The path to building a company (and getting venture funding) can be varied and long and winding. In the latest Founded and Funded we talk about two of the paths – Startup Studios and Accelerators. They each offer different benefits. Madrona investor, Elisa La Cava sat down with Madrona Venture Labs’ Mike Fridgen and FFA’s Leslie Feinzaig to dig into the differences and the types of companies that benefit these types of programs.
Transcript (this is machine driven transcription so expect some typos)
Erika Shaffer: [00:00:00] .
Welcome to Funded and Funded. I’m Erika Shaffer and I work at Madrona Venture Group. In Founded and Funded we want to tell the stories of founders of venture funded companies. In this episode, we’ll look at how companies get to be venture funded. Two different tracks to that, or joining a startup lab, which is sometimes called a startup studio or joining an accelerator.
We sat down and talked with Leslie Feinzaig of the Female Founders Alliance, which runs an annual accelerator called Ready Set Raise. And with Mike, who runs Madrona Venture Labs, a startup studio that is the innovation arm of Madrona Venture Group. They both sat down to talk with Madrona investor Elisa La Cava.
Elisa La Cava: [00:00:52] Hi everyone. My name is Elisa La Cava and I am an investor at Madrona Venture Group, and I am beyond thrilled today to have two incredibly important people in our Seattle ecosystem on the Founded and Funded podcast. First let me introduce Leslie Feinzaig.
I actually met Leslie when I first joined Madrona two and a half years ago because attending an FFA pitch event was one of the first things I did in my role, as an investor in the Seattle area and meeting some of the first entrepreneurs you worked with in your Ready Set Raise program. So I have been a big fan of Leslie and what she’s been doing for the past two and a half years since I’ve been in my role.
And I know Madrona has been a supporter of FFA. For the full three years that you’ve been doing this program. So this is incredible. But more about Leslie, cause I know you all want to know about her. She is an entrepreneur and investor. She is the founder and CEO of Female Founders Alliance, which we call FFA. And it is a national community of founders, executives, investors, and supporters that collaborate to help under represented founders succeed. And her accelerator Ready Set Raise is three years old and it has been dubbed the Y Combinator for female founders by Tech Crunch. So welcome, Leslie.
Leslie Feinzaig: [00:02:11] Thank you for having me. I’m so excited to be invited to the Madrona podcast.
Elisa La Cava: [00:02:15] Yay. We’re so thrilled to have you. Okay. So I’d like to introduce our second guest, Mike Fridgen. He is the managing director of Madrona Venture Labs, which we will also be calling MVL. So we have MVL and FFA. And he has been managing director of Madrona Venture Labs since 2015. And it is the incubation program of Madrona Venture Group. And Mike has an incredible story, career, as an entrepreneur himself , founding companies since he was in college . Notably, he was part of the founding team at Farecast, which sold to Microsoft. And he was also a founder and CEO at Decide.com, which sold to eBay. So welcome Mike.
Mike Fridgen: [00:02:58] Thank you so much. This is going to be fun.
Elisa La Cava: [00:03:00] Yeah. So the topic were, today is labs and accelerators and this wild world we live in entrepreneurship where people decide to start a company, they have this idea. Maybe they have a co-founder, maybe not, and they decide to start a company and then suddenly think, okay, How do I do that? What’s next? How do I get the resources? Make the network, meet people, understand what the steps are. I need to take both fundamentally to build my business. But also to get customers to, hire your first recruits for your leadership team to get outside funding, if you’re looking for outside investors and there are tons of different ways you can do that.
And so we’re going to talk about two of those ways, which you are both experts in, which is the labs model and the accelerator model. So maybe I’ll just start off with an open question. What the heck is the difference? And what are they?
Leslie Feinzaig: [00:04:02] I think you should go first, Mike.
Mike Fridgen: [00:04:04] Okay. Happy to do it. So I say the difference in a word is the stage. So startup studios began with founders at the earliest possible stage. This is day one with an idea and at MVL there’s really two paths. One is , the path is where it’s our idea and we’re recruiting founders in. And generally when we get to that stage, we’ve done deep market analysis and research.
We’ve talked to dozens of customers. We’ve pretty, sold this idea into a set of investors to see if there’s a market for it. We’re really building conviction that there’s a product to build, there is a real burning problem to solve and the customers want it. And at that point we move forward and we recruit a founding team and we start with the CEO to begin a journey of further validation, then building traction, and then ultimately fundraising.
So that’s one path. A second path is when the founder has the idea, but it’s still very early, it’s at a conceptual level. And we’re going to then engage with that founder to go through our process. To really get it to the next level and ultimately get it to funding and on their way.
