Office Hours: I'm Sarah Kunst, Managing Director at Cleo Capital and Advisor/Investor to 50+ companies.
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Office Hours: I'm Sarah Kunst, Managing Director at Cleo Capital and Advisor/Investor to 50+ companies.Featured
Posted in:Venture Capital Office HoursStartups
Hi Elpha!I’m an entrepreneur and investor. I’m the Managing Director of Cleo Capital, a fund that taps women as scouts to source and invest in early stage companies and I’m an advisor or investor to over 50 companies. I’m also a contributing editor for Marie Claire.Before starting Cleo Capital, I was a Sequoia Scout and the founder of fitness tech startup ProDay. I’ve also been a VC at a large fund, on an LP board and have been honored by Vanity Fair, Forbes, Business Insider and Cool Hunting for my work in tech. I’m excited to be here to answer your questions about fundraising, raising a fund, advising startups, or something else!
cadran·Nov 11, 2019cadran·Nov 11, 2019Thank very much for joining us, Sarah!Elphas: please reply in the comments with your questions. She may not have time to respond to every question, so please emoji upvote the ones you'd most like her to answer.
Hi @SarahKunst thank you for taking the time! I’m kicking off a pre-seed round to raise $1M with Angel Investors for my health tracking app for skin, Skinary. I am currently speaking with different VCs on both the east and west coast to introduce myself to the space, and I’ve focused the conversations on asking for feedback on my pitch, and my fundraising strategy in hopes I can gather great insight to a successful pre-seed raise, and maybe they’ll be part of my seed round in the future. The consistent feedback I’ve received is ‘this is great’ ‘keep in touch’ ‘just get more traction’ ‘you are doing everything right’ - which sounds amazing, however I’m looking for critical and actionable feedback and I’ve heard from other founders that this is what everyone says. How can I get that solid critical feedback from seasoned VCs so I don’t fumble an opportunity when I speak with Angel Investors?
Investors are shy to provide real feedback on why they pass. I would recommend asking specific and direct questions, limit it to 1 or 2, that are easy for the investor to fill out or hop on a quick call to answer. You can pilot different questions to start gathering feedback. You probably have a gut sense about why they are passing. What areas did their questions focus on (i.e. user acquisition costs / high CAC), you can then ask a question that relates to that area to better understand their concerns. Also, if you're still early try targeting funds that are seed to help decrease the amount of time you're spending on pitching.
This is a lift and ask from VCs(a 'quick call' with every company I passed on would eat up 5-6 hours a week for me and that's for a 15 min call) and most still won't give you honest feedback. You're likely better off getting a friend who's successfully raised money from VCs or an investor friend to give you the brutal honest truth. If one or two ppl pass it's likely because they're not a fit. If 100 people pass there's an issue with your deck, product or pitch.
Thank you!
We should chat! I'm on the east coast and will soon be fundraising for my current company (stealth beauty brand) but I used to have a skincare app. I know a lot of angels in the NY area so DM me if you want to chat!
I sent you a DM!
Hi @LisaGuerrera, I'm heading to New York for a few VC meetings next week, mind if I send you a message?
Go for it!
Hi! Are you raising from angels? If so, you probably don't need to spend time meeting with VCs right now. If you're raising from angels, focus on meeting with angels - individuals who angel invest - vs VC funds. It sounds like VCs feel you're too early and want you to get more traction whereas angels will often invest earlier. Feel free to ask when someone intros you to an investor how early they invest and be candid about your investment terms, amount and the revenue you have before the meeting if you want to know if they'll be at all in range to be a fit.
Thank you Sarah! This is super helpful especially since I was just in SF and a number of VCs agreed to meet + talk about my funding strategy and business model. Since I'm too early based on their investment thesis, I can pivot!
As a startup founder, how can I make the most out of our advisors/investors relationships? What are somethings most founders don't ask you about but should?
Great question. Following.
