For parents of toddlers and babies, finding the right daycare can be a huge challenge. Jessica Chang saw this as an opportunity.
With a background in investment banking and as the owner of several preschools, Jessica gathered a small team and developed WeeCare, a SaaS platform that helps daycare providers get credentials and connects them to parents searching for daycare in their area.
“Anyone who has a one-bedroom with roughly 300 square feet of space, in an apartment or their own home, can actually start a daycare,” she says.
“It’s a platform that provides caregivers, educators and entrepreneurs the tools and support needed to start a licensed in-home daycare and effortlessly manage operations,” she says.
As a mother, Jessica knows how important reliable daycare can be.
“Parents need to find things that are convenient and affordable,” Jessica says. “We’re raising the bar and adding quality.”
Leveraging past successes in a ‘very structured’ way
When it came time to raise capital, Jessica and her two co-founders leveraged their existing business relationships for their pre-seed round. All the co-founders had previous startup experience and all had been involved in exits.
“We came in as a very strong team, and therefore our early pre-seed investors bet on the team and the market opportunity,” Jessica says. WeeCare received support from Amplify, Fika Ventures and Wavemaker — all based in southern California.
“We picked really good pre-seed investors,” Jessica says. “They were very supportive of us establishing relationships early on with potential later investors.”
Jessica leaned on those pre-seed investors for everything from help narrowing down her list of potential seed round investors to making introductions.
“When we decided to raise our seed round, we had a very structured way of going about it,” Jessica says. “We looked up all of the people that invested in our space. We narrowed it down to the partners we wanted to talk to. Then we asked our current investors for introductions. The process went pretty quickly once we did that.”
That’s an understatement. WeeCare had its first term sheet just one week after Jessica started pitching. Social Capital led their $4.2 million seed round just a few weeks later.
Part of that success can be attributed to the team’s early focus on proving out the business model before approaching investors. “We wanted to actually build the foundation of our company,” she says. That meant getting people to start a licensed daycare from scratch, enrolling kids, and getting happy, paying customers.
They did that with just 10 daycare facilities on the platform before Jessica went out to raise. “But because each daycare needs a long period to ramp up, we had roughly another 70 daycares in our pipeline by the end.”
They also made an effort to test it in different income areas. “We understand sometimes tech gets a bad name,” she says. “We’re trying to create affordable, convenient early childcare options that are actually accessible to all families.”
A highly targeted investor search
The premise is compelling, but to get funding, Jessica also focused in on finding the investors who would find their business most appealing. That meant looking for firms that invested in ed-tech, education SaaS platforms, other education projects, as well as marketplace investments. They used that criteria to identify 20 prospective investors.
Jessica also wanted to know which partners led the deals and then use their network to try get warm introductions.
As for finding out who the partners were, “It was a lot of digging,” Jessica says. “A lot of LinkedIn. Luckily people like to say that they’re a board member of a company.”
She made a point of starting conversations with investors before actually pitching them. Jessica spent time building relationships before the seed round, so investors had some context for the company and could see the progress it made.
By the time she was actively fundraising, potential VCs had already met Jessica and heard her pitch. Her meetings were “mostly about updates and metrics,” she says. “And they had done a little bit of research, so they were excited about the space.”
When a competitor gets capital
WeeCare faced significant competition from a startup in San Francisco that announced a round about a week after WeeCare did. But Jessica wasn’t too bothered.
“When you have a number of competitors that are raising funds as well, it gives a clear indication that people are excited about the industry,” Jessica says. “It does make us think about strategy, but it also gets us really excited because investors are, too.”
Competitors can actually be a positive signal to investors. If two companies grow up simultaneously, it shows a need for their services. But, Jessica says, founders should strive to set themselves apart.
“You do need to know your competitive landscape and what differentiates you from your competitors,” Jessica says. “Telling investors that you are exactly the same company, but the market is ready, is not a good answer.”
A great pitch presentation is a must — but don’t use it
When she worked in investment banking and private equity, Jessica saw founder after founder do nothing but read through a slideshow.
“Founders focus a lot on their presentations, which actually is a big distraction from an investor’s standpoint,” Jessica says. “They’re like, ‘I hear pitches every single day. Tell me something new. Get my attention.’”
Jessica was careful to build a great presentation, but she tried not to use it. Instead, she focused on telling a story that grabbed investors’ attention.
“We almost never opened our presentation,” she says. “We had one, but we went into every single pitch focused on engaging the investors’ issues. If we needed to pivot based on their interests, we did. At all times, they were focused on us — and we were focused on that.”
While later-round pitches might need to be more metrics-driven, the seed round is all about story, says Jessica.
“When you want to capture a room, you really only have the initial five minutes to capture an investors’ interest. Talk to them directly. Showcase your story and your passion.”
Nathan Beckord is the CEO of Foundersuite.com, a software platform for raising capital. Foundersuite has helped entrepreneurs raise over $1 billion in seed and VC since 2016. This article is based on an episode of Foundersuite’sHow I Raised It podcast, a behind-the-scenes look at how startup founders have raised capital.