A Wyoming Success Story (Heather Shoemaker - Language I/O)

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Heather Shoemaker: I knew the market was crap for raising a round But what I had going for me is . , I'm a female engineer. It's always been hard to raise money. , you know, like it was never easy. what's one more obstacle?

Jason Yeh: This is funded. The show were founders who raised millions in venture capital share the gritty side of what it actually took to get that money in the bank. I'm Jason Yeh. Not too long ago. I was trying to get my ideas funded. And back in the day, I was a VC listening to founders, pitch me for money.

you think of were successful venture backed tech companies are headquartered. You probably think of cities like San Francisco, New York, LA. Maybe even Austin or Miami. It's safe to say that small cities like Cheyenne, Wyoming with populations of 70,000, probably don't make the list.

Today, I'm joined by Heather Shoemaker, founder and CEO of language IO. [00:01:00] An AI powered translation software company.

That's raised over $20 million in venture capital. The best part is they've done it all while headquartered in Cheyenne. Proving that in a post COVID world, you can be venture backed from almost anywhere.

. But being a female founder in the tech industry, while going out to raise venture capital doesn't exactly scream easy, especially from a flyover state. And Heather's case.

She was even told by one VC and I quote. It would be so much more believable if you had a beard. Oh,

. Despite every obstacle, Heather still managed to come out on top. Having recently raised an $8 million series a in one of the most challenging fundraising environments in history.

all of that perseverance had to come from somewhere. Maybe it came from your childhood, which turns out. It was quite the cold one.

Heather Shoemaker: So I was born and grew up, went to high school and everything in Alaska.

Jason Yeh: where all the great founders are, are born, right?

Heather Shoemaker: right?

Um, but [00:02:00] I, yeah, as a, how, like, it's hard to describe yourself in, in a couple sentences, but things that apply to becoming an entrepreneur later were definitely there.

Like there were traits. For example, I was seen as bossy. Um, I remember my, my siblings getting irritated with me 'cause I was too bossy and controlling and at one point my par my parents were, sat me down and they're like, Heather, you'd make more friends if you were just less I was like, okay. So, you know, I, I think that's kind of entrepreneurial at some level, right?

To just be a little bit bossy. Like, you know, how you to go.

Um, but I had to get that under control because I think more successful entrepreneurs, um. I do have to learn how to work with people and play nicely with others. So, you know, you can't just be bossy. So I, I hope I did eventually learn my lesson, but another thing as a kid that I loved to do was just invent things like I thought

The be all [00:03:00] end all was to invent something new. And so I would like get chemistry sets and concoct things and not that I ever invented anything as a child that was worth mentioning, but it was like something that I found really fun to do that I think did play into how

Jason Yeh: And the, either the bossiness or the inventive streak. Um, was that something that maybe that you took from your parents? Were your parents entrepreneurs, were they inventors, scientists? Um, you know what, what were your role models growing up there?

Heather Shoemaker: No, uh, my dad was actually, uh, an Olympic athlete. He, um, skied in Sapporo. And I wanna say it was 72. He was a teacher in Alaska. He, uh, was a ski coach and a gym teacher in Alaska. And my mom, I mean, she's since got a graduate degree, but at the time I was growing up in Alaska. She was a stay-at-home Mom, I just, I.

And, and we were in a really [00:04:00] rural area, like Alaska in general is rural, but I didn't, I just spent a lot of time in the woods, you know, , like not doing your normal neighborhoody things because we had a lot of property. There weren't a lot of kids nearby. Um, so I was on my own a lot.

Also being bossy,

Jason Yeh: Fascinating. Well, well you certainly had like an elite performer to look up to and

your father, right. Someone who I'm sure put in a lot of hours and, and worked really hard to get to where he was.

Um, well, well, I'd love to kind of take you through this path and. Um, I'm sure you've done other interviews and other types of, uh, podcasts might really focus on the start of the entrepreneurial journey.

I want to at least touch on that, but, we'll, we'll actually fast forward and then get to where your company is today, but tell

me a little bit about your path towards starting Language io. Like were you consistently an entrepreneur or did this come out of your Years as a, as a corporate, [00:05:00] you know, corporate ladder climber.

And tell me a little bit about where you were

Heather Shoemaker: I am like the opposite of a corporate ladder climber, which is how I wound up as an entrepreneur. Right. So just to give you the, the. You know, short story as to how I wound up being a, being an entrepreneur. I started with a degree in linguistics from the University of Washington and Seattle, and for a while I was an interpreter for the Immigration and Naturalization Services, um, and did a few things in just the interpretation field, and I loved it.

I felt like being able to communicate in other languages was just exciting. Like it gave me a rush to be able to talk to people. Um. that other people couldn't talk to because they didn't speak their language. Right. And when I realized that I could learn a language and communicate with folks that, that other people could, like, there's just something exciting about that.

I can't really tell you why it's not very tangible, but I did realize, um, shortly after getting [00:06:00] that, uh, undergraduate degree from U-Dub in Seattle, that that wasn't . My end goal, like I enjoyed doing it, but there wasn't any money in it. And, you know, I did wanna make a good living. And, um, I always loved math and I remember hearing an NPR interview when I was trying to figure out what I was gonna do with the rest of my life.

