Business

Want to Find Funding for Your Startup? Read This Advice First

Two veteran founders tell all.

As part of The Riveter’s Founders & Funders event series, The Riveter’s COO Danielle Hill recently sat down with two key figures in Seattle’s startup ecosystem, Chris DeVore and Matt Oppenheimer, to answer some of the many questions first-time entrepreneurs have when navigating the startup and funding world.

About the panel

Matt Oppenheimer is the co-founder and CEO of Remitly, the largest independent digital money transmitter in the United States, whose customers transfer more than $6 billion annually. Remitly is disrupting the broken $588 billion remittance industry with its mobile-first money transfer service that is easy, affordable and secure. To date, Remitly has raised more than $150 million from leading venture capital firms.

Chris DeVore is managing partner of Founders’ Co-op and recently stepped down as managing director of Techstars Seattle. He has helped over 200 Pacific Northwest startups raise over $1.5 billion in investor capital. Previously a co-founder of Adjacency (acquired by Sapient, NASDAQ: SAPE) and Judy’s Book (backed by Mobius VC and Ignition Partners), Chris also created Patagonia’s online retailing channel and led product and business strategy teams at AT&T and McCaw Cellular Communications. As a community volunteer, Chris co-chaired Seattle’s Economic Development Commission; partnered with the University of Washington to create Startup Hall, a commercial innovation space located on the UW Campus; and is currently a board member of Friends of Waterfront Seattle.

What does early investment look like?

Matt: “Fundraising is never just an easy, simple, quick process. In the early days, when you’re talking about mentor investing, and I think that’s a really important distinction, it’s about painting an audacious vision. It’s about having the right team that can execute on that vision. It’s about talking to enough investors because it’s important to have a competitive process and enough names (cause you’ll get a bunch of nos). Later in the company life cycle, it’s more about the traction and metrics and, you know, P&L. A lot of more just data to back up … but still those same things apply.”

Chris: “For the seed-stage investor, you don’t have the models and the traction, you don’t really have much of anything to go on. So we are indexing around the human potential that we see in people and that usually means that they are extraordinary people in lots of different ways, and they have a point of view.”

First timer? Be committed to learning fast

Chris: [Remit] would show you their test framework, and it was an Excel spreadsheet that had like 100 hypotheses in it, and what results they’d have from that hypothesis to validate or invalidate it. And they were just incredibly rigorous and fast. Everyone is unique in that sense, but a lot of what investors are looking for, in the early days before you have traction, is does the team not only have the know-how, but are they a learning machine? Are they going to learn and reiterate and work faster than anybody else, with greater fidelity between what they’re hearing and what they actually build? It’s not, “Oh, if I hit this certain revenue number or this certain amount of customers.”

How do you know who to involve?

Matt: “I mean those early, call it, first 50 hires, even bigger if you’re thinking super early stage in terms of co-founders et cetera. Getting the right team members on board, it will make or break your company, and I think that is the probably single most important thing, is surrounding yourself with the right team members.”

Chris: “[In investment] there are plenty of bad actors and bad behaviors, so you do have to have your guard up a little bit. One of the nice things about any organizing principle, whether it is accelerator program or a graduate school, or university, or a place like The Riveter, is that there’s some kind of curation being done. And there’s a self-healing mechanism where people who are bad actors are identified and thrown out of the system.”

On being flexible

Matt: “I think that one of the things we did is try to test the hypothesis. So, I knew we wanted to change the industry, but the original idea, this was even before we [Chris and Matt] met, was to build a search engine for remittance, because I felt it was not transparent, it was expensive, et cetera. We quickly pivoted before even building products, ’cause I talked to a bunch of companies that were trying in that space and failed. And, we did that quickly because as a startup, we didn’t have the room.”

When “no” can help

Matt: “First off, I think it’s really hard to get feedback from investors. I think the investors — high integrity great investors — will tell you no, and they’ll tell you why. But most investors are more about having optionality and being like “Let’s stay in touch.” And, you get to know investors through that process, and the good ones tell you no, and they tell you why … three times, three different rounds were led by investors that said no the previous round And it’s important not to build a business for an investor, you build a business to add value to customers, but there are different strategic decisions that we made.”

Is venture backing right for your company?

Chris: “There’s so much angst built on venture investing, and it really is only appropriate for the very tiniest slice of businesses. And those businesses really have to have the opportunity to, very quickly, become a category-defining dominant player. It’s not that there are not any great founders or great business ideas, but very few businesses and family teams are constructed in such a way, and hit the historical moment in such a way, [that they] are able to execute as they walk up that scale, to really achieve what venture demands at them. And the problem is that everyone’s like, ‘Oh, I need to go raise venture capital.’ Venture capital is the wrong tool for most business financing jobs, and yet it is the tool that everyone assumes is the one that they should pursue. The number one favor that you can do for yourself, as a founder, is to really get good advice about ‘is my business really a fit for venture?'”

Building for diversity and inclusion

Matt: “I think that it’s important to listen, to not try to come up with ideas to improve diversity and inclusion in a bubble, but to really engage diverse communities. That’s the first thing that comes to mind. I think that there’s a difference between diversity and inclusion in my mind as we’re looking at Remitly. Diversity is about ‘top of funnel’ recruiting and engaging, again, diverse communities. But then once we’ve actually hired diverse communities, making sure we have an inclusive environment such that all voices can be heard.”

Choosing where to build

Matt: “Another really important thing, there has to be the technical talent [present in your area] to build a product company, but that doesn’t have to be the industry talent. In fact, industry talent can be suffocating at times. We’ve been very intentional with hiring compliance professionals that know what they’re doing in the industry, hiring business development folks that have the right relationships, et cetera. But we’ve actually, in our interview process, hired very few folks from the industry that are building a product because we want our product folks to be rethinking how it’s done. Not leveraging what’s been done the best. If Amazon would’ve started in Bel, Arkansas, Amazon would not be Amazon.”

Finding a technical co-founder

Matt: “I had no network, as I mention, Techstars was very helpful there. And a funny story, I posted a job for a CTO on the Highway 12 Venture’s website eight years ago: It’s an embarrassingly naive job spec. And so, I didn’t know exactly what I was looking for but I did have a deep, deep respect for the technical skill set, which was very different than what I possessed. And I think that’s another really important thing about co-founding and early-stage relationships, is I’d think about how hard it is to do that other person’s job and then multiply it by 100 because I didn’t understand. And coming to it with that is a weighted form of good partnership, find the right people around you that are very different in terms of what they can bring to building a business.”

What if you don’t come from money?

Chris: “[For entrepreneurs that don’t come from money] it’s hard to even think about having the time in your life to think about something other than making a living. Like, there’s a luxury and privilege in that. One of the things that I love about the accelerator model, whether it’s Techstars or YC or anything else, is that it does take people, in any case, before they’ve done anything, and it’s not a lot of money, but it’s access to a network and it’s a little bit of money in a sort of space in your life. So I think the accelerator model for people from that background is actually fantastic and I think Techstars and YC are really committed to finding founders from not-obvious backgrounds because they think that that divergence of opinion and divergence of experience is where interesting-ness comes from.”

Heather Peteroy is a copywriter and creative strategist in Seattle, WA.