This week, I spoke with Tara Hunt of Buyosphere about her experiences nurturing her company to life.
Tara has been a fixture in the start-up world and it only seemed natural that at some point, she would go out on her own and start her own business. She had the experience, and the connections, but she still had a rocky road to travel to get funded and beyond.
Karen: What did you think you knew about starting your own business based on your years working for other start-ups which didn't apply when you started your own company?
Tara: While working with startups, I got to be part of building and getting the word out, but I never understood the fundraising side of things. There really isn't anything that prepares you for that part. Pitching to investors is not at all like selling your startup concept to users. Nobody had taught me about term sheets and valuations and, really, there aren't any hard and fast rules in this area.
Karen: Did you think it helped or hindered to be a woman when you were raising money?
Tara: I don't think it helped at all, but being a woman wasn't the main reason I felt hindered when raising money. I think the main hinderance was what I already mentioned: no previous experience with raising money itself. The pitch is different, the terms are complicated and nuanced and the whole process fell way outside of anything I'd ever had experience with. I suspect that very few startup entrepreneurs have experience with this process, but the key is getting a great mentor.
I said being a woman wasn't the main reason, but I do think that being a woman (and doing a startup that serves women) puts an extra level of complexity into the process that doesn't help.
Karen: Can you describe your experience on the money trail? What lessons did you learn
Tara: I'm lucky because I'm pretty connected. I already knew lots of angels and VCs and I was one degree separated from many others. I didn't have to do any cold calling, so that already put me at an advantage. I think in total we pitched between 40 and 50 times, which I've heard isn't a crazy number, but it felt like it at the time! Raising money was my full-time job for a while and became incredibly distracting from building Buyosphere itself. I think of all of the lessons I learnt, these were my top five:
1. Yes means maybe. Maybe means no. And no? It could be the closest to yes you may come.
We ended up raising our seed money from investors who had turned us down. I came back to them with an improved idea and answered all of their previous doubts. Yes can fall apart quickly. And maybe is just someone just not wanting to turn you down flat.
2. Fundraising is distracting. Avoid it if you can.
If I could go back? I would have kept my speaking/writing career + consulting work while working on Buyosphere on the side for as long as possible. I quit everything that brought me an income because a VC I talked with early on told me it looked like I wasn't committed enough. He didn't end up giving us money and I ended up in a more desperate position.
3. Speaking of which, never be in a position where you can't walk away from the money
Once you are in a desperate position, you lose your bargaining power.
4. Get a mentor/advisor/coach who knows how to pitch
Pitch to her before anyone else and let her rip apart your deck. It'll be less painful than the future maybes and nos.
5. Don't raise too little or too much
I don't know the 'too much' first hand, but I've seen having too much money destroy focus for a company. But I do know the too little side of things. We never raised enough to give ourselves more than six months runway. That is not enough runway. It's a launch with feedback. You need a launch with feedback, time to implement that feedback and improve several times over. Eighteen months runway would be ideal, 24 months would be heaven.
Karen: Did you consider whether it was better to start up here in Canada or the U.S.? What influenced that decision?
Tara: It's still pretty much impossible for a Canadian to start a company in the U.S. I could have done it on an investor's visa, but that meant I needed to show I had $300-500k in the bank. I'm not that good at saving for a rainy day ;) I don't know if being in the U.S. in general would make a difference. Being in San Francisco I would have been closer to the money and lots of other good resources for startups, but you pay for that access. I think the ability to grow a startup outside of the Valley is pretty strong now.
Karen: What was your pitch deck like?
Tara: Which one? I had new versions for every meeting based on feedback and FAQs and who I was going to pitch (did my homework before meetings). I think I lost count at 42 versions. In general, though, it wasn't super long and focused on the problem we are trying to solve and how we are thinking of monetizing.
Karen: What has been your biggest learning curve so far?
Tara: My biggest learning curve has been the business of startups -- the fundraising, the term sheets, the valuations and the general complexities of the language: down rounds, cap tables, preferred shares, common stock, etc. I read whole books to try to get acquainted and it is still confusing.
Karen: If you could give advice to new entrepreneurs, what would it be?
Tara: Find ways to keep from hitting the fundraising trail as long as possible.
Karen: You have made a pivot and a redesign recently. Can you walk us through those decisions? Were they hard decisions to make?
Tara: We've only ever made one pivot and I don't completely feel it was a pivot: moving from data-driven to human-driven search. I don't consider it a pivot because we have always been trying to solve the same basic problem: shopping and fashion search is broken. It doesn't account for taste or preference. It doesn't account for quality or fit. At first we approached it with trying to create a personal data store of your favorite stores and brands, but that approach was the long way around. Last summer I had the epiphany that human beings understand taste inherently, so why not do people powered search like Quora?
Karen: What's next for Buyosphere?
Tara: There is so much on our roadmap right now, but we'll move in the direction our users lead us. I want to do this right, not rushed. I think we still have time. :)