Where this really interesting reporter was talking about the . Emerging field of software development and how, if you could learn how to code Java at the time, that was the be all, end all. Um, then you, your career was set. And I always, you know, I watched the movie Hackers back in the day and I thought like coding was super exciting and it felt like another language, just a really powerful one, right?

Like I spoke French and Spanish and some Portuguese, and of course English, but what if I added Java to that, like . A language that actually did things that sounded super exciting. And of course, at the time I was into cyber science fiction and, um, I, [00:07:00] it just seemed like a, a really fun thing to go into. So I went back, I got my master's degree at CU Boulder where I was, I had moved to at the time.

And, um, right out of college, out of getting my master's degree, I was able to combine my love for both, um, . Speaking different languages and writing code in the field of software, globalization,

And so I worked at a, a couple companies for about a decade and basically I just traveled around the world and worked as, um, . A consultant for big companies who needed to internationalize their code base. And during that era of my life, I had a lot of fun, learned a lot about corporate culture, and got to do what I loved.

But one thing that I realized was that the biggest challenge that companies faced when they, they go global wasn't what I was doing. Like what I was doing was necessary, but the harder to solve problem was the messier. Operational challenge of how to provide multilingual customer support because . , [00:08:00] there was no technology at the time.

People weren't super comfortable yet with machine translation and they were like traveling around the world, staffing up native speaking support teams for all 20 languages that they needed to support. And it's just not scalable. They wouldn't have high occupancy rates for those teams. Um, and so that's when I started thinking about it.

I wound up getting recruited by a company in the Denver Tech Center called E-College because I'd been doing some internationalization consulting for them, and they were like, Hey Heather, we'd love to pull you in full time As the head of product globalization on the product side of things, um, would you be interested in doing this because we.

Our goal is to get acquired, but we know we need to fully globalize our platform. It was a learning management system before we can get acquired for the amount that we're looking for, and we'll give you lots of shares, which you come on board. So, um, after negotiating really hard, not for salary, but so I could work virtually, which at the time [00:09:00] was not a thing.

Um. I, we finally came to an agreement. I got a lot of shares in the company, and I came in and led the, the globalization effort successfully. We globalized the platform into, um, I wanna say about 10 different, or yeah, 10, four or 10 different languages. We were successfully acquired by Pearson for just under half a billion.

And my, you know, my shares vested and that kind of set me up and not being, uh. A climber or really not feeling super comfortable in corporate culture, I thought now it's time to make my escape right, and kind of go and build this thing that I, I knew that there was a product market fit for. And so I, I left.

I, um, just started. Working with folks, um, that I knew in the localization industry, language services industry, talking to them about whether this was something that they might be able to sell. Um, wound up getting [00:10:00] a contract to build my initial solution, and it just kind of blew up from there

because it was

a really needed. Yeah. And so initially I just bootstrapped it being an engineer, not an MBA person, not a business person. I didn't know what I didn't know. Um, I didn't really think I needed to go after funding being very naive at the time, right? Because nobody else was in my space.

It was like we, I was the first entrant in this made up market of multilingual customer support.

So initially I didn't even try to raise money. Um, just bootstrapped it and, but

Jason Yeh: and I'll just say, so you've, you've been working in I 18 n is that what

you guys refer to it as? I think a

lot of people don't, A lot of people don't know where A 16 Z comes from,

um,

but internationalization, um, that's a great

backstory, uh, great origin story for, for starting the company and, um, you know, I'm sure that that served you well as you

Eventually did have [00:11:00] to go out to fundraise. 'cause people want to know, you know, do you have an expert insight? Do you have, um, uh, experience that helped validate this problem space? And it feels like you had tons of check marks. And I love the idea that, you know, you didn't know what you didn't know, but you knew how to build, right?

So that's where you started your company, which means you, I think you had it in your mind that you could build something a, a business without raising money, but at some point. Heather you run into some kind of realization that's like, okay, I'm, I'm building, I'm building. Maybe you're, you, you had that first contract, you're making money. Can you remember what you were going through or what part in the initial journey of the business, um, where you kind of ran into this wall or this aha moment that maybe there was something bigger but you needed to fund it? Like, tell me a little bit about what was going through your head then.

Heather Shoemaker: Yeah, so again, being an engineer, not a business person, I was naive going into it [00:12:00] and you know, we started just chugging along, pulling in customers. There was a good product market fit for this solution, but I, what I should have known was that others were going to notice that. And I remember . We would pay attention, like when we had a few employees, we would, we didn't have a huge marketing budget, so we were paying a lot of attention to what was going on on LinkedIn and who was looking at our profiles.

Um, you know, to see if the prospects we were trying to sell into were, um, paying attention to us. And I started noticing these people that weren't prospects looking at our profiles, specifically . , um, for a few com uh, companies that ultimately became competitors, right? And they were very early stage as well.

But this one group, I, I noticed that they were always looking at our profile, and then I started paying attention to who they were and the news. And, found out that they just got a pretty significant fundraise and I knew that they were going after our space [00:13:00] and we were no longer the only ones in the field of multilingual customer support.

And that was my where, where my misgiving started to kick in. Like, I can't bootstrap this forever. We can't just grow organically. I mean you can, but you're just going to die this slow, tragic death as the . The better funded competitors gobble up the market share. Right? And so I, I am good at doing research.

