It’s tough to fly a plane when you’re trying to fix it. That’s the challenge three early-stage founders in Austin were facing as they launch and scale their companies. From raising money to building new products or developing a tech stack, these founders, like many others, feel as if every decision is make or break. Three advisors from the Austin startup ecosystem — a VC, an angel investor, and the CMO of a tech startup – recently shared their advice with the founders and audience at The Riveter Austin.
The Challenge: Which Comes First, Customer Insight or Growth?
Gloria Chan is the founder and CEO of Recalibrate, a startup offering science-based corporate services for mental wellness. The idea was born of Chan’s own debilitating medical battle with chronic migraines. When her neurologist told her that stress related to her fast-paced lifestyle and 24/7 management consulting job was causing the migraines, she dismissed it. But after six months of trying to find an answer, Chan realized she was addicted to stress. She decided that she had to make a change and went on short-term disability. “As someone who was really clinging to my identity as a young female executive in the corporate world, it was crushing,” said Chan.
But out of the experience came a newfound respect for mental wellbeing. “When push came to shove I geeked out on body-mind science,” explained Chan. “So much is known about the science behind it, that I decided to take the jump and share this knowledge with others.”
Chan started Recalibrate a year ago, selling education, personal coaching and group classes to companies as a means to prove demand for a physical space. In that year Recalibrate became consistently revenue generating. Proof of concept in hand, Chan raised a $150K friends and family funding round and started looking at leases. But then her gut instinct told her to re-evaluate. “I realized that the product power over the past year does not necessarily indicate that a physical space is the right way to go.”
Chan’s goal now is to identify what she can build into a sustainable competitive advantage now that a physical space is out of the picture. She wants to do formal customer insight work to learn what’s working, what’s not and explore avenues for new growth. As a consultant Chan always advised clients “we’re going to fix the plan” but now she understands the struggle.
The Question: “While I have some financial stability, I don’t have the resources to hire help and now it’s my job to keep my plane flying while also trying to figure out how to fix it. What advice do you have on how to do both?” asked Chan.
Sara T. Brand, a founding general partner of True Wealth Ventures, an early-stage VC fund investing in women-led businesses, validated Chan’s move away from a physical space. “VCs, particularly in Austin, tend see brick and mortar as hard to scale,” she said. She encouraged Chan to find ways to stay flexible so she can find out what’s truly resonating with customers, what she can build on and what she can test before she invests. “I’m a believer in getting product-market fit and getting profitable before you pour fuel on the fire,” said Brand. “You don’t want to continue to build the plane and trick it out while it’s tanking.”
Claire England, Executive Director of the Central Texas Angel Network (CTAN) recommended exploring new products beyond a pure service play. “Angel investors want to see revenue that’s going to multiply 10X,” said England. “With service companies that usually doesn’t happen, and it ends up an acqui-hire.” She advised Chan to make it turnkey. “If you want to go big, consider a SAAS tool for employers and evaluate product-brand fit to automate as much as you can,” said England.” England also suggested programs like the Texas Venture Lab that work with grad students to solve startup challenges as a way to stay lean while learning.
Mary Ellen Dugan, CMO of WPengine, the WordPress hosting platform and most well-funded tech start-up in Texas, told Chan to “never take your eye off the ball of what people are coming to you for.“ You have to recognize what customers want to buy and what you are really good at. Then you can introduce that you have something else.” She warned that excitement about the “new carrot” sometimes gets in the way of growth. “Make sure you don’t take the foot off the gas of what is working because you are only a year in and you have to consider how much energy can you expend,” said Dugan.
Dugan encouraged Chan to do some analysis. “Looking at the resources you have now, how much are you willing to put at risk either with the funds or the time that you have? Can you do the research yourself? Can you hire a freelancer?” asked Dugan. “You already have a growing business, so keep that going. The more market share and visibility you gain, the better position you will be in a year from now.”
The Context and Challenge: Where To Begin Fundraising as an Ed-Tech Company
Gina Morales is founder and CEO of A Mana Project, a startup to unlock the potential of STEM education for preschool students. As the founder of the Austin STEM Academy, Morales saw a gap in STEM resources for preschool teachers. That inspired her to build an online application to provide creative STEM curriculum, crowdsourced lesson plans, a marketplace for the exchange of ideas and community. Morales started the company in January after graduating from the Founder Institute accelerator program. Now Morales is focused on initiating her marketing efforts, building the audience and gaining traction. Currently they have signed up one school district client.
Morales’ next stage is raising money for building out the online platform and is considering crowdfunding but is curious if that’s the right decision and how that will affect future funding. “Since we are so early stage what is the best avenue for raising. Would it be crowdfunding with IFundWomen or angel investors or go straight for VC?” she asked.
