Wendy Lea, GetSatisfaction: Challenges with Venture Funding

Transcript follows & video below. This is Part I. You can view Part II here.

Could you tell me briefly about your past history in sourcing venture capital?
So prior to Get Satisfaction, my experience has been as a board member working alongside CEOs. Oftentimes I was the non-executive board member, the only non-vc around the table. When it came time for a new round then I would be asked or I would offer to go with the CEO on initial meetings to set up a new round. That piece of work is very different, supporting a CEO is very different than raising money as a CEO. So you must have a great love of startups then?

You know I do. Having been an entrepreneur myself, owned my own business, started & founded my own business with 4 other partners. In that case though we were bootstrapped, we didn’t use outside capital. It was a services business & we basically took mortgages out on our house, that’s how we did it. Because of the services component the need for capital was different. It wasn’t less, it was just different. We built a business from zero to $50million in about 6 to 7 years & we only had a line of credit. We were acquired by a big public company. So I had a view of entrepreneurship through that financing lens. Basically I would call that self financing & customer funding, nothing wrong with that, none. As a result of having that exit, I had the opportunity to learn some new things. One of the things I learned was about venture backed startups. It was very new to me. In fact I remember the very first venture capitalist I ever met was Brad Feld, then at Mobius, now at Foundry. I remember asking him so what do you do really? This was only in 2000, so this was a decade ago. But to think I had gotten that far in business & had been acquired by Siebel Systems. That was so cool, we owned 100% of the business & I had to ask him what do you do? It was kind of funny. I laugh about it now. But it is very different raising money as a CEO. In this case, with Get Satisfaction, I joined them in March 2009. When I joined there was $500,000 in the bank & we had 9 people, 3 founders. They had been unable to raise a proper A. They had raised from First Round Capital & OATV $2.5M & they’d gotten incredible traction with that. So good on them, because it was good timing, good site, incredible traction outside & all good things. But then when they’d tried to raise summer 2008 & all of 2008 (remember that bad year?) they were not able to do it because they had no business model. They were trying to raise on momentum, not on financials because that’s how all their friends had done it, so why not them? Then of course the near economic collapse certainly stopped that. So long story short they did a final little tin cup around, $500k, new angels, so there’s a lot of angels on our shoulders (which we’re very grateful for). I came in on that money & as soon as I came in, I had to figure out how to go raise money.

Wendy Lea

You had obviously learnt a lot about venture from the start, when you asked Brad & being a board member, but were you hesitant about becoming a CEO & having to source venture?

Good question, you know I think I was so completely in love with the business & the business model of Get Satisfaction, I denied, did not allow pragmatically this thing about raising money to get in my psyche. Honestly, if I had known what I know now, I probably would have been more hesitant. I’m not saying I wouldn’t have done it but I would have done it with a lot more realism. Because it was really challenging.

Wendy Lea

And it takes up so much energy & focus when really you should be running the company.

Yes this is true!

Wendy Lea

Well good on you & probably great that you were in a bubble & didn’t even think about that dimension of it so Get Satisfaction got you & you got Get Satisfaction?

I think so.

Wendy Lea

What personal lessons being a woman have you taken out of your successes &/or failures in that regard?

The first lesson is that all of the vcs that I was introduced to, and we were in a very good position in that way in that our seed investors First Round Capital & OATV have an incredible network & their job is to do seed funding & then hand off their babies to Sand Hill Road or other larger funds. The biggest lesson is learning how to qualify them: the size of the fund, where they are in their funds is it $150 or $200 or $500 or 1B because that has to do with the kinds of returns that they expect. It’s not that I didn’t think about it but I wasn’t conscious with the strategy of that data & therfore I think I invested too much time meeting & greeting because I was fascinated by it. Given my age & my experience, these are interesting people & I’m like ‘Oh cool, I meeting …. from ….. That’s cool & he’s interesting, we know the same people.’ I think if I were to do it over again, my number one lesson would be to look at the relationships that our seed guys had, to apply a more efficient & strenuous lens on that total market, meaning the vcs. Then decide which of those would be the most likely, based not just on what they had invested in in the past (that would be one criteria). But also the size of their fund, also the way they make decisions, where they were in their particular fund (the one they were investing out of). Again, it all sounds very basic now but that’s a big lesson.

Wendy Lea

I can understand that that would be an important piece when you come out of a bootstrapped company.

That’s right! So that’s kind of the left brain, more strategy. The second lesson would be just to realize that this is not a marketing pitch. It’s not a sales pitch! It’s an investment pitch! I’ve been in sales & marketing all my life, all my adult life. There’s a part of the positioning of the business that is sales & marketing oriented but at the end of the day the vcs job is to bring home a return within a certain payback period for their Limiteds. I think I was not as clear & definitive about that part of my deck as I could have been. Because the business was early, we didn’t have a lot of data & the business hadn’t been monetizing that long, as an investor you had to really think, well where is this going? That would be the second thing, just more investment oriented data.

