Speaker Q&A: How To Raise First Dollars When Investors Are More Cautious; The Founder Perspective

May I have your attention please welcome TechCrunch editor Annie Saunders Amanda Del Amaral co-founder and CEO fiveable Sarah Dew co-founder and CEO alloy Automation and Armand Heather Connie Founder and CEO of parthian Hello thank you so much for joining us Here today A quick programming note There's going to be a QR code that Flashes up on that screen there if you Want to ask a question snap that that's Your opportunity once it goes away there Will just be one more to ask a question And otherwise you're out of luck Um So I just want to jump right into it uh I have some questions pre-populated here Till you guys start rolling in Um Why do you believe your startups will Succeed when one of the very things that Keeps startups going venture capital is Kind of dwindling Uh Amanda you want to start yeah Um hi I'm Amanda uh CEO and co-founder Of fiveable so what we do is we started Out writing a lot of content for AP Students I used to be a teacher so that Kind of trans transitioned me into Basically scaling myself and that has Now evolved so we not only create the Content but also spaces for students to Study together and I feel like for us The reason why like we will win is is

Really like a student Focus like being a Teacher I you know I know what goes on Right in the classroom I know what Stresses the kids out I know how to talk To them like they're real people and I Feel like a lot of edtech companies just Sort of focus on the different Stakeholders in the students lives and You know those are important people too But at the same time it is very Important for us to just like get really Narrow on on the student Yeah for us like I think we got our Start Um thinking we'd have to survive for a Year on about 200k of funding so that Was before we successfully fundraised During the start of the pandemic so There's a period where we thought we'd Survive and that actually created and Seeded this company culture of doing Just a lot more than what a typical like One person an XYZ role can do so we we Actually like maybe every week we get Someone who's like wait your marketing Team is only this many people and Usually they think it's 5x the size of What it is and so we always have Operated on the philosophy of cutting Out inefficiencies across teams and just Like bureaucratic inefficiencies and Then making sure everyone is 5xing Themselves Um yeah so hi everybody uh if you were

Upstairs you already know I'm Armand I'm The CEO and founder of a company called Parthian we are a personal finance Education company we pair everybody up With a financial coach and they work With you to create a learning path that Is dedicated to you based on your Interests your goals and your needs Um And I mean the reason why I think that We're Still going to be successful despite the Changes in the market is because I don't Think that we were able to raise because Of The hype I think that the way that we Think about the business is in a very Fundamental way do we think that we have Strong business fundamentals Um do we have the team to prove out all Of the experiments that we naturally Need to run as an early stage business Do we believe that there's a big enough Market that we can scale into Um and despite all of the competitive Competitive differences and advantages And value propositions that I believe we Have I think fundamentally I think we Are going to succeed despite the changes In the market because Again on a fundamental level I think we Have a really strong compelling business 18 months From unique or difficult to understand

Parts of your business like how did you Describe the tough stuff One of the most difficult parts of our Our company for some investors to Understand and this sounds just wild but All students can learn anything and that Is just like Not something that everybody believes in And so we were starting with ap and Getting you know questions of like well Those are the good kids aren't they and I'm like well that's not my investor you Know so I think for us the hardest Questions was really It really kind of was more about their Values and how they understood education And what the student was going through And what happens in schools and and like Convincing them that this is a need Um when they were very removed from the Populations that I'm serving and so that That tended to be the hardest parts Yeah kind of following up on that Actually it's we almost pre-qualified Investors based on if they believed in The market we're in so we build Essentially what's e-commerce software And a lot of investors were like you're Selling to smbs and like they don't even Realize or think about Um the fact that Burberry like large Fortune 500 companies are pretty much E-commerce and so Um we didn't necessarily necessarily

Want to go through the work of educating In our first round at least but usually After say one or two rounds like some Investors came around and then they also Actually started reading our stuff and So our thought leadership helped turn People around on certain areas they were Confused about Yeah I think um Naturally there's going to be this Information imbalance and just Understanding and balance based on the Investors experiences and just the Amount of time that an investor has Spent in not only your Market but really Focusing on your user Um and so for us we had a similar Experience where half of the investors That we spoke to were like oh my God I Have an MBA from Wharton but I need Financial education and the other half Would say I just spend 40 hours a week on Reddit And I know everything I don't like why Would anybody need your company right And so I think Part of that is definitely vetting who Are the investors that do understand but Also just completely sidestepping that And showing people right I think leading By showing is incredibly important we Can talk back and forth for as long as Possible but getting a product in front Of an investor getting numbers in front

Of us or having a user speak to the Investor right I think all of those and That's harder for you of course but I Did it though we did oh did you Sometimes we'd have we would like record Students or even help investors talk to Some students that worked on our team And that That was always clutch it's huge yeah Um and yeah I mean again I think getting Out of here's my nine slide pitch and Into Let's show you let's doc let's discuss You know I think getting into those more Natural forms of communication has been Really important for sure so we've got Some questions starting to roll in thank You audience for making my job easier Um how do you stay positive when Investors ghost you after weeks of Discussions I mean if they're gonna ghost then They're not going to be someone I want To work with so that's just you just you Just sort of get over it and you're like Okay well that's just they're on I'm Marking them down as a no and the fact That they're not going to tell me no Means like I may be less likely to come Back to them later right like get like We were talking earlier like getting a Note is like the best thing and then you Can just maybe not the best thing but Second best thing and then you can you