Elisa La Cava: [00:05:10] That’s exciting. And we can come back to this later, but the difference between having an entrepreneur who has that concept and then knows to come to you and the MVL team. Versus you and the team coming up and developing and vetting this concept, but then realizing I need a founding CEO. I need to reach out deep into my network and find someone who I think would be incredible at taking the helm of this idea that we’ve already started and launching it from there.
So I would love to, we can circle back later into kind of the process for how you get in touch with these two different profiles of entrepreneurs. Super, incredibly interesting. But before we go any further, Leslie, what’s an accelerator? And how do you think about that in context of what you’re doing differently with FFA?
Leslie Feinzaig: [00:05:59] Yeah. The, let me tell you the bad news is that the word accelerator now means a ton of different things to different people. The first piece of advice that I have for any founder out there is that when you see something described as an accelerator that you double click and go research what they actually mean because it can be like a traditional pitching and fundraising.
Like we are a traditional accelerator we’re pitching and fundraising accelerator. We were modeled after Y Combinator and Tech Crunch and TechStars rather. But there’s also development accelerators, there’s sales accelerators. There’s programs that call themselves accelerators, but all they really do is introduce you to people and you don’t actually accelerate anything.
So it really has a lot of different meanings. I’m going to talk specifically about these pitching and fundraising accelerators that are designed to help a company raise their first round of capital. That’s what Ready Set Raise is. You come into the program and in a few short weeks, we equip you to give a pitch, that is we call it the perfect pitch. And then we put you in front of hundreds of investors nationally. Try to match you as much as possible. We develop a mentor network for you and give you the relationships that you’re ready to walk out of that accelerator and ready to have a very successful fundraising season. So it, it’s less about, it’s less about a short MBA where you learn about sales and marketing. Although we can do all that stuff. It’s more about accelerating your capacity to first to raise that first round of capital and getting your company ready to do that.
Mike Fridgen: [00:07:33] I think it’s so helpful that Leslie points out that accelerator can mean a lot of different things to different people in different organizations, and it matters so much who you’re working with. And it matters so much like the team that’s surrounding you to support you. And when I think about accelerators in terms of stage, I think it’s at a later stage. So this is generally where the founding teams in place, there’s an early product development, product developed. And in some cases they’ve even raised some funding, but they’re looking to take it then to the next level. Most accelerators generally work within a three month time horizon. So something within that range, when you’re talking about a startup studio it’s much earlier, so you’re really at that earliest point and working over six, nine, 12 months before you’re getting to the funding stage, just to help clarify some of those differences in terms of timing and in terms of the idea.
Leslie Feinzaig: [00:08:23] One of the great ways of judging that is we if you are not ready to raise a round, you’re not ready for our accelerator. And that’s a key thing for people to, to be introspective about because just because you need money doesn’t mean you’re ready to raise money. And I mean that in, in the sense of where the business is, there has to be an investible story and we’re going to help you pull everything together to tell it and fundraise successfully versus an accelerator, ours is not the place where you come in to figure out your business.
We assume that you did that on your own already. Versus if you go to a lab, you’re going to have a lot more time, a lot more support to figure out the operating company itself.
Elisa La Cava: [00:08:57] I love what you just said. Leslie, you said just because you need money, doesn’t mean you can raise money.
Leslie Feinzaig: [00:09:03] Which sucks, just to be clear, because when you need money you need money. But the truth of it is it’s in the long-term. Not good for you to get money when you’re not ready for it.
Elisa La Cava: [00:09:14] Right. And when you are ready to bring on outside funding, investors are investing, explicitly because they hope to get a return on their investment at some point. And you have to be in a position to prove that you’ve, de-risked certain elements of your business to be able to deliver on that promise of return one day . Oh, go ahead, Mike.
Mike Fridgen: [00:09:32] I’m just going to say again, I think this was really helpful because so many people have these questions about the differences and how to think about these different models. I think w it’s just such a great point that they have to be ready to raise, and she doesn’t have confidence that, you’re going to be in that spot.
Then it’s just going to give her reservations. Cause she wants to put, people are going to be ready in front of investors and have this be a successful model. And similarly we’re looking for a set of traits around the CEO really early. One of the things that I was going to share though, that I think would be helpful.
Is that also within the studio model, there’s a set of doers that surround the founding team. And what I mean by doers, people actually co-building with you through each phase.
Elisa La Cava: [00:10:11] Maybe talk more about this Mike, because how does it change if it’s an entrepreneur coming to you with an idea versus your team building the idea and then hiring an entrepreneur in.
Mike Fridgen: [00:10:23] In both case, if we have conviction that this is something that needs to exist in the world, this is a real problem. And we are going to partner with the CEO, whether it was our idea or their idea to go build it and to go serve customers and to go create evidence and proof that we can then, without traction, go to investors and make a compelling case to fund it and that we can then take it forward. And what I mean, doers, with our team, we’re a team of former founders across engineering and data science and product and design, et cetera. And so when we work with the founder, we call it swarming.
