Sarah Jacobs
Keep investors in the loop. ClassPass founder Payal Kadakia pictured.
When ClassPass founder Payal Kadakia started her fitness company in 2013, money was tight.
Even though she'd been part of rigorous tech accelerator Tech Stars, she had trouble raising her initial funding, she told Business Insider US editor-in-chief Alyson Shontell on an episode of Business Insider's podcast,"Success! How I Did It."
"I think I had a lot of people who were like, 'Payal, we love you but product's not there,' or 'business is not there.'" she said. "I never gave up, though. I think as a founder and entrepreneur, you just keep hustling through it."
Kadakia raised a bridge round of funding - "an extra $300,000 to stitch between where I was with my capital and where I wanted to go" - and it made all the difference.
With that money, she was able to show potential bigger investors her company's progress. She explained:
"I always say investors invest in lines, not dots. I was giving them so many dots that were so much better than the last time I had seen them and I was keeping people in the loop. For me the reservation number and our revenue trajectory, I remember just sending charts and the hockey stick to people. So many of my investors, I remember when they were like, 'When you texted me that, it was like, 'Oh my God'.'"
By June of 2014, "I feel like that was when I knew we had cracked something that was really special," Kadakia said.
You can listen to the full interview here:
Subscribe to "Success! How I Did It" on Acast or iTunes. Check out previous episodes with:
- DropBox founder and CEO Drew Houston
- AOL CEO Tim Armstrong
- BuzzFeed founder Jonah Peretti
- Facebook COO Sheryl Sandberg
- Cleveland Cavaliers forward LeBron James
Here's an excerpt from the transcript:
Alyson Shontell: Does the money come easily? Was it a bit of a slog? I know you had two different co-founders I think at the time.
Payal Kadakia: When you have hype of something like Tech Stars, it definitely gives you some clout but at the end of the day, we didn't have the numbers at the time. It was a moment for me to go back to my mission and I decided we would let go of certain people. We would focus the company on pivoting and iterating, which was a hard decision to do but what was the point of keeping a product up and funding that when it's not working?
...
Shontell: How hard was it the first few years and were investors actually interested in it? Did you find that it hard to pitch to them at first?
Kadakia: I think I had a lot of people who were like, "Payal, we love you but product's not there," or "business is not there." I never gave up, though. I think as a founder and entrepreneur, you just keep hustling through it. I knew I'd figure it out and as long as you don't run out of money, which is the number one key, that's like your right to keep going. You have to keep making hard decisions, like I remember I needed a bridge round and people were like, "of course," because they were seeing -
Shontell: Explain what a bridge round is.
Kadakia: I needed an extra $300,000 to stitch between where I was with my capital and where I wanted to go and I wasn't ready to go into a big round and so it was awesome because I think people were just like, "your progress." I always say investors invest in lines not dots. I was giving them so many dots that were so much better than the last time I had seen them and I was keeping people in the loop. For me the reservation number and our revenue trajectory, I remember just sending charts and the hockey stick to people. So many of my investors, I remember when they were like, "when you texted me that, it was like oh my God." I remember sitting down with Hayley from Birchbox and I was like, "here's what it looks like," she was just like, "show me that again." I feel like that was when I knew we had cracked something that was really special. That was January of 2014.