Can you know come sometimes turn them Around later but if they ghost you or That that to me is sort of like it's Just kind of bad behavior from an Investor and I don't really want to work With someone like that yeah I feel like I'm trying not to laugh because actually Ghosting is much more Awkward for the Investor usually I mean tier one Investors do not ghosts it's so easy to Just say no and re-freeze in like Pre-canned response but I've definitely I've seen investors in person after they Ghost and they're the ones trying to Avoid you and not vice versa and it is Pretty embarrassing Um and they will essentially just like Run away and hide Yeah Um that I think that might happen today Right that's true I can't thankfully Don't have my glasses on so I can't see It in the audience Yeah um For me it's been helpful to we talked About this earlier to understand the Like what is the Venture Capital Business and are these people just like Evil which is what a lot of I think Literature online wants Founders to Believe is that Venture capitalists are These people who who just don't respect Founders time like is that the case or Do are they just incentivized to behave

In these weird ways that are not human Sometimes right and to your point I Think you don't have to like I'm not Saying that the incentives are making Every VC just ignore and be rude but Understanding why some people are doing That made me understand that okay Yeah I don't want to work with this Person but there's also like nothing Wrong with me this is just a weird way Of saying no I don't want to invest in Your company Um understanding that kind of helped me Sleep at night yeah actually I'll add um Just to have some empathy for investors Um they they have a lot of emails in Their inboxes and um it's really easy to Just forget and accidentally ghost and I Remember there's this one time a couple Months ago I added Angel to my bio and I Probably got like hundreds of DMS Overnight so I imagine for most Investors like they literally can't Manage the flood okay Given that you all raised you know Fairly recently someone asks how Important is it to plan for future Rounds during your earlier rounds like Did you get your earlier rounds with Raising a series a series B series C Series D down the road I mean I think like You're raising a you're raising because You're building a venture scalable

Business and that is likely going to Need more Capital along the way or you Know something that we may choose to do And so I think that it's something that As a Founder we're sort of trying to Kind of map out what the those Milestones may look like when that may Happen but at the same time like it's a Things change day to day you know so my Last two rounds did not happen at the Time that I thought they would they were Earlier than I thought they would happen And so it's it's about kind of having a Sense of what you expect but also being Willing to adapt to that Yeah I think there's a lot of just Boring data setup stuff you need to do To prepare for like future rounds I feel Like you know at pre-seed stage you Don't really care about net dollar Retention but you know you're going to Care about it at XYZ stage Um and same with like NPS both external And internal so we try to think ahead About that because in earlier rounds we Almost like scrambled to put stuff Together because every deal kind of Needs a data room to go through Yeah I think Um I have kind of two thoughts on the Subject one is that To your point Amanda like when the the Moment you receive money from a venture Capitalist or even an angel you have now

Stepped onto the The Venture treadmill And that is going to run and Understanding how that machine works is Really important and you kind of Mentioned this in the last session there Are just numbers that you're expected to Be at and there are rules to this game Which brings me to the second kind of Thought on this which is as Founders we Are fundamentally inventing something New and there's a lot of decision making A lot of creativity that needs to go Into that raising Venture dollars is not Doing something new many people have Done it there's a process and there's a Way to do it and not trying to reinvent That I think is really important so Planning for future rounds when we raise The precede I generally know what a seed Looks like and so I know what is my Dilution here going to mean in the Future what are the numbers that I'm Hitting here going to mean then right What is the valuation going to do a lot Of people who raised In January raise the precede with no Traction at a 50 million dollar Post-money valuation they're now Thinking oh wow my series a is going to Be really really difficult Um and so just understanding what the Next Milestone should be helps you Understand what right now should what Should be happening right now okay sorry

To go back to the beginning someone Asked for an early bootstrapping startup What would you say are the checklist Items you would need to hit before Deciding to raise outside capital We're not going in an already anybody Can jump in I don't think any of us are bootstrap But my two best friends are and I think It depends on the space like they're Like what they saw was like investors Cared a lot about Maus and daus and Um that was something they didn't really Track or they were tracking more of the Dau stuff so Um yeah in general like profitability Sometimes still doesn't lead to a good Fundraise Yeah I mean it's just I think different Again I think about things in terms of Games they're just different games and Sometimes you can bootstrap a company That is Is intriguing to venture capitalists Where you have really sticky daus Maus All these things But a lot of times that's just not the Case and you're making a lot of money And you're growing really really fast But it's just not something VCS would be Interested in and that's okay and I Think a lot of people say that's okay in Like a weird condescending way towards Lifestyle businesses but I actually mean