We really swarm around the founder. And so you’re fast tracking your development. You have a team of people who’ve done it and they can help you take the shortcuts to get that product in market and have it land successfully. So I think those are two differences because the models are different too.
You’re going to, to be clear as an entrepreneur, you’re going to give up more equity generally in a studio model, and that doesn’t make sense for some founders. Some founders are ready for investment and accelerator is more suitable to them, and it makes more sense financially for them because they’re going to, they’re gonna, give up less of a trade off around equity.
Leslie Feinzaig: [00:11:33] To that point, it’s worth mentioning that traditionally one of these fundraising accelerators is going to take, I actually forget what the latest the terms are, but somewhere around 6% of the business and they pre value your business. So you don’t get to negotiate what chunk of equity you’re going to give up and for how much money. We just by virtue of how we started as a bootstrapped company ourselves, right? We’re bootstrapped accelerator. We started off by making it equity free, so we actually don’t take any equity in the companies, what we take this investment rights. So that, that down the line, when you are raising your round, on your terms, on the terms that you set with your lead investor, then we can participate in those terms.
And we are very strict about not negotiating that, so we do take those investment rights and we have the right to invest in you down the line because we believe in every company that comes on board. But like Mike said, that is actually a much like whether we invest on the spot or later on, like that’s a much more traditional participation in the company versus if you go to MVL, like you are co-building that company with an entire team of people, we’re not doing that for you. We assume that you built your business on your own. And we’re going to put the equivalent of the world’s most bad-ass advisor group working for you for free, right? Need to spiffy up your model. We got you. We got your CFO on hand. You need to build that deck beautifully. We got you. We can put the right people in front of you. We’re going to work with you endless hours in a short period of time, but we’re not actually going to do any of that for you. We’re going to put the right people in place that you can do it yourself.
Elisa La Cava: [00:13:10] I love that you bring this up, Leslie, cause this was my next question is that next level down, what would an entrepreneur exactly get or receive in working with a lab or an accelerator? And I love how you frame that saying, if you need specific help, we have people we can connect you to, to flesh out your model, your financial model to go through your investor pitch deck and help you craft that story , to give you access to a number of different advisors who can coach you, but you still have to do all of the work.
And so I’m curious, is there anything else you’d add in terms of specifics for you know what entrepreneurs can hope and look forward to receiving in working with a group like FFA.
Leslie Feinzaig: [00:13:55] I’m channeling my COO here. And what we like to tell entrepreneurs is that you get what you put in. We are not here to do for you. We are here to accelerate you. So the way to think about it is like, whatever work you put in, we’re going a 100x effort by putting you in front of the right people. I don’t know if a100x is the right number, but like we’re going to, we’re going to accelerate and amplify all of the things that you are doing on your own. Need to hire? Let me put you on my 20,000 person newsletter. Need to get on, need to get your press release? Let me put you in touch with whoever at Tech Crunch, GeekWire. Need a specific area of expertise? Opening up our Rolodex. We’re just going to open up all of these network opportunities and to some extent, the people that are really great at supporting startups and all of this stuff can’t support every startup, right? So we become for them and actually for you guys , for Madrona Venture Labs and for Madrona Venture Group, we become like the curators of who they should be supporting.
Like we bring you and say, we just selected these eight companies from 400 of the country’s most promising entrepreneurs. These are worth your time. The primary outcome that we look for in the companies is a successful set of fundraises down the line. So it’s not just about raising our first round.
It’s about setting yourself up for multiple like, for getting on the path successfully for the long term and having a great outcome for your investors. That frequently looks like getting ready to start a round and closing and successfully, but , as it’s turned out we end up having a long relationship with some of these companies, right? Like either I will get on their advisory board or on their board, or, I don’t have the capacity to get everybody’s boards, but they’re, they’ve been recruiting from our mentoring network to put people on their boards. They’ve been recruiting from our mentor network to hire actual employees and C-levels into their companies by introducing each other to investors down the line, lots of media sharing, lots of like stuff that you just share with founders. They’re also a great founder cohort support, right? They actually, even right before we started recording this podcast, I had my monthly Ready Set Raise community check-in where we get all the founders together once a month from all the cohorts and just talk about what’s going on and celebrate each other’s wins. Nobody understands what you’re going through better than somebody who’s going, who’s walking the road with you. So you get that, that Vistage, like network for life.
Elisa La Cava: [00:16:12] And you’re building the power of that network over time with each additional cohort, which is amazing.