Wendy Lea

As a woman, were there any particular lessons that you took away with you (more on the gender side of things?)

I’ve thought about that, a lot of people have asked me about that. I don’t think its just a gender thing. In my case there were 3 dimensions of me that I’m really proud of but also worked against me compared to other entrepreneurs. There are 3: being a woman; over fifty; from the South & not having a MBA. It is what it is, right. But in Silicon Valley? And by the way not being a technologist. So I’m not from Google or ebay. I’m not from MIT or Stanford relative to technology, I’m just not. I’m commercial. So I didn’t have that, which is important to these guys especially with this kind of business. This is a disruptive model. It’s an online model, but still that was important & I see that now. Then there’s financially independent so what’s going to motivate this woman? Think about that. So she’s had a hit & an exit & now at this stage & age (& I don’t feel old) but it’s just the reality,right. Why, why would you go do that? So I think they were kind of fascinated & enamored with that, do you know what I mean? Also just my background, I’m running an online business but I’m an enterprise software girl, so I’m jumping tracks, although it’s in my field of CRM. I think for me, I never felt that well you’re a woman & therefore its been hard, I honestly never felt that, ever, not one time. But I did allow myself to feel less than whole sometimes when I added up all those features, those dimensions. I thought eww compared to the other folk they see, that they had invested in before. Remember I wasn’t standing there, having brought in a win to another vc. The win I got was on my own back. Yet the vcs, all of them that we met, I’m talking the top tier on Sand Hill Road & San Francisco & in New York, they were deeply respectful of that, that we were bootstrapped & that we got this wonderful exit. Therefore we made a lot of money but the fact that we hadn’t made that working through a venture capitalist situation. It’s just different.

Wendy Lea

It’s a different model?  I guess what I’m hearing is that this challenged you in ways but it didn’t challenge you as a gender issue.

No I couldn’t say that.

Wendy Lea

What attitudes towards you being female have you noted from venture capitalists when you have been sourcing venture?

Not really. These are really smart, skilled folks. They have a job to do. They have Limited Partners to prove their value to. I respected their jobs immediately & I think they respected mine. I’m so fortunate, I’m representing an incredible business. It’s incredibly disruptive. For them it wasn’t really about me being a female. It was about this business at this stage in this economy. I’m guaranteeing you now, we’re off to the races, business is on fire. We’ve raised money too but it was just early. Not in terms of business overall but for this particular business it was early.

Wendy Lea

So you’re quite remarkable really, in that you didn’t tick all the usual boxes when you were going to pitch for venture. You said that at times you felt less than whole. Could I ask what antidote you used in that respect to support yourself.

It’s a good question, it was really tough! The specific time period was June through December 2009. It was a lonely, dark time. What did I do to kind of replenish myself & to keep from going goofy or getting down (cause I couldn’t afford that)?

Wendy Lea

Because you had to build your confidence, didn’t you?

I had a couple of very, very close advisor friends. One that had worked for me before & he’d raised a bunch of money after we worked together. Just wicked smart & completely loving & open & knew me well. So when he would see me kind of get into a funky spot, a spot of doubt he would help. Many times at 6:30am, he lives in Portland, he would call & say ‘How are you?’ I would say terrible. I actually had a term sheet pulled, which made it even worse. So I got one pretty quickly from a very major firm & then for a range of reasons, they changed their minds. It was never executed but it was delivered.

Wendy Lea

That would have been a crisis of confidence?

Oh man, I went through a lot of jump through hoops before I got the physical term sheet through email. Then the weekend before the final signatures & references & all of that & then they chose not to do it. It was very distressing to me personally, professionally & to the company. That was the darkest moment relative to the financing! But you know you reach out to your friends. I have a sweet dog & I walk him around the block. No one from my family would understand, it would make no sense to them. They thought I’d lost my mind for doing this in the first place. ‘Why don’t you just go to Bali & hang out? What are you doing?’ So friends, I have a wonderful lot of friends at Watermark.org & Astia. Chris Shipley would help me. Diane Green, the founder of VMWare,we would ride bikes & she would say ‘Ok, don’t lose your cool!’ A lot of good female friends, a lot of good advisors who’d been through the business & just my own understanding the value & power of solitude, very restorative.

Wendy Lea

Yes, that can be very healing! It is, I totally agree with you on that! Thank you so much for sharing that personal stuff.

Comments are closed.