My first startup, founded right after college, I'm 27. Biotech.
I've poured my soul into it for ~5 years and we've stalled technically again and again. It hurt to come to terms with but I think if we don't reach our MVP by early Summer it will be time for me to leave, to give some context.
Investors keep reaching out. I am happy to tell them about what we aim to do but I feel conflicted about feigning optimism.
What is appropriate here? As a CEO, should I secure whatever funding I can to support the team and extend runway, or should I be honest about how make or break our situation is and tell them that we would love to stay in touch to discuss investment should we reach our technical goals? I don't have experience to know whether this is a judgement call for each CEO or if there is an accepted standard.
Any input is helpful, thank you.
SoLo Funds wants to replace payday lenders with a community-based, market-driven model for individual lending, and now has $ 10 million to expand its business in the U.S.
Payday lenders offer high-interest, short-term loans to borrowers who are at their most vulnerable, and the terms of their loans often trap borrowers in a cycle of debt from which there’s no escape.
Around 80% of Americans don’t have adequate savings to cover unforeseen expenses, and it’s that statistic that has made payday lending a lucrative business in the U.S.
Over the past decade websites like GoFundMe and others have cropped up to offer a space where people can donate money to individuals or causes that in some cases serve to supplement the incomes of people most in need. SoLo Funds operates as an alternative.
It’s a marketplace where borrowers can set the terms of their loan repayment and lenders can earn extra income while supporting folks who need the help.
The company is financing tens of thousands of loans per month, according to chief executive officer and co-founder Travis Holoway, and loan volumes are growing at about 40% monthly, he said.
While Holoway would not disclose the book value of the loans transacted on the platform, he did say the company’s default and delinquency rates were lower than that of its competitors. “Our default rate is about three times better than the industry average — which is the payday lending industry that we’re looking to disrupt,” Holoway said.
The company also offers a sort of default insurance product that lenders can purchase to backstop any losses they experience, Holoway said. That service, rolled out in April of last year, helped account for some of the explosive 2,000% growth that the company saw over the course of 2020.
SoLo has seen the most activity in Texas, Illinois, California and New York, states with large populations and cities with the highest cost of living.
“Our borrowers are school teachers… are social workers. When you live in those larger cities with higher costs of living they can’t afford the financial shocks that they could if they lived in Dayton, Ohio,” said Holoway.
While the company’s borrowers represent one cross section of America, the lenders tend to also not be hailing from the demographic that a casual observer might expect, Holoway said.
About half of loans on the platform are made by folks that Holoway called power lenders, while the rest are coming from less frequent users.
“A majority of [power lenders] are college educated and the majority of them tend to be white men. It’s individuals who you might not think are going to be power lenders… They may make $ 100,000 to $ 125,000 per year,” said Holoway. “They’re looking to diversify their capital and deploy it to make returns. And they’re able to help individuals out who otherwise would not be able to pay for groceries, paying rent or taking care of their transportation expenses.”
Given the company’s growth, it’s no wonder investors like ACME Capital, with support from Impact America Fund, Techstars, Endeavor Catalyst, CEAS Investments and more joined the new round. previous investors like West Ventures, Taavet Hinrikus of TransferWise, Jewel Burks Solomon of Google Startups, Zachary Bookman of OpenGov, Richelieu Dennis of Essence Ventures and tech innovation accelerators also participated in financing the company.
“For too long, there have been limited options for individuals in need of immediate funds due to unforeseen circumstances, like a shift in hourly schedules, unplanned car troubles or other cases,” said Holoway. “SoLo was created to offer safe, affordable options for borrowers that need cash quickly, while also creating a marketplace for lenders to grow capital and help community members in need. We believe that at the end of the day, people are innately honest and tend towards generosity, and our platform’s growth is further proof that people want to do good in the world and make an impact.”
An inside look at how successful VCs are courting the small world of big investors.
At DocSend, we spend a lot of time analyzing the data behind what it takes for startup founders to market their ideas, land meetings with VCs, and in turn source and close deals — from pre-seed to Series A.