Leslie Feinzaig: [00:16:16] That’s exactly right. The, the students become the teachers. These founders are even taking us like the Female Founders Alliance ourselves into their fundraising journey. So all of a sudden we are, our investor network explodes, and we are able to, Hey, you invested in this company, let me show you these five others that came through our accelerator, because I think that you’re going to like that.
So really amazing things have happened. And I talk it up to the fact that there’s a little bit of, if I just survive a little bit longer, right? This is going to absolutely explode. It’s only been three years and we have so much. There’s so much big announcement stuff coming down for the companies that have participated that it’s almost daunting to imagine where they’re all going to be next year.
Elisa La Cava: [00:17:04] And, you bring up kind of another point that we’ll dive into in a minute, which is the fundraising journey. Which is , deserves chapters of its own. But Mike, I wanted to quickly, get back to the labs model and just get the next level down when going back to the original question I just asked Leslie on what can founders hope to specifically get help with in lock step with you and your team.
I know you mentioned creating evidence and proof and you have this kind of swarming process you do, but what does that actually look like?
Mike Fridgen: [00:17:36] Absolutely. So really when you’re talking to day one founders and what they, when we asked them, what are they looking for? What do they value? There’s really two things. It’s de-risking and fast-tracking building a venture scale company. That’s what they’re looking for. And again, I’m talking about day one, I’m talking about really early because there’s other options.
And other options to bootstrap, which can be a lonely, expensive process over a long period of time. And the idea of coming in MVL is really de-risking and fast tracking. And part of that, is the team. Working with the team to vet the idea, using a proven process that’s been used from, by founders. And, our team has been doing this for decades, but then also over the last dozen companies that we’ve built, we’ve continued to refine this validation process. So that’s an important part. The second piece is we mentioned getting to actual traction and building. We have a process around doing that quickly and access to an incredible network within the Seattle area, not only our personal networks, but frankly Madrona’s deep network in our community to have access to companies and talent.
So when we are building and maybe we just started with the CEO, but we’re out in the market and we’re bringing on an incredibly talented CTO and, lead product, head of design, et cetera. We’re forming that team together, leveraging our network, as we’re working with customers, as we are building that product out. And then ultimately getting to funding, where we’re, de-risking that process all along the way as well. With us, we start talking to investors incredibly early and we make them part of the conversation, so by the time we’re raising there’s a lot of familiarity there and there’s a lot of lean in and interest in leading the rounds and participating in the funding round.
So that’s all part of the mix when you think about de-risking and fast-tracking what might take two years to bootstrap in your garage, you can do over a six to nine month period with people who are focused on your success and have been doing this on a repeated basis throughout their careers.
Elisa La Cava: [00:19:39] okay. Amazing. You just make me think about the sheer number of entrepreneurs and companies who are hoping for help growing their businesses or for raising outside funding. And, you look at MVL and FFA and you have limited resources, namely your time, in how you choose to allocate what kind of companies and what kind of entrepreneurs you’re able to help.
So, and Leslie, you mentioned earlier a stat on 400 people applied to your most recent cohort which means most entrepreneurs and companies don’t fit your program. So can you talk a bit more about what, what doesn’t work with your models?
Leslie Feinzaig: [00:20:22] This a really tricky thing because we don’t want to discourage people from applying. We in fact, want to encourage people from applying. We think that there’s great benefits in going through an application process, because we’re basically asking you to describe your pitch in, in, in like long form.
So as you’re preparing to go into a fundraise, even going through an application like this is good. Second , specifically with women and specifically with women of color it’s important to encourage entrepreneurs to just try, because if you don’t try, you are undercounting yourself, right?
Like you’re immediately assuming that you’re not going to be the one that makes it through. We have more than one example of companies that did not, were not selected one year applied again and were selected the next year. And the companies that we like from there, we end up building relationships with. So who is it for? So the first thing to know is usually when you’re not accepted into a program like this it’s less than there’s something wrong with you or your company. It’s more that there’s a company that fits the program a little bit better. So we’re going to end up selecting companies that we believe we can accelerate the most.
LeslieFeinzaig: [00:21:38] Does that make sense? The best use of my time or the best use of flexing our entire program’s muscle on someone’s behalf is somebody who is absolutely ready and is just missing, it’s just missing that, like that rubber stamp of de-risking. So, very frequently, it’s just somebody who is a little further ahead, who has better chance of opening and closing around at the end of the accelerator, at the moment in time that they’re applying . Who is this not for?
The one thing that we encourage people to do before they apply is to find true evidence of demand for what they’re building. And Mike was talking about how much work, imagine how much work Madrona Venture Labs spends validating those ideas before putting people and money against them.
