Demo Day, and I'm gonna be completely honest about that.

So med tech is pretty traditional in terms of investment [inaudible 00:05:40] devices and our team didn't come from that background. That was sort of part of our superpower in terms of thinking about the product, but it made fund raising really challenging. So what worked for us was to tap into people's optimism and desire to change the world, and so the investors who really came into that first seed round after demo day were people who believed in the vision. And also were willing to think not just about the US but globally.

And so most of those investors came from California, came from Silicon Valley. Some came from other parts of the world as well, some institutional, but a lot of angels. And so it just seemed like they had more appetite for risk and they were surrounded by more risky things and so they were willing to look at us and say, "Hey, why not." So that was the big difference.

Future of fundraising activities, similar to where you're at is, you know, now we're in a different position and now we actually are reaching out into that med tech community, which again, is not is interested in risk and has different kinds of metrics and so it's about adapting to that. So we definitely see differences geographically as well as based on what people's backgrounds are.

Amy Nelson - I'll talk about the angel round that we raised and then how I have approached raising this seed round. In the angel round that we raised, we raised on a safe, and it's an important kind of precursor to going out to raise is deciding the vehicle on which you will raise which is something I had to learn about. I was a lawyer for ten years, so I was brand new to all of this when I started this a year ago.

So we decided on the vehicle we would raise on. And then I kind of stumbled into my first angel investors by attending events. So I went to Startup Week and I raised my hand. I think you were on the panel I was at. Was it the Mompreneur panel? Yes. And I raised my hand and asked a question and prefaced it by talking about my business, because I would say that is the one thing you have to talk about what you're doing to everyone because you never know who you're talking to.

So, you know, I raised my hand and asked a question about the business and afterward a woman came up to me and asked me some questions about it and I ended up pitching her and she became my first investor. My second investor, I was in my daughter's co-op preschool class talking to another mother who I barely knew about what I was doing, and she said, "You should talk to my husband, he's a serial entrepreneur." He became my second investor and then introduced me to my third and fourth investors. And so for me that was really a lesson in you don't know who does angel investing and who you're talking to who might be interested in your business.

On the flip side, I then went ahead after those kind of instances, I went ahead and made a list of people in my network or people I wanted to invest, and then for the people I wanted to invest, I found connections to them. I was super methodical about it, you know, spreadsheet, going on LinkedIn. I want to connect to person X. Who can introduce me? Asking the people to introduce me and seeking out those really warm connections which I think is massively helpful in fundraising. Which makes sense because, you know, it's easier to say yes to taking the time to listen to someone or listen to an idea if you have an introduction from a trusted person.

And then the final piece, I guess, about the angel investing piece that I learned a lot in the pre-seed round is that that early in a company, and I was raising money when the Riveter was just an idea that I had, you know, I had a deck and an idea and myself. And angel investors and early, early investors are largely investing in the founder and if they think you can pull it off. And so you have to be really confident that you can and project that and present that every way that you can.

And with the VCs in approaching the seed round I, at the beginning, I don't think I was incredibly organized about how I would go out and do it. And then I realized what I needed to do was put together a full deck, which I didn't want to do it because it's like a high school project. Like, oh, I have to sit down and write all the slides and...but it's really, really important because it's what people will look at when they're, you know, being introduced to your business and thinking about it.

And so I made a deck and then I sat down, and I made a long list of VCs that I wanted to talk to. And then once again, I figured out a way to get warm introductions which took a lot of time. I completely underestimated how much of my time as the CEO would go to fundraising in the early days. But that's kind of...And then I've gone geographically all over the country both times. So just in terms of where our investors come from, they come from Seattle, they come from San Francisco, Los Angeles, New York, Boston, everywhere. Which is everywhere the Riveter will be. Kristen Hamilton - Yeah, that's nice. You know when we were on the Mompreneur panel, I asked when the Dadpreneur panel was gonna be.

Amy Nelson - What is that?

