I’ll never forget my third pitch meeting. I was just starting to raise my $5M seed round and was feeling pretty good after my first couple of meetings. I walked into a beautiful Madison Avenue office, and waited nervously to be called into a big conference room. Excited to share our compelling story about making college more affordable for students and front-line workers and our progress toward that goal, I didn’t even have to finish my second sentence when the venture partner cut me off and proclaimed, “I believe your consumer is dead.”
Interesting, I thought. Did he really just say that? Did the 95% of American households that I would serve not spend money (the definition of a “consumer,” after all)? What did that even mean?!
He told me that he did not believe student finances were that challenging. In fact, he felt there was no problem at all; it was a seamless experience. I came to learn that he was basing this only on his first-hand experience of applying for financial aid and navigating the maze of paying for business school… after stints in private equity and law school.
The first “no’s” always hurt, but in hindsight, I was lucky that this happened at the beginning of the fundraising process and early in our company’s lifecycle. While many investors will not even give you feedback, I now had insight into what many venture capitalists at the time were thinking about my business.
The problem I was solving was foreign to them. They did not believe, or have enough consumer data to understand, that low-income households and students could ever be good candidates for financial services. They also were convinced that this business would be extremely expensive to scale compared to the lifetime value of a student customer.
But I remained undeterred. I knew that there was, and still is, an undeniable barrier to college affordability. Regardless of socioeconomic background or gender, all students who want to attend college should be able to do so. I had a clear vision and a plan to help solve this. And I knew that we could deliver in this market.
By coming face-to-face with someone who didn’t even believe my target market existed, I was able to learn valuable lessons and focus my fundraising efforts moving forward. Here are three key takeaways that may help if you’re looking to raise capital and support for your startup:
1. Get quick no’s.
Later on in my funding efforts, I met with yet another investor who told me he didn’t believe in the buying power of underserved students and female students. Instead of trying to change his mind, I realized right away that if an investor is spending a lot of time upfront questioning the market I was trying to reach, it was a sign that they weren’t the right partner. It also indicated that they would likely not move fast enough for a young company. While funding cycles can take time, not every part is meant to be a long, drawn out process. An investor should be able to give you a quick no if they don’t think it’s a good fit for them so that you can move on.
2. Showcase your results.
Raising capital can sometimes be a catch-22; you need money to secure customers, but you need customers to get money. Particularly if you’re a first-time founder, it will be much easier to secure investments if you have traction. Investors want proof that your idea is going to scale, so showing evidence of this through customer usage and data can provide the necessary back-up. While market data can sometimes do the trick, the more real-time traction you can show, the better.
3. Find investors who are aligned with your goals.
It’s best to identify an investor who has personal or professional experience working with your customer or who is aligned philosophically with what you’re trying to achieve. These types of investors are much more likely to be committed to working with that same audience moving forward and understand some of the pain points you may be trying to solve. Similarly, be on the lookout for investors who can help make your business stronger — whether through advice or industry connections and knowledge. Ultimately, you will get much more out of this kind of partnership than just an infusion of capital.
I’m grateful to say that through the fundraising process I was eventually able to find my allies – investors who support my company, continue to advocate for our mission of reimagining college affordability, and have helped me raise over $20 million to grow Frank to close to 5 million students and front-line workers today. It just took a few no’s to get there.