Think about your own idea in the same way. So we generally don’t admit idea stage entrepreneurs. We admit people who maybe they haven’t built their product because it’s expensive to build something, but they have hacked the backend and demonstrated demand. That might look like a waitlist, that might look like some LOI, some letters of intent signed with possible B2B customers, that might look like a big pipeline of people that you have relationships with that have demonstrated interest in working with you.
So it has different ways, but like show, you need to show us that people that are not your mom and dad and brother, and sister want to buy the thing that you are selling. And that they want to invest their time with you. And it’s not a survey. Like it’s not it’s not the results of the survey. Tell me that 70% of people want to do X. No. It’s like a real signup.
So that’s one category of I don’t want to say don’t apply, but I do want to say, go find evidence of demand that you can demonstrate to us before you apply and you’re going to have a much better chance of being admitted. And, hey, by the way, you’re also going to have a much better chance of raising capital if you have demonstrated evidence of demand.
And the second is we get a lot of applicants who have been at it for a really long time and bootstrapping for a long time and you get into this catch 22 problem, or you are successfully bootstrapping, but also not growing at a pace that, that makes it interesting for investors. So when you think about moving away from a bootstrap for X number of years , not weeks, not months, years to I’m going to raise venture capital. The problem that you get into there is that you don’t have velocity and investors look at it and the investors want to know if we put money into this, is it going to catch velocity and like really take off?
So frequently we get applicants who are like, this is my last ditch attempt because nobody wants to invest in, okay, but I can’t help you. So if that’s you, if you have the five-year trajectory, the thing that we want you to do before you come apply is find evidence of velocity, throw out a new program, right? Get, get a new hire and build in something that demonstrates that you are picking up speed and that there’s a reason to invest in your company now. And again, that kind of goes back to the difference between needing money and being ready for money. If you don’t have, if you’ve been working for a long time and you don’t have any kind of, what changed this year to make it a good investment now, versus it was five years ago? Then it’s going to be really hard for us to get investors excited or to help you execute a round successfully. And I know that it hurts to hear this and I’ve bootstrapped companies myself, so I definitely appreciate how much work it takes. But the more, the more I have developed my own journey and startups and venture capital, the more I realized that this is not about good businesses. This is about venture capital investible businesses. And those two are not necessarily the same thing.
So you might be building an excellent business that needs a different type of capital. So those are some of the things that like, we really want you to think about and look at before you apply, because they’re going to help you make that application a lot more successful. But having said that I, it’s very important to us that people don’t hold themselves back from trying and learning what they can.
We also, unlike I think every other accelerator out there, I don’t know anybody else who does this, but we actually give people feedback, if they ask for it. Every single person who gets rejected and wants to know why, we will gladly, it ends up being a huge time suck for the team, but we will gladly sit with you and help you see it from our eyes.
We, we have an interim step where we ask people to do a self evaluation. So that we’re not just going in blind and like telling you, hey, these like 70 people who you’ve never met think that you’re too early and that’s meaningless. So we ask you to invest in yourself first by, what do you think happened?
And then we confirm or deny some of the things that you’ve and we’ll add some color from the comments that we get on your on your application. So even for that there’s a huge value add in like putting your story down on paper and getting it reviewed by a very large group of like really smart people who do this for a living. And it allows your team to have a very structured way to give that actionable feedback at volumes,
If we’re not, if we’re not helping founders, then what are we doing here? You know what I mean? There’s a natural tension for us specifically for the female founders lines, there’s a tension between how selective venture capital tends to be with how inclusive we need it to be. And so this is why it’s important for us, but like Ready Set Raise is one part of what we do, but it’s not all of what we do.
So any company that does not get selected for Ready Set Raise still has access to a hundred percent of the rest of our programs, many of which are either free or like incredibly cheap. So like our goal is to accelerate the success of every founder who wants to do it. We don’t go so far to do that for you. You have to do it yourself. But we will enable it as to the best of our ability. We just can’t let go and go that deep with like every company you will hate the image of me on zoom after a while.
Elisa La Cava: [00:28:04] Yeah. Mike, what about you with the lab model? Who doesn’t fit working with a lab model?
Mike Fridgen: [00:28:10] The way I was thinking about this for us is it’s, everything is about idea and founder selection. And when you think about, from an idea standpoint, we’re really focused. We’re focused in AI driven applications. We’re focused in RPA and automation. We’re focused on future of work. We’re focused on things where our core MVL team has a track record of execution and experience, Madrona has an investing history and where Seattle has unique capabilities around talent and such. So we’ve narrowed our world around ideas selection. We have a process for vetting ideas within those areas. And then the next piece around founders, this is everything.
So you have to get the idea, right and then you have to put the right founder in that company for it to reach its, meaningful scale and see its full promise through. So we have six things I’ll go through them quickly. We look for in our, this is our founder framework founder selection framework.