It depends on you, your company, team and the investors and advisors. Basically think of what they are best at that you're not so great at and try to get them to help there. For some that's the investors' network of people to hire, others it will be co-investors, some may have great biz dev relationships for you, or if they were a CTO in a prior life they may have great engineering and product insights. Optimize for their strengths and your weaknesses.
Hi Sarah! Thank you so much for the office hours. I'm raising a seed round for my cannabis and hemp infused ingredients line, Potli (@getpotli). I've spoken to a few funds that are looking for more traction and have given me the "keep in touch" "update us on your progress" and "excited to participate in later rounds". Do you have tips for how to keep this dialogue going in an authentic, meaningful, and eventually action oriented way?When you've passed on rounds in the past, what types of updates and interactions kept you most engaged?
I think adding them to your email updates for potential investors is fine, and maybe sending them a note when they have big news 1-2x year(companies get sold, fund raises a new fund etc) and if you have products offer to send them a sample. Beyond that I'd just make sure that they can ACTUALLY invest in cannabis and get that in writing otherwise you may well be wasting your time.
Great to see you here @ChristineYi and so happy to see Potli growing!! Wishing you the best and rooting for you during this see round.
Ah good to see you here babe! Thanks for your support, let me know when you're back to this side of the world!
@SarahKunst Thanks for the AMA! I recently told an investor I'm not yet looking for funding. Was that a faux pas? I did say I'd like to keep in touch. The thing is I'd like to have a good team, and some good traction on board before I approach investment. I don't know why they got in touch, or how, as I'm pre-launch and flying under the radar. They just wanted to chat, didn't necessarily want to hear a pitch. Could they have just been scouting? How imp is it to always be ready to ask for X amount, know about valuation, etc? I'm ready with a pitch, but not an ask.
Why is everyone giving me the nerd emoji? 😬
haha good q! :)
If you don't have an ask you don't have a pitch. If you aren't yet looking for funding I'd focus more on building than taking meetings with investors.
Thanks for doing the office hour. Most VCs (including Cloe Capital) have a form or an emails on their website that ask startups to submit their pitch. Does that even work? Is it the equivalent of submitting resumes online, and there is a chance that they contact the startup? Or, is it better to focus on reaching out directly to partners and build relationships?
Not sure who Cloe Capital is but we have a form at cleocap.com and most firms check those submissions. It certainly doesn't hurt to submit.
Thank you! Yeh, it doesn't hurt, for sure.P.S. Typo by mistyping e and o in the wrong order.
How would you recommend other women to get started in investing today? Those that have capital and want to start a fund or start off with some angel investing? What percentages are fair outside of the standard (0.25-2%) for those who have helped those raise successfully at seed to Series A?
Just start investing. Sites like angellist and portfolia are great places to get started. If you want equity in a company get a contract before helping them. But note that unless you're a broker dealer you can't get paid to raise money for a startup.
Makes sense. Do you have other tips for those that have capital to start a fund already that want to do so and other training to help get started in the process?
@SarahKunst, thank you for taking the time to answer our questions! What advice do you have for someone about navigating bias from male entrepreneurs and/or fund directors? Recognize this is context specific so let's say the entrepreneur (male) is trying to raise capital and you (female) as an Angel investor are interested but they are dismissive. If time for another - what advice would you have for someone who has helped a firm with due diligence but never received credit for that work? Are there strategies to passing Investors deals and also getting credit for it?Thank you!
Why would you want to invest in a founder who's rude and dismissive? Thank u, next. If you want official credit from a fund, get a contract from them. Otherwise assume it's just you helping the ecosystem and it'll be good karma that pays off in the future.
Hi Sarah, thanks for doing this. I am co-founder of Infra FX, offer instant deployment to Multi cloud, and full life cycle app management for hybrid multi cloud, including failover to different cloud. I am looking for seed funding to go to market faster. Any suggestion? Thanks!
Go find angels who invest in your space and ask them for money. If you're earlier than MVP, look into accelerators for funding as well.
Our products launched already and have customer.
Hey Sarah,I've been following your journey ever since I came across you through Whitney/Bumble and it's so great to see a WOC in the VC world! You and Arlan are changing the game. What I'd like to know is how did you go about breaking into the investing career path and also juggle various different roles/projects? I wonder how you do it all!