So suddenly I started doing a lot of research about how to grow a company, how to, um, get VC funding. And I knew it was gonna be a tough road. I was in Wyoming. You know, that's where I had headquartered the

company.

It was pre C-O-V-I-D, right? So it wasn't normal to be in Wyoming. Everybody expected you to be in Silicon Valley.

I'm a woman. There are very few women founders, let alone of deep tech, right? And.

All the research I found [00:14:00] indicated that, yeah, you can raise money as a woman if you're selling fashion or makeup or baby related products in areas where women are expected to be the expert, but in deep tech, not so much.

You're gonna get a lot of pushback. So I had a a lot of strikes against me and it wasn't an easy road.

Jason Yeh: Well, um, you know, in other interviews that sort of, uh, yada, yada yada might be good. Um, but I actually think this is really worth talking through if you're comfortable with it. So,

um, at some, at some point you, you realize that wow, Uh, other people have noticed what you noticed, right? And then they started to fill their coffers to really go after this opportunity.

And so now you've gotta go do something and you're a student, right? You, you've, you've been a student, your, your whole career. You've, you've learned a lot of challenging languages, and now you think to yourself, I'm just gonna start looking up this new language of Investing in fundraising and [00:15:00] venture capital. Um, one of the things I've learned, so I've studied computer science as well, then went into that weird world of business

but, um, when people from a much more logical background, I. then enter this world of venture capital and fundraising. They're often surprised at, you know, what they run into. So I wonder if you could just tell us a little bit about your, your own journey of kind of getting yourself up to speed and then maybe touching on some of the harder experiences, um, you ran into trying to raise capital in the early days.

Maybe the mistakes or just bad, bad experiences, um, painful experiences that you went through.

Heather Shoemaker: Yeah, absolutely. And you bring up a good point. As a logical coder type person,

Jason Yeh: No

Heather Shoemaker: you expect things like this to follow a logical path. Right? And as you learned, I'm sure Jason fundraising. , there's some logic, but it's also in art, it's all [00:16:00] about who you know, opinions, norms, um, and when you don't fit the profile for what a VC is expecting, you kind of throw them off a little bit.

So, you know, I did all the research. I knew I needed to start talking to VCs and I thought, well, I'll start with some kind of local VCs because there aren't . Venture capitalists that, that you'd be familiar with. In the state of Wyoming, there are very few tech startups in the state of Wyoming, so I thought I'd, I'd hit up Denver and I, I started just joining like networking groups in Denver, fundraising groups, and I started talking to a few firms in the Denver area.

Now, stepping back a second. . In retrospect, this wasn't such a good idea. I thought that a regional firm would make sense because they want to invest regionally. What I didn't know was that it's easier to actually talk to a firm that might be on the other side of the country, but who is familiar with your market and you don't have to [00:17:00] first sell them on your space why your space is even viable.

Right?

But again, not knowing what I didn't know. I started talking to Denver firms and they . Tended to be pretty old fashioned. Strangely, you'd think of Denver as a really progressive area and maybe I was just talking to the wrong ones. But they were very much put off by the fact I was in Wyoming. I mean, hello.

Wyoming is a two hour drive north. Like we're not that far away, but okay. And then they just didn't get the space. I don't know how much of it was sexism. You can never really put your finger on racism, sexism, those aspects. 'cause nobody's gonna come. Well, often

Jason Yeh: raise their hand. Yeah.

Heather Shoemaker: say it. I I know.

Hey, ,

Jason Yeh: Hey, I don't like investing in women. Yeah.

Heather Shoemaker: Um, exactly. No, they're not gonna say that. But you know, when you read the research about how, um, VCs respond to women pitching versus how they respond to men [00:18:00] pitching, there are a lot of things they do only to women. They ask you, . questions that detract from your technology that are not encouraging that.

I'm sure you've read all the same reports I have Jason, but that was definitely happening and they'd just be like, I don't know why anybody would buy what you're doing when they could just integrate directly with Google. I. I'd be like, okay, maybe this is something I can't make you understand. There's something called context that a direct integration with Google Translate is lacking and I, you know, I would do my best to dumb it down, which was also probably a mistake.

And, um, retroactively when I look at it because. But you, it's, it's one of those catch 20 twos when I would dumb it down and use terminology that would make sense to your, the lay person who has no background in NLP or ai. They would just be like, well, that sounds really simple. I don't understand the moat, like what's to stop other people from building it?

But then when I would use [00:19:00] big words and just throw out a few 50 cent words that they might not understand, so they knew I knew what I was talking about or. Had the background, then they would glaze over and give, that would give them another reason to just say no. So

I, I tried this for a few years, got nowhere, and

to the point where I was talking to some colleagues about, you know, maybe I just pitch virtually.

I present mail, um, with a voice modulation solution, a mustache, and see if I get better there. But of course you can't do that because then you start. Lying and nobody's gonna invest in you, or they'll see you later. So that won't work either, right? So at a certain point I just said, screw it. Excuse my language.

Um, I am just gonna continue to go organically because I'm getting nowhere with this and literally just put the brakes on it all for about a year. I was at this, um, I was on the advisory board for a tech bootcamp in Cheyenne, [00:20:00] um, and . , I, we were at the graduation celebration. There aren't that many. It's a very small tech ecosystem, so we all support one another.