While we’re passionate about helping founders turn their ideas into flourishing businesses, we also recognize the massive challenge that VCs face when raising their own early funds by courting the right limited partners (LPs) to get off the ground. The good news for aspiring VCs is that the investing world is no longer completely dominated by a small, niche circle of investors. Advancements in technology, new capital accessibility, and evolving ways of working have begun to democratize the international investor community.
With many of the traditional barriers to fundraising becoming less daunting, early-stage VCs need to find ways to break through the static and reach the LPs that will get their funds up and running. To get a better understanding of what is working in the new world of VC fundraising, DocSend recently surveyed partners from 46 opt-in VC firms for our new research report: Looking behind the curtain: How VCs raise their early funds.
While it’s important to note the relatively small sample size in this survey and that not all VCs will have the same experiences fundraising, the data holds valuable insights into a historically closed-door process. After analyzing the data behind their fundraising experiences, we’ve identified three trends all fundraising VCs should bear in mind before picking up the phone — or really, jump on the Zoom meeting.
Don’t try to net every fish in the sea, just the right fish
The democratization of the global VC community means that more early-stage fundraisers are on the hunt for potential LPs than ever before. But does it make sense to cast a wide net and contact as many LPs as possible? Our analysis shows that the “numbers” approach may not be the most effective.
If expanding your network and practicing your pitch are important to you, you may benefit from pitching a larger pool of investors. But if securing funding in a timely or efficient manner is your priority, you’re better off taking a more strategic approach to who you reach out to. The graph above shows a definite point of diminishing returns when contacting LPs, somewhere around 60–70.
It’s also important to keep in mind that taking more meetings doesn’t necessarily result in raising more money in exchange for the time and effort committed by you and your partners. One small firm in our survey averaged over $ 5 million per meeting from only a dozen meetings. Whereas at the other end of the spectrum, a boutique firm averaged only $ 100,000 per meeting from 100 meetings.
While it depends on your firm and your overall strategy, early-stage fundraisers would do well to “pitch smarter” and make quality approaches to potential investors rather than focusing on sheer quantity.
Hit the ground running, but budget for the long haul
What kind of time commitment does the fundraising process require? For first funds especially, the data indicates it can take many months.
Again, it depends on the nature of the firm (niche strategies can take longer to fundraise than more general-strategy firms) but persistence is important. While things could come together more quickly, it’s best practice to budget for at least 6 months of fundraising, if not more
A key takeaway from our analysis is that although early-stage VCs should focus on quality pitches to well-targeted LPs, they do not necessarily have to rush back to the drawing board if the process takes longer than they initially hoped.
Find an anchor LP to champion your firm
An anchor LP is an investor that commits a significant amount of the total capital to the fund upfront, usually around 25% for first-time funds. If you’ve never raised a fund before (or if your last one didn’t pan out as you hoped) an anchor LP can give you the credibility you need to land more investors. According to our sample, the average fund had 28 LPs, so getting one credible name on board early on can go a long way in securing the rest.
While the share of the funds the anchor takes can be significant, the right LP with industry credibility can be a shot in the arm for your fundraising efforts and significantly shorten your fundraising timeline.
Do your homework, master your process
VCs raising early funds have plenty of tools to deploy, from leveraging existing professional networks, taking advantage of prior exits, and (of course) understanding the data on what has worked for their peers.
DocSend provides a competitive edge in the fundraising process. Our data reveals new trends and helps demystify metrics, allowing VCs to focus on what they do best: making their voices and investment strategies heard in an increasingly crowded global marketplace. To learn more about the fundraising landscape, check out the full report on DocSend.com.
How do your experiences fundraising match up with our sample? We’d love to hear from you either in the comments below or as a guest contributor on our blog at DocSend.com. Contact us at firstname.lastname@example.org to learn more.
A Look Behind The Curtain: New Data On How VCs Raise Their Early Funds was originally published in Entrepreneur's Handbook on Medium, where people are continuing the conversation by highlighting and responding to this story.