Podcast: Stronger Together - Founders & Investors - The Path to Impact

I recently appeared on the wonderful "Beyond..." Podcast hosted by Nihad Karabernou.

The podcast title was Stronger Together - Founders & Investors - The Path to Impact

Nihad is an experienced executive who has spent a career working in large corporations with an emphasis on change-making. Her podcast spotlights changemakers across a number of industries. She is currently the CEO of Acquence, a firm that helps companies with strategic transformations, and designs turnkey offsite corporate and wellness retreats. It was a pleasure to talk to her about building relationships between founders and funders to make change in the world.

Here are a few topics we discussed, but I encourage you to listen to the entire episode.

• How can founders and investors work together to create a stronger partnership?

A: First of all, I’m glad you acknowledge that it is and should be a partnership.  Startups should select investors that do act like partners and will be willing to offer some guidance, and most importantly some introductions to their networks.  This requires building trust, which doesn’t happen right away, but both sides should work at it.

• What role does transparency play in the relationship between founders and investors?

A: Transparency and frequent communication is a key part of building trust.

-              The best startups write short monthly or quarterly updates to their investors (and to prospective future investors) showing their progress.

-              Startups should include metrics including their burn rate, their runway, and their other KPIs whether they are looking good or bad.  Investors expect the road to be bumpy.  In fact, they can be most useful in times of crisis.  I was an angel investor in a company that went belly up with telling anyone.  I wished they had let us know when they were in trouble, and I’m sure we would all have tried to be as helpful as possible in that situation.

-              Good startups make targeted asks to their investors and supporters.  We are looking for intros to these type of partners, or we are hiring a new marketing person who do you know?

-              Another aspect of transparency is that the investor should make sure that the founder understands the term sheet.  Some investors count on founders not fully understanding it, but it’s a green flag if the investor spends some time explaining clauses to new founders who may not have seen them before.  Of course, the startup should also get their own counsel, but you learn a lot about an investor by how they write their term sheets and contracts.  Are they fair or overly one-sided?

• How can founders and investors work together to ensure the startup is a good business and not just a good product?

A: Investors are finance people and founders are often technical people.  Hopefully the technical founder has a more business/marketing oriented co-founder.  Investors are usually laser focused on the business aspects of the company and how to achieve rapid growth, whereas typically the founders can be overly focused on the perfecting the product.  Both are needed for success.

-              Investors can encourage founders to spend way more time and money than they probably think they need on building a community, marketing and developing a solid go-to-market strategy. 

-              They can help the company identify and fill in talent gaps.

-              There is a saying that first time founders focus on product and second time founders focus on distribution.  Investors have seen too many great technical products flounder in the market because no one knew they existed.  Founders often think “If you build it, they will come”, but that only works in the movies.

-              Investors can encourage early stage founders to have a clear exit strategy in mind.  Many founders hesitate to articulate one, since they think it’s too early to know.   However, it’s important that they realize that it’s better to have a goal and change it later, than to not have a goal at all.

• What are some innovative Go-to-Market strategies you have seen?

A: AirBnB famously launched their services in big US cities during conventions when hotel rooms were scarce.  This helped them get new users faster than they might otherwise.  They also realized in the early days that the photos that people posted of their rooms for rent were often not well done, and didn’t make the space look attractive.  For a while, they actually sent professional photographers to their new listings to take good photos, since this made a huge difference in sign-ups.  These were non-scaleable things that were needed in the beginning to get the flywheel turning.

In November 2024, Outlandish, an e-commerce startup, launched a groundbreaking retail experience by integrating TikTok Shop with a physical storefront in Santa Monica. The two-story store features branded stalls on the first floor, where hosts livestream product showcases on TikTok, while the second floor offers an in-person shopping experience. This innovative approach allows customers to purchase viral products, observe influencers in action, and even participate in live streams, effectively merging online and offline shopping realms. Since its opening, Outlandish has reported a significant increase in both foot traffic and online engagement, with some partner brands experiencing a 100X surge in gross merchandise value (GMV) within a month.

Shopify is a Canadian success story.  It’s an e-commerce platform that has grown to now power about 10% of all e-commerce in the US, with $235 Billion in GMV (Gross Merchandise Value) in 2023.  If you aren’t shopping on Amazon or Walmart, chances are you are shopping at a store built on Shopify.  Their VP of growth now that they are mature said that the two things that provide remarkable results as they tweak their product are 1) refining and perfecting the new customer onboarding experience and 2) reducing monetary friction wherever possible.  Shopify recently introduced "Shopify Magic," a suite of AI-enabled features designed to automate tasks such as generating product descriptions and managing discounts, thereby enhancing merchant efficiency. These initiatives have attracted a large volume of sellers, with the number of stores registered on Shopify increasing by 20% in the third quarter of 2024.

• What advice would you give to other minority or women entrepreneurs who are struggling to secure funding?

A: here are some things I always recommend:

• Join an accelerator.  Join more than one.

• Join peer to peer founder groups.

• Visit the big startup ecosystems and build connections there.  Do this BEFORE you are ready to raise money so that you will know people there when you are raising. Go to Silicon Valley. Go to New York.  In Canada, go to Toronto and Vancouver.  Go to the events where you will meet funders.

• Do NOT just limit yourself to female only events, accelerators and funders, but do take advantage of them.

• Get some advisors that can help make introductions for you.

• What systemic changes do you think are needed to make funding more accessible to underrepresented groups?

A: The solution is 3-pronged:

1. Education to make sure that underrepresented founders understand what funders are looking for, so they know what is and is not VC fundable.  If your idea or company is not VC fundable, that’s fine.  There are lots of other sources of funding out there.  I still see too many founders wanting to raise money where their idea isn’t big enough.

2. We need to actively counter our unconscious biases. The simple reality is that VCs are overwhelmingly male, and there is no doubt that there are some unconscious biases that creep in to funding decisions.  It is natural to want to fund companies you relate to pitched by people that you relate to.  It has been demonstrated that male founders are asked a lot of questions about upside potential, and female founders are asked more questions about downside risk.  We need to encourage funders to become more aware of their biases and make sure their questions are fair.  That’s even even more important in the current anti-DEI climate in the US.

3. We need more female and underrepresented funders.  More diversity of people writing the checks will make it easier for a more diverse array of companies to get funded.  Women in particular have tremendous financial power, yet they often tend to direct it towards charities rather than early-stage investments.  I would like to see that change.  People like Melinda Gates are powerful examples and very vocal about the need for more women to invest particularly in women's health.  Backstage Capital is a VC fund founded by Alan Hamilton, is very vocal about supporting underrepresented founders.

• What role do mentorship and networking play in helping minority and women entrepreneurs access funding opportunities?

A: It is one of those things that you don’t appreciate when you are young and confident, but there are lots of people out there with great experience and connections who are willing to help.  The Canadian Women’s Network brings cohorts of Canadian female founders to Silicon Valley twice a year for mentorship and networking.  My own consulting practice focuses on helping connect founders with funders both in the US and Canada. Look for mentors and advisors, and you will find that more doors will open.

Please listen to the full Stronger Together Podcast episode.

Find more interesting podcast topics on Beyond... hosted by Nihad Karabernou.

Find more interesting blogs from me on my website.

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Wishing you all success.