Right. And I was at this graduation, graduation ceremony and drinking a beer. And this guy came up to me drinking a beer and he's like, Hey, are you Heather? Like, sure am. And he's like, I hear you have a, a SaaS tech startup here in Cheyenne. I'm with this Angel Fund in Casper, which is a couple hours north, which is nothing in Wyoming terms.

He's like, I'd love to invest in your company. We, we we're just looking for tech startups to invest in and it was awesome. It was called Breakthrough 3 0 7, which is the, um, area code for all of Wyoming. And um, I know, right. And there just aren't that many tech startups. At least then there weren't for anybody to invest in.

So I went and met with, with Jared Stack, who was one of the partners there. In Casper, we pitched. They were really supportive. They were just thrilled to have a SaaS tech startup [00:21:00] in the state of Wyoming that was profitable, had like Fortune 500 companies to brag about and they were all in. He helped me kind of round out the round.

We got to half a million dollars, which for me was huge at the time. And, um. wrap that up, and once you raise a little bit of money and can demonstrate that you've got faith at some level by investors, it's much easier to raise more money. So from that point on iop, the doors were opening a little faster, like it was still challenging, don't get me wrong,

but then I started talking to institutional VCs and was able to raise

more

Jason Yeh: Well, man, that is a, that's an awesome story because so many people run into that initial wall. and that's when the story ends. Right? , that's when the story ends. And

it's unfortunate, and it's actually why I spend a lot of time in this space is because you do see these, um, special entrepreneurs that [00:22:00] have unique insights and ability to build, and they run into that first wall when they need capital and they, they can't get past it.

The, and they don't meet the breakthrough three oh sevens. They don't make the, they don't meet

the Jareds who take that flyer. Uh, and then are able to give you that initial credibility where then the rest of the people are like, oh, yeah, totally, totally. I, I'd invest in Heather. Right? It's like

you always see this dynamic of your, a lot of times in that first round, you're either You're either dying of thirst or you're drowning. You know,

you're dying of thirst. No one wants to do it, and then someone comes in and the, the game changes. So Awesome that you were able to really make it through that. And, and I guess that was just pre pandemic or Right in the beginning of the pandemic.

Heather Shoemaker: Yeah, that was just pre pandemic. I think that was in 2019 ish.

Jason Yeh: So, um, love that fundraising story. What I'd love to fast forward to is a few years later, um. You announced in July of 2023, [00:23:00] a fundraise for I think about a $8 million series A. Usually when people announce there is a bit of a a lag for when that actually happened and you can share whatever is comfortable for you, but I'm pretty sure you were raising and maybe one of the worst. Markets to, to raise capital in. So, um, between that first go around, uh, go around where you essentially had to not raise, try to raise and fail and not raise for over a year to then this, this most recent one, you've been through, you know, you've been through your, your fair share of battles. Um, tell me a little bit about. When you went out to go raise this last round that you announced, like what was happening in the company, what was the mindset? When what, what was this time, the trigger that you were like, Ooh, it's time to raise another round. Was it, are you running outta capital? Is there an opportunity you wanna pounce on?

Heather Shoemaker: Yeah, that's a good question. So . , there were a few [00:24:00] fundraisers between that original Angel round and what was technically the, A one round that you saw most recently. Right.

And um, so the way it all happened is after the initial angel round of about half a million dollars, um, to we, we knew that that was just to get us started, that we were gonna have to raise more.

Right. And luckily, the next raise occurred during the pandemic. And what was ? Like the pandemic was a horrible thing. But for startups in places like Wyoming, it was a beautiful thing because suddenly investors were like, oh yeah, what a great idea to headquarter in Wyoming. And a lot of these investors are very rich people and they're like, oh, I have a second home in Jackson, Wyoming.

In fact, and I, you know. Like, yeah, we're not in Jackson and Cheyenne's about as, as different from Jackson as it gets. But

Jason Yeh: Sure. Yeah. Same. Same, same.

Heather Shoemaker: know, for conversations to I know. Exactly. Um, yeah, that's another [00:25:00] story. Anyw who, like where we were located was no longer a problem and all the pitches were virtual.

And so it didn't matter whether we were pitching to folks on the west coast, on the east coast, in Europe and Israel, like . , it was fine. And so, um, through the network that I developed from that initial angel round and conversations that I had, I was connected with an investor in Boston named Bob Oli, and he has his own VC firm.

He's really well known in the VC world, especially on the east coast, but his firm was called Gut-Brain Ventures. He had already invested in the NLP space for years and knew our market really well. I didn't have to sell him on why you wouldn't wanna just integrate with Google Translate for customer support like that.

There was a layer of context that businesses needed to provide accurate, real-time translations in this field, and he looked at what we'd already accomplished. Bear in mind, we were . [00:26:00] A profitable company. Before we raised any money, we had big logos, um, amongst our customers. So he was just really impressed with all the hard work.

His wife, incidentally, is a feminist author with, um, a major university on the east coast. And so he was all about supporting women, um, which also helped. So he led our, um, first institutional round, a seed round for about $5 million. From there, we were able to raise a few follow on rounds, including an A round, the raise that you saw.