Kristen Hamilton - So. I've raised money in seven different rounds of venture, and one failed, so seven plus one failed plus an IPO. So scattered geographically everywhere, I would say, and my learning has been to generalize and stereotype. Silicon Valley investors are the most risk tolerant and do the least due diligence. They have had so many more reps, you know, it's just about learning, right? Then most or many of them have than other cities so that city has just, that environment, has just seen so many more iterations. It's definitely a unique environment. And then Seattle is emerging. My first company was started in Seattle, we did not raise any money from Seattle other than some angels who jumped in after we had a term sheet. But it's definitely emerging. There just haven't been that many venture capital funds in Seattle, and I think that it has been initially maybe more of a follower but it's really exciting to see what's happening now in Seattle because there's an increasing number of venture funds and more dollars in Seattle.

And the nature of Seattle's history in tech has been more enterprise and B2B, so therefore, you know, raising money for a consumer business in Seattle was a little bit harder, and again that's evolving. So there's differences and nuances I think geographically.

New York Investors are financial investors and they do a lot of due diligence. They asked me questions I had never been asked before that would make people in Silicon Valley roll their eyes. So it's really interesting. But I think the differentiator about the fundraising that I've experienced is more relevant from early when you haven't raised money before versus late when you've raised it before.

So a good friend of mine is the CEO of pro.com. He said that, "Kristen, we know who is gonna lead our next round. We don't know who it's going to be, but we know that person. We have a relationship with the person who's going to lead our next round." And it was a really interesting thing that he said because I thought, "Yeah, that's right. I'm not gonna go to a stranger at this point because we have relationships."

But that first round, that first time, you know, it was like beg, borrow or steal, and I was also 28 years old, so you know, it was really, really hard. And so to me that's just the difference is geographical to some extent as I described, but I think it's different strategies depending on where you are yourself in your fundraising evolution, and then also obviously where you are in your company, of course, as well.

Kirsty Nathoo - So how does, in terms of that strategy, how does it work? Even if you're raising, you know, a seed round or a pre-seed round or whatever you want to call it, everybody calls things differently, you know. Even the early first money, you're talking to a combination of individuals and to institutional investors of one form or another. How do you...? Do you change your approach, or do you talk differently to each of those sets of people? How does that work?

Amy Nelson - I guess I have thoughts on this and being kind of in the middle of it. So I have a background in political fundraising because I was able to go and out raise money for candidates I believed in, which has been very helpful in this. And I think the main difference that I've had to learn between raising from individuals and raising from institutions is that it is less of a conversation when you're talking to institutions.

I think when I started I kind of went in more conversational, how I am, you know, just me, and I realized...I kind of sat back after a first few pitches and thought, you know, I used to be a litigator and I know going to a meeting like that isn't being very professional in talking about a deal.

And I need to go in and say, "This is my business. This is an opportunity I'm giving to you to join something I am building that will show incredible returns, is a great business, and I'm a really good CEO, and this is the deal and I'd love for you to join me, and that's it." And I think taking that approach has worked a lot better for me. It doesn't feel entirely natural, it's not how I approach conversations with people every day, but this is a business conversation and to present it as such.

And then also I have learned the more...the farther I've gotten into this, and like I only have nine months of experience in this, so I am not an expert, but you have to nail the numbers. You need to know your numbers inside and out. You need to know the model that you've built, why you put those assumptions in, how things can change if you don't, you know, if say there was a downturn, how would it change this or x or y. But you really need to know your numbers.

You come across as much more knowledgeable about your business and you do actually know your business better when you know the numbers. And I think that's something that we don't talk about enough but that really, really knowing the numbers that you're presenting inside and out is so critical.

Kirsty Nathoo - Yeah, that's definitely a sad fact really when out fundraising, that women are held to a higher standard in that, and really knowing your numbers inside out is absolutely crucial because as soon as you start wavering, you lose the confidence of the investors.

Beth Kolko - I'm gonna just add something as someone who came to fundraising with a very little relevant experience. So I've been a professor and I know how to teach a class, but that was pretty much it. Turns out I didn't know how to build a medical device. So I didn't have a list of people to go to.