I have a ton of podcasts, interviews etc on this. I'd suggest just googling me, or any vc or founder you admire who's in the public eye, and reading the stuff that's already been written/recorded etc. We are asked to tell the same stories over and over again, it's all there for you to consume already :)
First thanks for what you're doing...such a great story and how you structured this fund is comprehensive (& thx for doing AMA here). I'm a serial Entrepreneur and female tech startup founder where co-founders & I have track records. Spent a lot on patents, now have to raise $100k to code up MVP to test and defend our assumptions (pre-revenue, pre-customer). I'm finding this is too far below the threshold even of local angels, and F&F wanted too much of the Co so turned down those offers. Any resources you can point me to for pre-revenue and such a small raise? Thx again, Jo
Try accelerators. That's one of the best sources of capital for small amounts.
Thx
Hi Sarah,Welcome to Elpha! I’m glad you are here. What are your thoughts about start founders outsourcing their accounting? I ask because I have seen this is a move that disconnects the CEO from important financial data that can help make strategic decisions as long as the accounting system is designed thoughtfully in order to create helpful financial data. I’ll connect with you on LinkedIn as well. Warmly, Carenna
If you're not an accountant you don't need to do your own accounting. If you're not a brain surgeon you probably shouldn't do your own brain surgery. It's ok to outsource things that aren't core to the business.
I agree 100% and I think bringing an accountant into your core team rather than outsourced to an external team is much better for the Ceo.
Thanks for doing this, Sarah! What strategic value do you think you bring to the companies you invest in (beyond the check)? Because of your specific background/ skillset, do you choose to focus investment on companies in certain industry spaces?
Like most investors, my value add depends on the company and what they're looking for. Sometimes they mainly just need capital, sometimes we have a more hands on relationship. I let the founder lead on that front. Pretty much every investor has a space they focus on for a year or two then their focus will shift, sometimes a tiny bit within the category or sometimes to a totally different category. What they're writing on their website, who they've invested in, what they're tweeting etc is a great way to figure out if you're a fit for a given investors' current thesis.
Hi Sarah. Thank you for doing this. I'm the co-founder of an all-women app development house in South Africa, building apps focused on the needs of women in their daily lives. We are prelaunch on our first app and trying to get our first customers. At what point do you recommend starting to contact investors? Pre-revenue has proved to be an obvious no, which is understandable ;) But how many clients or how many users equals an acceptable amount of traction? In a market where no one has "cracked it" but also no one is throwing money at it so no one CAN crack it, how many paying users does it take? Or should we just be making like the boys and contacting every possible investor we can find, hoping something lands?
Generally investors in the US don't want to invest in developer shops. I'd check around your local market and see if people will invest given the company structure.
Hi Sarah. Thank you for your response. I understand what you're saying and perhaps I wasn't clear. We would not be seeking investment in the development house - that is simply the vehicle by which we operate. We would seek investment in individual apps as we build them. Our first app is aimed at the salon market, which is what we are experiencing these issues with. Does that change your response at all?
Thanks, Sarah! What do you value most when hearing from an early-stage startup?e.g. If I were explaining to you how we plan to sell our product at scale, what would be the most convincing components/metrics you would look for?
https://guykawasaki.com/the-only-10-slides-you-need-in-your-pitch/ this is my preferred format for pitches.
Hi, @Sarah - Thanks for doing this! I am new to VC, and would like to hear your tips on evaluating startups and founders. Secondly, our LP has a specific area of focus (Esports / gaming) that we are not experts or gamers... it's proving to be difficult to assess the product/market fit because we are so far removed from it. How do you get creative about gauging the product beyond metrics and models. We've done focus groups, but curious if you have other special tricks.Thanks!!
If you're not experts in gaming and esports either hire someone who is, co-invest with smart people or don't invest in that area. If you want to learn more you can build a thesis like any other space but it sounds like you don't want to invest in that area so I don't understand why you would if you don't have an interest/passion for it.