Happened when we had scaled the company to a certain level, right? The economy was tanking at the time and still hasn't completely rebounded as we know. But we were all, the board and myself and the leadership team had come to the conclusion that we needed to put ourselves in a position where we had a path to profitability [00:27:00] and that we could really go after some.

Serious AI technology that we needed to develop to, to continue to be competitive in our space. And so Bob and the other folks that were now investors in language io, um, were all on board with it. And we decided that $8 million was enough to get us to profitability within a reasonable timeframe given the market conditions.

We didn't want to be in a situation where we had like . 12 months of runway and then what? Right. And we wanted to be stable. I mean, we will raise more money if there's something specific we need to go after. We just didn't want to have to be in that position for our survival. And yeah, it wasn't an easy fundraise.

The con, the terms that folks were offering were insane. The, um, structure that VCs were looking to put in, like, yeah, if you [00:28:00] don't, . Hit your revenue targets within six months, then this and that. And I won't even go into it 'cause I don't wanna throw anybody under the bus, but I, I'm sure you know what I'm talking about,

Jason Yeh: I mean, you know, the, the thing that you've actually gone through, you're the lifecycle of language IO means that you are one of the few companies that saw, both, have seen both ends of this sort of wave of uh, sort of more sober market to then crazy heated market right in Covid and then crashing back down.

And so you've

kind of seen the range of when.

Heather Shoemaker: Mm-Hmm.

Jason Yeh: Uh, maybe, maybe things were kind of on even playing, uh, on an even ground maybe in 20 18, 20 19, to then all of a sudden the power swinging over to the founders, you know, throughout that, uh, that bull market, um, with C-O-V-I-D and everything, and now it coming back to investors where they can start doing things like putting preferences and

other terms that, that greatly favor the investor, which is just a fascinating experience for you. [00:29:00] when, when you went out to say like, we want to raise this kind of a one, did you have capital in the bank and then you wanted to make that strategic move where you're like, look, it's not that we're out of money, but we already see that. Like when we get to the point where we will need a raise, we're not sure What the company is gonna look like, we might as well proactively go add that $8 million, tell the market what our plan to get to break even is.

Or was it like we're kind of backs against the wall and we have to make a move?

Heather Shoemaker: Luckily for us, our backs were not against the wall. We had about a year of runway. But I'm a really conservative person when it comes to finances, right? Like I'm an engineer. I'm not this crazy risk taker of a entrepreneur, right? Um, and so I didn't want to get my backup against the wall, and

I knew the market was crap for raising a round But what I had going for me [00:30:00] is . , I'm a female engineer. It's

Jason Yeh: Yeah.

Heather Shoemaker: raise

money.

Jason Yeh: doesn't look too more, too different. Yeah.

Heather Shoemaker: easy.

Like

what's one more obstacle?

Um, the market's crap. But you know what, here we go and . Lucky for me, I did have really supportive investors who'd already invested in the company who were making connections and introductions left and right.

Um,

and so, you know, of course I had a lot of failed conversations. I'm not gonna say it was easy, it was just as hard as it was to begin with, but we did, um, get introdu, well, two really cool things happened first.

Um . The state of Wyoming got federal funding to launch its own VC fund and promote tech in the state of Wyoming, right?

And we know how many tech companies there are to fund in the state of Wyoming. Not very many. Furthermore, those funds had to. Be co-invested. They couldn't, the state couldn't lead around on their own. [00:31:00] They had to find firms who had a VC ready to lead the round. And then the most that the state could do was match, but they, it was, they couldn't lead.

Right.

So. That's a certain level of sophistication that was difficult to find in the state of Wyoming. I mean, of course there are folks like that. I'm not saying there are none, but we were one of the first, well-known tech firms that had raised, raised VC funds in the state of Wyoming. I'd been to Wyoming Tech conferences with, with the folks who were leading this, um, this fund.

And they, you know, reached out to me and they were like, Hey, are you gonna raise a round suit? We've got this fund. I was like, . Heck yes. Um, and that just, that did make it a little bit easier because when you can go to VCs and say, Hey, the state's willing to put in however many millions of dollars already, we just need a lead investor.

In fact, the lead investor doesn't even need to put in the majority of money because the others were gonna do their pro-rata.

Jason Yeh: right, right, right.

Heather Shoemaker: So [00:32:00] it was . . I think honestly that's what pushed us over the finish line in these really difficult market conditions was having the state of Wyoming ready to co-invest almost as much as everybody else was putting in collectively.

Right. And it was, it was just a really good selling point. And finally, we, we, um, through Bob and some of the other investors, goov with Omega Venture Partners, who's also an investor in language io, um, . We were introduced to a guy named Omo, who's a partner in a firm called Joint Defects, also on the East coast.

He gets our space. Um, he liked the fact that Wyoming was ready to invest as well and was willing to lead the round, and it was super exciting for the state of Wyoming

for us. Um. And that was exactly the amount we needed because I have an amazing CFO. She put together this financial plan that was very conservative in our hiring, in our [00:33:00] spending.

And if we stick to it and meet these really conservative, um, revenue targets and growth, um, we're gonna get to profitability in 2025. We won't need another round. It doesn't mean we won't raise money if there's something strategic that we want to do, but it's not for

survival.