One is domain insight. So do they have deep insight in the domain that they’re operating in related to that, are they obsessed about the problem? We have two great examples. One in Brian Camposano who joined us in a company called Stratify. He had been a CFO, he had experienced problems around budgeting and forecasting and Stratify specifically solves that. It was a perfect fit and match.
Another example is Justin over at Strike Graph, the CEO who had problems with SOC two compliance with his business and was driven to go solve that for others in a similar spot. So domain insight, and then obsessed about the problem. And then along with that is a real bias for action. And this is something we tease out, especially in a world where we’re talking to founders who have a long history working in larger companies. The pace of a smaller company is just much faster.
And some people are wired that way. They’re just wired as entrepreneurs and they’ve operated that in every context in which, in their careers, but others haven’t. So we really try to tease out that next piece which is bias for action. And then what goes well with that is rate of learning. You’re taking action and are you humble and grounded that you can learn quickly? You can take from all that effort the right takeaways to, to adjust your business. And then the last one around the core set is strategic judgment. Do you have vision for where to take your company?
And I’d say the most important thing and it’s wrapped in all of those components is, force of will, ambition, drive. We don’t talk about this enough. The people are building meaningful companies have a calling to do it. It is their mission. They can’t not do it. Because these are not people who are doing the math. If they were doing the math, the financial opportunity cost doesn’t make sense, personal sacrifice doesn’t make sense. Probability of success, super low. So people who are doing the math should run, not walk, from doing this. It doesn’t make any sense for them. So you have to be a little crazy, you have to have a calling, and all those other attributes are nice, but if it’s not wrapped in that ambition and drive, it really, isn’t going to amount to much.
Leslie Feinzaig: [00:31:19] Mike, this is all hitting a little close to home. I like to tell people about, you have to be crazy to do what I do. I feel like anybody who’s building something huge, you have to be crazy to live this life. That’s why I’m not scared of people seeing our deck and sure you want to copy it? Like you think you can, you think you can live like this, please? Let’s do it together.
Mike Fridgen: [00:31:41] And this is where it goes back to Elisa’s question around who should not do this. If you’re not crazy and that doesn’t sound like you that’s okay, but you probably shouldn’t do this. I think that to me, that’s the kind of like the long journey to that answer is yeah, if that’s not, you don’t put yourself in that situation. And if you can’t not do it, if you know all of that, you know what doesn’t make sense on paper and you’re still called then it’s, you should go do it. You should go through your life into it.
Leslie Feinzaig: [00:32:07] There is a pace to a venture backed startup that is different from the pace of a business building. So I come from a family of small business entrepreneurs and I think that there’s a lot of people who feel the calling to build a business to create value.
And like to encourage as many people as possible from doing it. And maybe once in your career or twice in your career, you can try to go this kind of high velocity route. But it’s not to discourage people from starting companies. I think that starting a company can be one of the most rewarding things that you will do with your life – create jobs and create value and build products and satisfy customers and make people’s lives better. I think that building a company is one of the coolest things that you can do with your life. And I want more people to do it and more people to try it.
Going down the venture capital route, you have to be willing to kill that company. That’s you have to be crazy enough to grow that company so fast that you would be okay if you failed, but you’re not going to stop trying, like you would rather fail than not try hard enough.
And that is not something that is comfortable, that it’s certainly something that you’re dramatically underpaid compared to the level of work that you’re doing. And as you’re describing the journal venture labs, I’m like, oh, imagine building a startup with health insurance from day one. What is that like? Oh my goodness. Crazy. But like an office space that is nice and people like their snacks there. That sounds amazing. Most of our lives in the early days are like spectacularly unglamorous. And it’s worse because every, like you got one article and everybody thinks that you’re flying high, but actually you’re like eating crap all day, right? ,Like you’re cleaning desks and like sucking up to people and writing 15 different blurbs about yourself, all of which give you imposter syndrome. So you really, you got to want to go big and I hope that you do. Hope more people do. It’s fun. Try it.
Elisa La Cava: [00:34:07] So when people go through your application program, or Mike, they, get in contact with you and you decide who to work with. Now, you’re surrounded, especially with Ready Set Raise, you’re now surrounded by eight different teams of people who, to your point, Mike and Leslie, are ambitious are driven, are, you have everything you’ve learned about them checks those boxes of how much they want to build this company and need to build this company and are willing to break down walls to do it. And so one thing I thought would be fun to share is show off something that has been successful for a team you’ve worked with either at MVL or FFA.
What’s an example of great success you’ve seen of someone who’s gone through working with your teams and your program and has achieved their goal? And how you know, or how have you personally really helped an entrepreneur get past a roadblock that they were facing?