I'm going to second this spreadsheet, warm intros LinkedIn. Anyone who knows me knows how much I hate social media, but LinkedIn is my best friend. I spend a tremendous amount of time looking for those warm intros that can be made. But when we first worked on raising, we did it for years. I mean, years talking to everyone.

The first check came from a friend who had a company and gave us like their supply closet basically, turned it into an office for us. And he just saw us working every day for years on end and saw the terrible things that were happening. You know, all the typical stories you hear about investors, they all happened, and he just watched us go through it and he saw how dedicated we were, and that's where the first check came from. But my co-founder and I, we didn't know anybody with money. We didn't have any family with money, we didn't have any friends with money. Well, it turns out we did have one but, you know. So I guess what I wanna say is even when you're new at it and you don't have that existing network, perseverance is, that's what you need. That's really all you need, is that perseverance.

Kristen Hamilton - I'll just share one quick story. The first ever check that was written was by the guy I'd worked for, for my first job after college. So I was a consultant and he was the partner who started this consulting firm for tech companies and I, you know, killed myself for him. I was really...I worked...I'd sleep under the desk and so forth and he...and I was getting...I was an immigrant. So I got a green card through him and actually that was a huge deal because I was essentially a prisoner in this company, so I really didn't have a choice, so I really did. But I was a person that made his life okay because he didn't have to sleep under the desk, so I did that for four years or something.

And then fast forward, I started this company with this guy I went to college with and we're like here's our idea, and I went to his office with Glen and we sat there. And I'll never forget he hand wrote the check for $25,000 and he slid it across the desk, and he said, "Don't lose my money." And I said, "Okay, I'm terrified actually." I have a...I really am the most responsible with...I can't stand the idea of losing someone's money, it's like Canadian puritanical work ethic thing.

But I would say that the lesson in that is the first person that will write you a check is the person who knows you, I think to the point of you were in their supply closet or I was, you know, sleeping under the desk to make his life better. So he saw what I was capable of and they'll invest in you as opposed to necessarily your company. And it's funny, now I do some angel investing and I invest in people, you know, people I know really well and when they're starting something it sort of almost doesn't matter what they're starting because I know them that well. So I think a lot of angels actually think about it that way.

Amy Nelson - And one quick thing to add to this because we've talked about LinkedIn a lot for warm introductions, you might kill me for saying this but like, Kristen, Avne, Kiran, who you will hear from later, they have all made introductions for free, and that's what your community will do for you. You are a female founder, this tribe will help you, you just have to ask.

Kirsty Nathoo - So I think it's been made fairly clear that fundraising is pretty hard. It's a long process, and it has ups and downs. So how have you learned to cope with the lows of it and what support networks have you been able to leverage through that?

Beth Kolko - Okay, so I'm gonna tell my nightmare story. I won't tell that the nitty gritty details, but there was a horrible thing that happened. Just an investor was completely inappropriate, and it was in a Starbucks on Mercer Island, so it was really public, and I couldn't even get outraged. And then I had to take the bus home afterwards and so I kept my composure in front of him and then I got on the bus and I'm sobbing. I'm just texting everyone I know, like, "Is this normal? This person said these things." And they're like, "No, it's not normal."

And the next day I walked in and my cofounder I was telling him about it, and I'd been texting with him and he said, "I want you to write it down. Just write it all down right now. Write the story down." And it was sort of this purging thing. But basically your network, I mean, the people who support you in everything else in your life, they will support you through the lows because there will be lows, I mean, there's no way around it. Everyone men and women, fundraising is really hard, but it's also crucial.

Kristen Hamilton - I'd say other than a lot of red wine, my co-founder because there's nobody else to party process with in that way. Like we go to the party, which was not really a party, we have the pitch and then we process, and we process it to death, and we wonder about the, you know, body language in the room and whatever. So for me I've never...actually I'm a co-founder, I'm not a founder. I mean, I'm just, in my core I think I just prefer to co-found things and so it's a team and that for me has been my saving grace.

Amy Nelson - If, you know, there are days I do well at processing and days I don't. I think for me that knowing expectation is really important that I'm going to hear no all of the time until I hear yes, and just accepting that and knowing that it's absolutely not personal even though it can feel like it changes the bar for me. I am on my own pitching largely which is somewhat different, but I rely on my team a ton to talk through things with me, to prepare me, to balance things off of.