Jason Yeh: That's so cool, Heather. Um, one, I'll just say you seem to have a really great cap table, um, supporters up and down and, and

that's the kind of thing that you need in the challenging times to really galvanize companies to get it to the next level and galvanize fundraisers. So that's first thing I'll say. Kudos to your cap table and supportive

investors. Um, the second

Heather Shoemaker: should also make a shout out to, sorry, can you hear

Jason Yeh: yeah, yeah, yeah, go ahead.

Heather Shoemaker: quickly, I just wanted to make a, sorry to interrupt. A shout out to, um, Dan Caruso with Caruso Venture Partners. His firm is in Colorado, and he was also pivotal in, in the whole process in pushing this round ahead. I just wanna make sure I don't forget anybody, any of our major

Jason Yeh: Yeah. As you accept this award for being unfunded, you need to

make sure [00:34:00] that you, you mentioned No, I, I, I love that because a lot of these, these are unsung heroes in the success of, of companies a lot of times, like these small people that will go to bat, that will like, you know. Take the risk to say like, no, this is something that I want to do.

This is what I wanna support either with my money, my reputation, or both, and, and,

really get these things across the line. So I'm, I'm glad that you are mentioning these people. The second thing I wanna point out is this, um, this Wyoming fund, which I definitely gonna to look into and, and learn more about. So they, they said something that is actually pretty common to hear. A firm that will not lead, but would be happy to come in alongside a lead and put a lot of money. The thing that I think is different about this is that I think they actually, when they say that, they mean it. Like as in if you do find a lead, we're in, like we have, we're committed

as long as there's a lead.

Whereas a lot of firms will say that till the cows come home and say, oh [00:35:00] yeah, Heather, you love what you're doing, love what you're doing will definitely invest. Just, just come back to us with a lead and You know what I tell all founders is like, you can never listen to that because

that is the easiest excuse to give someone. They can say that forever and never have to make good on it. Even if you do come back with a lead, there's always a good excuse for why they don't want to do the deal or why they don't wanna join it. And so even that interest

from people that say they're not leads, but they'll join, uh, with a lead doesn't really help the round.

In fact, most Other VCs, when they hear that, they know exactly what that means, it means nothing. Whereas when a government and, uh, a state who's doing this is like, no, we wanna back these founders just get a lead. And we're in, actually think that makes a huge difference. So I'm excited for you to share, um, more about that fund.

We, we'll, we'll definitely talk offline.

Jason Yeh: Thanks to Heather. I was able to have a conversation with the people in charge over at [00:36:00] YVC, which spoiler alert. You'll get a chance to listen to, if you stick around to the end of the episode.

when we come back, I asked Heather what some of the hardest parts of fundraising were. You won't believe some of the things she shared. ​

Jason Yeh: [00:37:00] Um.

Heather Shoemaker: and that's a really good point, Jason, because I've wasted so much time with firms that were like, yeah, I'm in. If you find a lead, and I believed them initially being naive, and then I'd waste so much time keeping them up to speed on where we were at and then saying, Hey, we're ready to go. Are you in?

No. Oh, thanks. Thanks for nothing. Thanks for nothing is something that you wanna say so often

Jason Yeh: Oh my God. I'm sure. I'm

Heather Shoemaker: But Wyoming

was like, I'll give you, were like, I'll give you a letter of intent. Like, you know, so.

Jason Yeh: So good. Well, look, I mean, I think where you've gotten to is Um, and, and maybe you, you describe yourself as being risk averse and that [00:38:00] you just wanted to go out and make sure you, your, your back wasn't against the wall. But I think strategically, given that the market hasn't rebounded as quickly as everyone had hoped, move is going to look extremely prescient and extremely smart.

Um, you know, for the next, over the next year or 18 months. I I definitely think the people that were able to add capital in early 2023 or in some of the best positions where, and a lot of the people, by the way, that added capital when you did in the top of the market are in bad positions. Like you were able to balance that out, come out and do one more move that I think is gonna put you in a great place.

So, um, congrats on all of that.

I, I wanted to, um,

Heather Shoemaker: Thanks.

Jason Yeh: I wanted to kind of bring you back and, and. Uh, sort of float up above and think about your whole f venture backed startup career, and, uh, ask you, do you remember, um, [00:39:00] any of the hardest memories out of all these things? Any quick stories that come to mind? Um, either pitches or experiences that really kind of cut you deep. Um,

yeah.

Heather Shoemaker: so many

It's just you pitch so much

and you get so many rejections. It's just easy to. Give up. I'm trying to think of some of the tougher ones. I mean, there were folks I'd, I'd start talking to and they would be like, why did you try to grow organically? Like, the fact that you never raised money for the first couple of years indicates that nobody wanted to invest in you.

And I'd say, well, I, I wasn't trying, you know, like, like so many objections that, that are unfair that you get in these situations. Um, . Oh, I had one investor say who never invested by the way. He said, you know, I really like investing in women led firms. [00:40:00] Women are just more trainable.

I know that was really said.

Um, another one was like, this is ai. Um, it would just be so much more believable if you had a beard, , like, and um,

Yeah. Just, and, and then just like direct insulting comments like, um, about this technology is so easy to replicate. Um, I just, anybody can do it like. And I don't know why they thought it was so easy to replicate.