Mike Fridgen: [00:35:02] I’m happy to share a story. Daniel Perrone who is a co-founder and VP of engineering at Chatative. So I’ll tell you where the story ends. Chatative just sold to MailChimp. It was a successful outcome and great for the team and shareholders, and that’s all wonderful, but I’ll tell you this is a company that had many near death experiences and for Daniel coming in, working with the MVL team in early 2016 there was a ton of uncertainty as multiple factors unfolded over time around, product and customer and the team and, a market around conversational commerce and messaging that really took some time to develop. A lot of companies didn’t make it that were funded high flyers over the years. But Daniel was really the heart and soul of this company and keeping it together, keeping a great technology team together, delivering a high quality product over time. Gaining real traction and ultimately to the outcome that company has seen just recently. And, and what it really highlights is that it takes, it does take a village. It takes a lot of people around the table who cared deeply and passionately , are passionate about making the company work.
Like it really does. It’s more than just the CEO or the board. It takes multiple people. And for this business, Daniel really brought everybody together through, everything we talk about the trough of sorrow, the near death experience and got this company to the other side. So he’s a recent success story, but it’s not something you read about or will see. We saw him when the times were darkest, have the biggest impact and keep the company moving forward.
Leslie Feinzaig: [00:36:44] That’s it’s like the trough of sorrow is like, just imagine it sounds like a thing in Game of Thrones, but it’s a real thing that every founder goes through and it really is that dramatic. That’s right. Get yourself a good founder therapist.
Let’s see, so some success stories. It’s just like such a huge privilege to go through this journey with founders and like seeing them come out the other side.
There’s a few notable stories. We had one company from the last cohort in 2019 that it’s a sexual health, so like a sexual wellness company. It’s super cool, huge growth, but a tricky space to fundraise and the founder is an unapologetic. This is a sexual health company and this is what healthy sex looks like. And she just closed $1.2 million and she did it $25,000 at a time. Can you believe what that takes like? That is a crazy person. That is what crazy looks like to not stop and raise $1.2 million $25,000 at a time. That is insanity. I’m incredibly proud of her, that she closed it and her growth is like just amazing this entire time. So that’s one that, that we just learned about.
There was another company in the accelerator last year, that was a local company here in Seattle, technically in Tacoma and Her experience. So this is the company called the Give In Kind, the founder is Laura Malcolm. Laura had bootstrapped this company for four years by the time she got to Ready Set Raise. She started the year like, 2019, she started the year, I’m going to forget her metrics, but like tens of thousands of users, 20% month over month growth. Reliably every month without spending a penny in basically anything. She moved her company to , she moved her company to Thailand, twice, to save on the costs of rent and childcare and development. This is how crazy she was.
And she came back to Seattle early 2019 with these amazing metrics. She started fundraising. She was trying to raise $500,000 on a 3.5 million valuation, which if you know anything about how far this company had gone, is like an insultingly low amount, and she couldn’t even raise a hundred. There was just like, nobody would give her a break. She came through Ready Set Raise and this was almost purely like a change in how to tell your story, drilling down in your business model so that you can demonstrate how it grows and how big the market is.
She ended up raising three times as much as she was aiming for, so she ultimately raised $1.5 million. Madrona participated in that round. I invested in that round. She like doubled or tripled her valuation. Six months later, she raised another million dollars as a bridge, because guess what? Her company was built for COVID and exploded.
And now she’s gearing up to raise her next round. She recruited from the accelerator, and ended up on Tech Crunch, the Today Show, like Digital Properties, like just all kinds of incredible goodness. And a lot, a big part of that was going through the journey with us, which, it’s just one of the most impactful, turnaround stories that I’ve had the privilege to be a part of. And, when you think about what that company does. So this is a company that enables people to support others through in kind help. So what do you do when somebody dies and you want to send a telegram or flowers? She has a marketplace so that you can send things that actually, that are actually helpful and not just, taking up space. So this year through COVID and through her growth, they powered 1 million instances of people helping each other. It’s just mind blowing to have been a part of that.
So that, that’s probably the certainly the most public story, because it’s all out in the public domain. There’s a lot more than I can’t talk about cause it’s coming up later, but that’s a very prominent one that I’m very proud to, I’m very proud to have co-invested with you guys.
Elisa La Cava: [00:40:45] Yeah, it’s such a powerful story. And you hope every company can find breakout success like that, with the help of such a powerful network that both of you can help bring. You touched on COVID. We are in a global pandemic. Why would anyone in their right mind try and start a company right now?
Mike Fridgen: [00:41:06] Yeah, I think this is a great time to start a company. I think there’s three reasons. Okay. So one is talent. If people are so compelled to start a company right now leave their comfy jobs and all the things that come with that, they must be real. They must, they must want it deeply, right?