I talk to my family about it a lot too because probably they wish I wouldn't, but I do and it's good. And, you know, I take time out to exercise which is really important for me and my own mental health because you can let this consume you 24 hours a day and you should give yourself an hour. You should give yourself an hour a day, I think that's really important.

And you're going to hear horrible things. You're going to hear things that people wouldn't say to men, but it's really equally as hard for men and women in terms of the number of investors you're going to have to pitch to before you hear, yes. So just a good attitude is really important and red wine.

Kirsty Nathoo - Okay, so we just have a couple of minutes left so I guess for each of you is there anything that you wish you had known when you were starting that you can share with the audience here so that when they go off to do their fundraising they've got that piece of advice in their mind?

Beth Kolko - So there was a time with my company where I was working to raise...so essentially for med-tech, you know, we raise this money to build a device. It's really expensive to commercialize devices, I should have raised more money to commercialize it and I didn't. And I started, and it was hard, and I was like, "Oh, I'd rather just talk to our customers because they love me."

And that's what I did, I let myself stop doing the hard thing and then I did the comfortable thing, which was, I'll work on sales because I love doing that and you know that's where I get the positive feedback and it's not where I'm getting the relentless nos. And that was a mistake. I should've stuck with the hard thing. That would have been better for the future, for growth trajectory of our company. So don't be afraid of the hard things.

Amy Nelson - I think for me, it would be as I was going out to raise the seed. I wish I had said, "I am going to start raising the seed on this date and at that time I will have my deck ready, I will have my list of VCs I want to approach ready, and I will just go and do it. And I kind of dragged the process out a little bit on the front end of not having everything prepared and starting to talk to people, and I think every time I go forward I'll have my list of people I'm reaching out to, the dates I'm going to fundraise, like you make a business plan and make a fundraising plan. I think that's the best way to put it.

Kristen Hamilton - I'm gonna give you use something very tactical that I didn't do before when I started doing this company which has been incredibly helpful. So the first few times you pitch, you're terrible, and so they say go with the, you know...what's the right way to say this? The VCs that seem like your least favorite or the less, you know, impressive, you wanna have some raps. So don't have those raps with an investor.

The only other person...the fundraising process is an unfair equation because as entrepreneurs we raise...I've raised seven rounds of venture, that's a lot in a career. Mostly you raise two, three, one. And venture capitalists are doing many, many more deals than that so they've seen the picture before. So the only other person who can really give you good feedback other than an investor is a CEO who's raised money.

So what I started to do is I do this like...I don't have a name for it, but all in one day I ask my friends who are founders who have raised money successfully to come for 45-minute chunks and we pitch them. And we get in a room and there's no like, you know, pretending, they're an investor and we are pitching them. And we go for 20 minutes or whatever and then we get feedback for whatever the rest of the time is. And they're like relentless, you know, which is exactly...it's a gift. That feedback is a gift.

So we did that and in one day we pitched to four CEOs who had raised a ton of money and sold companies to Google and like that value was so incredible. So find ways to do that. I would just highly recommend it. And then think about that feedback. Once you start actually pitching investors, you're not gonna get a yes on your first pitch but you are going to get feedback, so that's your goal.

Your goal is to get that feedback. And when you call them, you don't say, "Are you gonna, you know, invest?" You say, "I really want your feedback." And they'll actually respond better to that and you really want to write it down and think about it and ask people if it seems like good feedback and weigh it against the feedback you get next time which is completely the opposite of what they said.

But really, I mean, keep, really, notes on your feedback because some people don't learn as they go through the process and each round is a learning process even though you've raised before. So you have to just really think of yourself as a beginner all the time.

Kirsty Nathoo - Okay, well, I can actually talk about this for hours but sadly we've run out of time. Thank you very much to the three of you for sharing that knowledge and giving us advice. I'm hoping that for you now who are thinking about starting startups and going out and raising that you have some really helpful information there. So yeah, thank you again.