I'd be like, we have proprietary machine learning. This was before generative ai, by the way,

proprietary AI that we have built. We have an mlt. I don't know why you think your intern could just replicate it over the weekend. That was said. Um, so yeah, I guess you just have to have really thick skin

and the ability [00:41:00] to, at the end of the day after you've had these

Really depressing conversations. Just remind yourself that that's just one person. They don't know necessarily what they're talking about. Oh, so much of the conversations are really based on like how their day had gone up until that point. You know, like,

did they eat the wrong thing for breakfast? You know, like there, there's so many

Jason Yeh: By, by the way, Heather, this is,

Heather Shoemaker: react negative

Jason Yeh: this is one of those things that as an engineer, you know, someone tells you this, you hear this same story, uh, you know, Heather from 2019 or 2018 hears this story, and you would be like, that does not compute. You know, that is not, how could that possibly be the thing that impacts the millions of dollars?

But it's, it's totally true. It's such a

feel-based game, right.

Heather Shoemaker: It is.

Jason Yeh: Um.

Heather Shoemaker: Yeah. And I expected it to be logical and there's no, there's sometimes there's logic involved. But so [00:42:00] often it's not logical at all. You just have to, you know, just if you believe in yourself, you know you've got product market fit, you know you've got a good solution, just stick with it. I mean, that's all I can say.

Like, don't give

Jason Yeh: So, Heather, I, I don't wanna leave you on like, dwelling on some of the worst times in your fundraise. I actually wanna balance that out with, um, kind of one of the better memories. So, Raising this last round in a horrible market, you're gonna get tons of, you did get tons of noss, but you do get introduced to omo at, at joint effects.

Um, do you remember where you were when he let you know, um, that joint effects was gonna come in and actually lead the round? Do you remember where you were or, or like what the circumstances were?

Heather Shoemaker: Yeah, I, I remember, and it was my CFO, Meg, FAHE and I, who were like both equally in.

The weeds grinding on this every day when we realized the state of Wyoming had written [00:43:00] their letter of commitment for a, a large chunk.

We got the Pro Ratta in and rounding up those pro ratta. Oh my goodness. Um, and then of course, Tuma was willing to lead for this amount and he was willing. Yeah. There was a day where Meg and I just got on the phone and I think we were both about ready to cry and laugh at the same time when it was.

When all the pieces finally came together because we thought we had all the pro ratta and then somebody was not in Right. And we had to go, like, what's funny about this round is it was $8 million. Right? But to almost term said you have to be at at least $8 million, or I, I'm not leading the round.

And we lost one pro rata that said they were in.

And that that was only, I mean, I say only, but it's still a lot of money. It was only like . 200 K and in a round of 8 million, you don't think a lot of a 200 K pro ratta. But that was a difference between closing the round or not. [00:44:00] So at the last minute after business hours, one of our investors came, I think it was actually Tomo who came back and said, I know you need another 200 k.

I've got these guys. They'll be in for 200 K. So we had to like make these pitches at 8:00 PM and they were like, yeah, I trust Oma. We're in for 200 K. You wouldn't think it would come down to that. And I was even at the point where it's like, you know what? I'll write a check because this needs to happen.

But it turns out our attorney said I couldn't because something about conflict of interest and the operating agreement, it had to be . an outside investor. So

it was down to the wire and then Megan and I got on the phone and we were just like, oh my God, it's over ,

Jason Yeh: that I, I know a smaller version of that feeling. And, and you know, I'm sure it's like the balance of trying to keeping it, keep it together for the, you know, probably six months that you're doing this and knowing that like, this is existential to a certain extent. Like, you know. [00:45:00] If we don't do this, it's gonna be really tough at least.

And so getting

to that point must

Heather Shoemaker: Yeah.

Jason Yeh: just the feeling washing over you. And I can, I can almost imagine it myself, so that's great.

Um,

Heather Shoemaker: Yeah, the

Jason Yeh: asleep the next day of sleep. Um,

Before we ended our interview. I was able to ask Heather, if there were any up and coming entrepreneurs, she was excited about in Wyoming.

Heather Shoemaker: oh, yeah. Um, Jared, the angel investor I told you about, who really I, I attribute our initial fundraise and our ability to raise money at all.

He started his own venture called Flow State, which is associated with the oil and gas industry in Wyoming, which is the biggest, um, employer here in the state.

Flow state. So that's Jared Stack. He's awesome

as well.

That was my conversation with Heather Shumaker, founder and CEO of language IO. One of those top companies providing multi-lingual customer support at a fraction of the.

Jason Yeh: cost.

In past [00:46:00] seasons, there have been episodes where we've gone deeper to chat with the VCs who invested in the entrepreneurs that we interviewed. It was awesome to talk to Julia liftin from awesome people ventures about her investment in Sam Corker's of levels and walk her forehand from canopy about his investment in neuro IDs, Jack Alden.

For this episode, I got a chance to talk to Bert Adams and Gordon Finnegan at Wyoming VC. To hear about how they ended up investing in Heather and what they're doing to stimulate Wyoming's venture capital ecosystem.

so, so YVC is funded federally, so it's funded through the State Small Business Credit Initiative or S-S-B-C-I, which was part of the American Rescue Plan Act or arpa. Um, and so Wyoming was allocated. 58.4 million to use to help support small businesses. Um, at the business council where, where Gordon and I work, we already have 11 loan programs to help support businesses.