Thanks Sarah for taking the time to answer our questions. I am a start up founder and will be launching the MVP for our product within the next 2 weeks. What advise can you give on the best way to connect with investors, should we be sending cold emails or is there a better option to get an audience with potential angel investors?
If you're still at almost launching an MVP stage I'd suggest waiting on investor outreach and focusing on getting into an accelerator or something else geared towards incredibly early stage companies. It's a lot easier to get that money and a lot easier to raise from angels once you have some money in and a product that's launched. Re angels, start with your network - friends, family, alumni networks, etc but most will want to see more than an almost mvp.
Hi Sarah! I have a question. Are online applications to VC’s really effective ?
Most take 5 mins at most so they certainly are worth trying.
Hi Sarah, We are raising our seed and have lots of interest and several large firms who say they will be in when we reach $70K-$100K MMR. It's totally possible to do quickly as we have 2 confirmed enterprise pilots BUT we need capital first to launch the pilots. How do we get in front of more scouts? How do we find them? How do you suggest we get first investors in so we can meet the MMR required to reach our funding goals and scale?
Don't talk to large firms if you're too early from them. Talk to accelerators, angels and pre-seed funds.
If you have a sex tech biz, how would you get funded ? Better yet would you be interested in investing in sex tech related companies ? Tks for answering!
With any sector the answer is the same - go to investors who seem interested in that space. Either by what they've already invested in, what they post online, things they've said on panels etc. Anyone can submit their pitch deck to me at cleocap.com. Happy to take a look.
Thanks for doing this & huge congrats on your experience! I'm a founder of a Vouchery.io, marketing software for automating personalized e-commerce promotions. We haven't yet raised capital but have a stable seed-stage MRR. As we're getting a lot of traction in North American markets, I've been considering to start fundraising in the US ( I'd be happy to move over there if that's a requirement ). From your investor's perspective, what's the best way to do it? Best,Ewelina
If you're not in the US, you need a US based Delaware C Corp entity to get investments from US based investors.
Hi Sarah, Thanks for addressing our questions. At what stage is a good time to start courting investors? We just raised pre-seed $ to develop our MVP platform for our fashion tech company. Development and testing will take about 7 more months. I don't want to start too early before we have any traction and waste introductions when the timing is too early to raise. We have retail businesses for our MVP test location. We have many relationships with big chain retailers in our pipeline (because they are customers of our parent company). However, we don't have sales or intents to purchase yet. Is it too soon to start going to networking events/send cold emails? We're in that awkward phase where we are more than an idea but not a business yet.
If you just raised and you don't have an MVP yet, go focus on that. Launch the MVP and get feedback from customers then worry about raising more. Try to start raising when you have at least 4 months runway left but you really need to be head's down at this stage vs worrying about networking. Investors can't invest if your product isn't progressing.
Hi Sarah. I recently wrote about you so for that reason it’s exciting to be picking your brain. I am creating a fund from the ground up. When you put together your fund, did you use all of your own funds or did you use some of your own funds and pool it together with a partner?
VC funds are by definition money from people other than the founders of the fund. If it's your own money it's generally called angel investing or a family office. Some family offices have brands/names like Gingerbread Capital but most do not.
Sarah! Thanks so much for doing this AMA. I love the model for Cleo and that you're putting your fund in the hands of scouts - a great idea to improve diversity of deal flow off the bat. What made you decide to approach your fund that way? Also, I'd be foolish not to plug... I'm currently raising a pre-seed round, for Subscripta, we're in the sweet spot of marketplace, consumer goods, and technology platform. I'll submit our deck to you through your "pitch us" form later today!
Thank you @SarahKunst for doing so much to end the woman/capital problem. Research shows: men get funded on potential, and women's businesses are evaluated in terms of their risk, how can women fundraising address this disconnect?
Hi @SarahKunst, thank you so much for doing this! In your experience, what has been the biggest hurdle you have seen women face before getting to a point where they can qualify for VC funding?
Office hours with Sarah are now over. Thanks so much Sarah for answering our questions!
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