This is not wantrepreneur time. This is like for the real people who are driven. And can’t cannot do it. So you have, I think for that reason the real strong founders step up in these moments. And I think also, this is also a time of people are drawn to mission.
I think a lot of you can tell just in our community and in our world, so doing something that they really love and believe in, I think there’s , people are putting more stock in that personally, willing to Millie to make those leaps. Second is opportunity. During these types of moments, people change behaviors.
If you go back to the 2007/2009 timeframe, that’s when Airbnb was built. They just had this massive IPO. They’ve totally changed the face of lodging. Go back to that moment. What was happening. People were looking to save money on lodging, as a consumer, people were looking to make some extra money, renting out an extra room in their home.
So there was a moment of change and a company seized that opportunity. And if, if you can go back and listen to their story. Talk about near death experiences. I mean that they had a very tough road, but they caught a moment of a behavioral change and they had a model that really added value within their marketplace, both sides of the equation.
And certainly we’re seeing that with more remote work and work will never be the same for us. So are we seeing massive behavioral change right now? Absolutely. There are new opportunities. We couldn’t have imagined a year ago. And then the third thing I’d say is there’s less competition. You have incumbents retrenching it’s again, there are fewer people taking the leap and trying to build companies.
So I think there’s this real sense of if you are passionate about a problem and you put your head down and in this, the next couple of years through this pandemic, as we come out of these things are building a great product, finding product market fit, demand will come back. So those, so then you’ll see the benefit of everything coming back your way as we emerge out of the pandemic.
So I think for the right founders and the right ideas, this could be a better time for, for some for some companies to be built.
Elisa La Cava: [00:43:23] Wearing my investor hat, there is so much optimism and energy in the private capital markets right now in terms of investors, venture firms wanting to invest and put a lot of money into new startups, against all odds with how crazy 2020 has been, I’ll throw out an interesting stat.
So much capital is going towards new startup creation, but there’ve also been a lot of reports talking about the lack of improvement and even backwards slide in fundraising that supports women entrepreneurs, black entrepreneurs, people of color leading these startups.
And so I’m curious, what is your approach, in the worlds that you live in labs and accelerators, how do you think about attracting founders and incredible teams to your programs and even how do you access founders outside of your networks? How do you reach this incredible population of people you may not be connected to now?
Leslie Feinzaig: [00:44:26] I think when we all went back to zoom and these open networks closed themselves and you have to like book time with people , you know, we also closed avenues for it, it the clique became more cliquey on a nationwide basis, number one. Number two, the entire economy has suffered a woman’s recession, right?
So like we see it in the economy at large that really the big losers in 2020 were women. And that’s partially because of the sectors that were most effected in terms of unemployment, but it’s also partially because we are, we are still the primary caretakers of our children and all of our kids came home.
I can tell you what it’s like to try to run a full-time business, while caring for two toddlers full-time in the household. I am lucky to have a partner that, that is an equitable partner in my house. But even then that was an untenable situation and I’m not surprised that we’re coming out of the next of the past few months of COVID with these very dramatic inequities.
And so the fact that venture capital has retrenched. Is both sad and also a huge missed opportunity for every investor. Okay. I’m off my soap box now. All of that said, I think of like the female founders lines.
Our purpose is to be the conduit of great deal flow for everyone. That’s what we want to do. Like we want every investor in the country to come work with us and to put companies in front of them. I don’t, I don’t, I don’t even know how to answer the question. How do I get away from my network?
There’s 2000 verified companies in the Female Founders Alliance already and thousands more people who are at idea stage or at like founder curious stage. So need the deal flow? Please. Come help us, come work with us, like we, nothing makes me happier than finding rounds that are being led by external investors for people who have been in our community for a long time.
So that’s our reason for being and, and that’s my open invitation. So, what I would like to see is for, for these VC firms to build systems so that they can bring diverse women, non binary people of color, so they can bring these founders into their traditional process and invest full-size rounds equitably. If you’re not. Making like building a real process to evaluate these companies and make them a part of your primary deal flow pipeline, then you’re not actually making a big change.
Elisa La Cava: [00:47:07] Very well said, Mike and Leslie, thank you so much for being a part of our podcast today. It has been incredible to talk with both of you and we’ll continue the conversation.
Mike Fridgen: [00:47:18] Thanks so much.
Leslie Feinzaig: [00:47:24] Thank you so much for having me. This has been super fun. This is like the most social life that I’ve gotten in weeks. So let’s do it again sometime.
Mike Fridgen: [00:47:27] Let’s
Elisa La Cava: [00:47:27] Awesome. Thank you.
Erika Shaffer: [00:47:29] Thanks for joining us for Founded and Funded. If you want more information on either Madron