Tips for Raising Early Stage Capital
Fireside chat discussion with two prominent venture capital investors who focus on early stage branded consumer companies, Deborah Benton and Jesse Draper
On July 27th, Women Founders Network held its 2017 Appreciation Event where the Top Ten Fast Pitch Finalists for 2017 each gave a 60-second pitch on their companies and mingled with judges, sponsors and investors.
The event featured an intimate fireside chat discussion with two prominent venture capital investors who focus on early stage branded consumer companies, Deborah Benton and Jesse Draper.
Deborah Benton is a partner and Chief Investment Officer at Kaktus Capital and has deep consumer company operational management experience, including senior leadership roles at Nasty Gal and Shoe Dazzle. Deborah’s experience enables her to identify promising high-growth branded consumer companies and to mentor management teams and facilitate their growth.
Jesse Draper is a fourth generation venture capitalist and a founding partner of Halogen Ventures. Halogen Ventures is an LA based early stage venture capital fund focused on female founded consumer technology companies. Halogen Ventures believes in hands on attention and plugs each of its portfolio companies into a strategic network of advisors, investors and accelerators in the greater venture community.
The event was hosted by branding and digital agency Citrus Studios at their beautiful Bergamot Station location in Santa Monica. Citrus was founded by Kalika Nacion Yap, is a 100% woman and minority owned business, and currently employs eight talented designers, programmers and analysts.
Entrepreneur and founder of Citrus Studios, Kalika Nacion Yap, kicked off the event with inspiring words about entrepreneurs: “We are builders. We are architects of change. We need to inspire.” This led into the fireside chat with Benton and Draper.
Target the Right Investors and Keep Moving
Deborah Benton sees a lot of momentum in the Los Angeles funding scene. She encouraged the entrepreneurs to understand which investors are right for them – angel, VC, investment focus, for example. The more closely you can match your thesis to the investor, the better.
Benton pointed out that today’s investor landscape provides more options than ever before.
“In the past, you were either a venture or private equity company. In the last five years new options have opened up including high net worth individuals, corporate venture capital and micro venture funds.” -- Deborah Benton
The best way to meet an investor is through a warm introduction. It also helps to be creative in approaching them. Introducing yourself at a conference can be a great opening move.
Benton and Draper agreed, “If you don’t close an investment after three meetings, move on. You don’t have time to waste.” Benton added, “There are so many reasons you get a no. Don’t get discouraged.”
Feedback from investors can inform areas of your business model and strategy that need to change, “If you can’t raise after pitching 50 investors, something needs to change. Listen to the objections.”
Finally, make sure to partner with the right investor. It’s best to understand the investor and whether they are a good fit for you. “Always fact check. You don’t want a bad investor.”
What Investors Want to See
Early stage investors like Benton and Draper are basing a good portion of their investment decision on the team. Draper shared, “It’s all about the people. I like people who are confident and don’t understand the word ‘no’.”
Beyond that, Draper wants to see a great product or an incredible idea for a product with strong customer traction. Both Benton and Draper take a hands-on approach to help the entrepreneurs, “We know that it’s messy. Investors can bring expertise and connections to the table.”
Get Comfortable Asking for Money
Benton and Draper were surprised at how many women entrepreneurs don’t make the ask for capital at the end of the pitch. “Get comfortable asking for money and know what you are worth. Get comfortable talking about and asking for capital.”
“Use your own cash and Friends and Family money to get it as far as you can. Then go raise. Every funding round should take the business to the next level." -- Jesse Draper
The fireside chat opened up for Q&A and the panelists were asked advice about how much to raise and how to match funding rounds to the company’s stage of growth.
Draper said, “Use your own cash and Friends and Family money to get it as far as you can. Then go raise. Every funding round should take the business to the next level. For example, use your own money and Friends and Family money to create traction and develop a minimal viable product. Build your tech and test it. The next step would be to raise a $1-$1.5 million round and really launch.”
Determining valuation can be a challenge. Benton said, “As a founder don’t be afraid to push back on your lead investor. There is no hard and fast rule.” Draper added, “At early stage, you may give up 30%. Take as little dilution as possible to raise what you need.”
As the fireside chat came to a close, Draper inspired and challenged the room: “My goal is to create a bunch of female billionaires who will invest back into the ecosystem.”
If the 60-second pitches from the Top Ten are any indication, the WFN October 19th Fast Pitch Event will be a great opportunity to invest in the women-entrepreneur ecosystem.