CEO of Foundersuite.com, which makes software for raising venture capital and managing investors.
When friends Jessica Rolph and Rod Morris partnered to launch Lovevery in 2015, the two founders already had massive success stories under their belts.
Jessica previously had a successful exit from organic baby food company Happy Family, which she founded. Rod helped take SaaS utility platform Opower public as part of the company’s leadership team.
Despite their wealth of past experience, Jessica and Rod had plenty to learn when fundraising for Lovevery, a subscription business that puts sustainable, science-backed play kits into the hands of parents. As parents themselves, Jessica and Rod knew their idea had legs when they began working on it — but they still felt “very vulnerable” during the fundraising process, according to Jessica.
“With the success we had in the raises, on the outside they [seemingly] came easily,” Jessica says. “But on the inside, getting to that place where you have momentum is hard.”
As they grew Lovevery, they found fundraising successfully was all about the timing. On an episode of How I Raised It, Jessica and Rod shared the lessons that came from raising $32 million for Lovevery over three funding rounds.
When it came to Lovevery’s seed round, Jessica and Rod didn’t have much more than an idea and a slideshow to share with potential investors.
“We had a vision, but no branding,” Jessica says. “We didn’t have a product to show for ourselves…We didn't even have a product name at the time.”
Still, Jessica and Rod knew they didn’t want to bootstrap the company themselves, since they saw the value in having a community of investors to be accountable to and gain feedback from. So they kicked things off by pitching “anywhere and everywhere.”
"Fundraising is about relationships, and you don't know who's going to say yes or no," Rod says. "So you have to manage all of those relationships and you have to ask a lot of people."
For Lovevery’s seed round, Rod and Jessica really wanted to give original Opower and Happy Family investors a chance to participate, so their seed — and later, their Series A — was mostly made up of individual contributors, rather than VC firms. And many of those investors weren’t pitching in huge amounts.
“I find a lot of people struggle in the seed — they want to go to venture in the seed or they think that they are going to be able to pull in hot funds,” Jessica says. “I think taking really low minimums is really important. At Happy Family, we took $2,500 as our minimum. Because somebody was like trying to decide between, you know, getting a new stove and investing in our company, and I’m like, ‘Fine, get the new stove and just give us $2,500.’”
While Lovevery’s seed round and Series A was mostly comprised of individual funders, the duo slowly began approaching institutional VCs for the next round. Once they started reaching out to firms, Jessica and Rod realized they probably should have started those conversations a little bit earlier.
“No matter how early you think you should be talking to potential funding sources or how much time you should be spending talking about potential funding sources, you're probably underestimating how much time you should be dedicating,” says Rod. “And you're probably not spending time early enough with different people to make your odds as good as possible.”
Regardless, things worked out for Lovevery: They closed their Series B with $20 million in funding, with participation from firms like Maveron, GV, Reach Capital and the Chan Zuckerberg Initiative.
So how early should funders be kicking off those conversations?
“If you raise your seed and have a run room of 12 to 15 months…[start conversations] six months after your seed,” Jessica advises. At 18 months out from their Series C, Rod and Jessica have already started having meetings with funders and potential investors again to keep things warm.
“It’s a check-in. It’s not a pitch,” Jessica says. “And as you're getting further along the process, investors are curious — a 30-minute meeting is not a big deal for them.”
The final tactic Rod recommends is “managing all of the investors you're talking to like a sales pipeline.”
When it comes to generating competition around a deal, “a lot of it comes down to timing and talking to enough of the right people at the same time,” he says.
For every round Lovevery’s run, Jessica and Rod maintain a spreadsheet tracker detailing the investors they’re speaking to, their contacts there and what stage of the conversation they’re at.
As a founder, Rod recommends getting all of your ducks in a row and making important decisions first. Consider the following:
+How many investors do you want competing to lead the deal?
+How many people would you like involved in the round overall?
+Which investors, in particular, would you really love to have competing for the deal?
Once those decisions are made, the goal is to get enough investors to the late stage of the pipeline — i.e., the due diligence stage or just before it — at the same time, and then lay out a target date by which you’re trying to receive term sheets.
Then, without becoming too salesy or aggressive, Rod suggests creating a timing constraint for potential investors. He recommends reaching out to them to let them know where they are in the process and keep them informed about timing and deadlines.
“The only thing you have to ask yourself at that point is, ‘Is there somebody I'm really interested in participating in this round, but they're not quite at this stage yet?’” Rod says. “Generally if, if an investor is interested in you, they can move really, really fast and they appreciate the heads up. So there's no drama with that.”
It’s not always an easy process to maneuver, but Jessica says the key to running it successfully is being confident — even when it’s hard.
“It's rare to have multiple people in due diligence where you're like, ‘Alright, now I'm running the show.’ You have to pretend like you're running the show,” Jessica says. “You might not have anybody in due diligence at that point, you might have a bunch of people in the pipeline, you might have people dropping out — but you remain confident on the outside.”
Nathan Beckord is the CEO of Foundersuite.com which makes software for raising capital. Foundersuite has helped entrepreneurs raise over $2 billion in seed and venture capital since 2016. This article is based on an episode of Foundersuite’s How I Raised It podcast, a behind-the-scenes look at how startup founders raise money.