That's okay you can make a lot of money And make a lot of impact doing that Um Yeah Okay how has the shift in the macro Environment affected your Five-Year Plan Or has it not affected your Five-Year Plan what's a Five-Year Plan yeah No I mean I think like I mean for our Company we're in edtech we started Pre-covered it was just a different era And then all of a sudden everything Happened and we were sort of right place Right time teaching online and and then Raising and you know and now we're sort Of like in this like still covid but We're so you know here we are you know Unmasked and things are kind of back and Students liked remote learning in some Ways but largely didn't and that Affected teachers so much and so like The the entire space has changed there Were assumptions and even just like Actual like learnings that I had when I First started fivable That are just not true anymore and it's Not because of anything we did it's just The the world has just literally changed And so I I think for us it's just been Constantly adapting to what's happening And and with the with the macro Environment I mean we're kind of talking About this before but like I don't think The bar for me has really changed I

Think it was hard before and I think It's gonna be hard going forward for me To raise Capital like that's just how It's been so it's about like you know Like we've been saying like just kind of Being able to navigate that storytelling And and meet the right people at the Right time and kind of hit the mark on That Yeah I think I've always been pretty Optimistic so I don't know if we really Have changed our five-year plans and Honestly five years was a quarter of my Life ago so I didn't really have a job At that point so hard to say Yeah Um For us I mean I think it changed It doesn't change The Five-Year Plan I Think we face as Founders difficulties And random things popping up not only in The market but on our teams and in many Other places that pop up every single Day and if that changed The Five-Year Plan every day then this would be a Really really difficult ship to to try And drive but Basically what I'm trying to get at Without quoting basis but I'll be that Guy staying stubborn on the on the Vision but really flexible with the I'm Going to butcher this with like this the The the the path or whatever he says Um I think that's really important and

So for us the the specific example is That we raise some money in December and I wanted that to last us Um a fair bit of time and we had Very long Runway we were doing well and Then when the macro economic basically When the when the fund funding dried up For people we were still getting Interest and even though we still had Runway and we were still sticking to our Short-term plan we did take on Additional Capital just to be Opportunistic and kind of Take advantage of that Um Given the difficulties that we were Seeing and so again like both of you Mentioned I think being opportunistic But still sticking to the vision is is Kind of how we do things Um okay someone asks what did you find To be the most valuable spaces to Network in to connect with high value Angels and I'd argue you could even go Beyond that if you didn't take funding From Angels you know how did you network To find the investors you found I think it was it's like a kind of a Domino of like meetings you know you're Sort of like asking the people around You for intros and then you just kind of Keep going until you were talking to People that you just kind of never Thought you could or you know realizing

That you're only so many degrees away From from people and we've talked about Twitter a little bit too and just Generally people are pretty willing to Like chat and so sometimes it's just Kind of shooting your shot Mm-hmm yeah and um through customers and Partners actually we've found the most Alignment there and like the best money Because you're kind of asking them for More money not just to pay for your Product but if they're willing to give It that just means they believe in your Company even more Um so through that and then also I think You can't understate the value of Twitter but also just like people Following the herd right if you have a Name brand investor that's going to do You the most in terms of finding the Best angels Yeah Um for us I think it was really Difficult different uh before we raised From institutional investors and then After There were really two things before the First was Twitter we or I was and still Am Relentless about dming people that I Think are really Um intelligent just people that I want To work with I will just DM them and Even if they don't respond I'll continue To just not Badger them but just share

Interesting thoughts so I talked about Um uh Natasha from from TechCrunch That's how I met her she would just Write really good Um really interesting thought-provoking Articles about edtech and finance and That's exactly what I think about every Single day and so just respond to those And that's how we got to know each other That is how I got to know most of the Angel Investors that wrote our first Checks that was one huge thing the other One was that I cannot understate we went Through pair VC's accelerator and they Were incredible at helping us so Yeah I mean that team is is phenomenal And then afterwards just continuing to Ask our existing investors for more Introductions that was Um huge okay we've got minute 20 left uh Do you have any advice for non-technical Founders raising capital for the first Time Yeah don't be afraid to do it I'm I'm Not someone who I considered myself as Technical I think that term is tough Because now you can just kind of build Anything no code or low code but in General like if you have a problem to Solve then surround yourself with people Who can do the things that you can't and Pitch it you know like it is sort of Like worth it to put yourself out there And see what you can build

I'm technical but I've never been asked To do a technical deep dive on any of my Pitches so I feel like it's totally Unimportant actually Yeah um agreed I'm Technical and no One's ever asked me about that like one Of our VCS Um recently was like oh you studied Computer science and I'm like wow yes I Did Um and so that's one thing I I think That the times are changing and the Other is like you mentioned Um we all have holes in our backgrounds And surrounding yourself by people who Fill those holes is just a part of the Game and if you're non-technical just Filling that Gap is I think really Important Okay we'll do one more because several People have asked and I'm also curious Why is it called fivable oh uh we Started supporting AP students five is The best score you can get on the exam So we wanted to we wanted a student to Think of it as like I could do that like That test is fiveable Um and it's sort of evolving over time As we go beyond AP and try to figure out Like where we can kind of fit in but Sometimes I feel like our content is is Designed in a way where it's like a kind Of explain it like I'm five so that's Been helpful more recently too okay well

Thank you very much for coming to TechCrunch disrupt and sharing all of Your insights and uh thank you thank you All for coming