England acknowledged that if your goal is to build something big, VCs can help you get there faster and with more money, but it’s a challenge to get funding pre-revenue and you have to decide if that is really what you want. For example, at CTAN only 25% of the portfolio has VC money. “Many companies don’t need the dry powder of VC funding to reach sustainability and have a good acquisition”, said England. “For an angel it’s a great run if the lifetime raise of the company is 5 million and they can exit for 75 to 100 million.” She advised Morales to stretch her resources before she raises through bootstrapping or Friends and Family. “Spend time doing office hours with investors and build relationships before you are ready to raise,” recommended England. “It will save you time in the long run because you can say I’m not looking to raise now but I want your advice on when we will be ready to raise.”
Brand pushed Morales to explore other ways to position and fund her company. “Ed-tech is a hard sell for venture capital,” said Brand. “If you have a startup focused on teachers and schools, corporate sponsors may be a better route as they understand the importance of building a STEM pipeline.” She also suggested going a philanthropic route. “There is a study that I don’t like but it shows that when women entrepreneurs switch from pitching for-profit entities to non-profit, people throw more money at it,’ she shared.
Brand also recommended talking to angels and VCs to get the “good, bad and the ugly” about crowdfunding. “Find out if they have funded companies who crowdfunded,” she suggested. “It’s important to understand what that cap table looks like because cap table is a big deal to early-stage VCs.”
Dugan offered up a pivot in business model from B2B TO B2C, noting there is more money there. “I was intrigued. If I had a preschooler this might be something I would like to do.”
The Context and Challenge: Building the Tech Platform Before the Tech Platform
Allegra Moet Brantly is the founder and CEO of Factora, a wealth building community for women.
A second-time founder who spent time in both the fashion, tech and finance industries, Brantly has seen both sides of the financial equation. “I started out in New York City making no money and ended up making plenty of money but having nothing to show for it,” she said. Her experiences took her on a personal finance journey, not only for herself but for others. “I realized there was a really big mismatch with the women I knew that are resourceful, powerful, incredibly talented and yet not confident about personal financial or investment decisions.” shared Brantley.
Her solution is to get personal. “What we are all missing in this online tech world is that human touch,” said Brantly. “Money is personal and there’s a lot of fear, sometimes shame, and even intimidation about what to do with it.” Brantly believes that if women can tackle these barriers to wealth together it can be an empowering experience. Factora Circles convene women for a series of four sessions and the provide access to a private network of female investors for sharing and evaluating opportunities.
As the next step Brantly is evaluating outside learning management systems (LMS) to take circles online as Factora doesn’t yet have the resources to build a custom platform. The challenge is that the existing platforms don’t have the community element. “Women need to see other people doing it to feel comfortable,” said Brantly. “I can’t expect people to do 16 hours of financial programming and homework on their own.”
“I’m putting a tech stack together and wondering how to navigate the path between using an outside learning management system platform and investing in building the technology on my own,” asked Brantly.
Dugan suggested taking advantage of the tech platform hosting expertise in Austin to get advice on the red flags or trigger points to consider. “I would use this as an opportunity to reach out to chief architects in town,” said Dugan. “Ask them about what happens when they have triple the amount of customers, or ten times the amount. What are the longer-term implications of incorporating the billing system? Assuming it is cloud based, what is the right provider? When did you hit the point when homegrown wasn’t enough?” Dugan believes they would be flattered to share their experience and that it just may lead her to finding a CTO or advisors as well.
England advised Brantly to place high priority on finding an LMS platform that could grow with Factora’s vision and consider white-labeling options. “Make sure the platform you go with is a sustainable and has staying power, especially as your needs around billing or a subscription model expand,” said England. “If you have to build your company on it, you want it to last.”
Christina Vuleta runs Break The Future, a consultancy focused on brand and product strategy that positions companies for growth. As part of this, she leads Venturing Salons, a conversation series designed to help women founders move their ventures forward. Previously she was the VP, Women’s Digital Network at Forbes Media, where she relaunched the women’s channel as a business-first platform for entrepreneurial women. Prior to Forbes, she built her own strategy consultancy while running 40:20 Vision, a resource for women to facilitate wisdom exchange and the 40 Women to Watch Over 40 list. She began her career at Saatchi & Saatchi Advertising and went on to work at Faith Popcorn’s Brain Reserve, KBP+S, Fahrenheit 212 and The Futures Company. She’s an advisor to fine jewelry e-commerce platform, MEMO, and messy.fm, a full-stack podcast production platform and is a mentor for Backstage Capital.