Bert & Gordon: And so with S-S-B-C-I, [00:47:00] you could use it for debt for equity. And in Wyoming we have a really sort of nascent. Entrepreneurial venture capital ecosystem, and so we went all in on equity. So YVC has a a two-pronged approach. First, we've got about 60% of that fund we're gonna use for direct investments, and that's what we used as we invested in language io.

we have the other 40% of the fund that we're gonna use to help capitalize new funds. Within the area that are gonna support Wyoming entrepreneurs. So part of the restrictions is, is we don't have LPs, we have federal money from Treasury. Um, part of those restrictions is that money has to stay in Wyoming, the majority of it.

So what we're trying to do is, is grow the ecosystem on both fronts, both on the direct side to to help entrepreneurs, and then on the fund side to help capitalize more funds so we have more checkbooks at the table as we're looking at deals.

Jason Yeh: Fascinating.

Bert & Gordon: I will add real quick, [00:48:00] Jason, one thing that I think is important about YVC as a fund that, that we share with companies is because we don't have LPs, we have, uh, a unique ability support the entrepreneur, right? They essentially become the stakeholder, so we don't lead on purpose because we don't want to be the one sort of.

Pushing valuations and crunching and, and trying to get the best deal. We actually can take the position of supporting the entrepreneur in, in this case, Heather, and help to negotiate those terms and really get it so that it's good deal for the investors, but also a really good deal and, and founder friendly.

Jason Yeh: let's, let's fast forward and kind of shift our focus into talking more about Heather Shoemaker and language io.

where I want us to shift the conversation is, um, to talk a little bit about the challenges Heather had. When raising these rounds of capital, and in some ways we can look at a bunch of different things that might've [00:49:00] impacted the perception of her company and her as a founder and why it was so difficult.

But, you know, she's an engineer. She's building a, a real cash flowing business. It's growing, and yet no one is actually like leaning in and jumping in to be that first domino. She's piecing together smaller checks when you, when you look around the world. Look around the country at least, and similar companies with maybe less revenue, less background, less understanding are raising bigger rounds of capital, especially in like, you know, the heady days of 2020 to 2022.

Um, everything from who she is, where she is had an impact for sure. Um, when she talked about trying to get this round together, she talked about like still just kind of like struggling to get the first people to really believe in her. And she made it a point to talk about YVC and I. [00:50:00] Your involvement in her round because of something that you all did.

You have a structure where I think you have a 20 some million dollars fund. You're making investments, but you cannot lead. You can do what you describe as co-lead. And if you've heard or read any of my content, I'm quick to tell founders, . Be very wary of people that say, oh, yeah, yeah. Well, I, we'd love to co-lead.

You know, we'd love to co-lead the investment. And it's just an easy way for most people to say, go find a really sexy lead. And then if you find that sexy lead, yeah, we're happy to hitch our, you know, our, our wagon of that horse.

squadcaster-87cb_1_12-01-2023_113111: So tell me a little bit more about like, fast forwarding to this round. And your process for getting to a place where you could commit but not lead, and then how you took it from there.

Bert & Gordon: You wanna take that or you want me to take that? Uh, I guess I'll maybe start it off. I, I know co-leading, um. Can cause some hesitation. [00:51:00] I, I think we like to sit more in a, a founder advocate role where, you know, we, we can sort of be the afterburners as she starts considering or pushing toward term sheets from prospect investors and, you we can also be the folks that come in that, that have a direct relationship with those investors.

know, we, we like to have an independent relationship, so we're not just sitting on calls with the founder. Uh, but we're having one-on-one conversations with them. But, you know, we're, we're the advocates to the point where, you know, when it comes to situations like Heather's, we may be one of the largest checks at table.

So they, outside investors can know that we can really bring a lot of weight and support behind what they're pursuing. And if we can sort of find that happy middle ground where we can advocate for. for Heather in the terms that she's trying to Dr. Trying to drive towards, but then sort of help meet the preferred [00:52:00] investors halfway.

Um, not so much negotiation, not so much co-lead. More so advocate investor, where at the end of the day, our stakeholder is the Wyoming based founder and company. Uh, we don't have to answer to, to an LP that's gonna be. Coming over our quarterly reports and, and subsequent outcomes. But no, it's not that we don't want to have those great outcomes, but our, our outcomes are just reflected differently.

Jason Yeh: Very cool.

Bert & Gordon: One last thing, do you remember any main things about Heather that stood out to you? Like, um, you, you do take a VC mindset. You're not just a government agency. You're looking for the best types of investments. Independent of the fact that they are in Wyoming, so you're gonna be focused on the founder.

squadcaster-87cb_1_12-01-2023_113111: What are some things that stand out to you about Heather?

Bert & Gordon: I guess I can talk back to, you know, 2018 when she came into Jackson and I. Frankly, I [00:53:00] drove her around in my car and it was a pleasure of just getting to know her and, and hearing her insights into this burgeoning industry. You know, even if we look back five years, the concept of AI was still pretty foreign and, and science fiction based.

Whereas now integrate that into anything and, and similar to let's say, blockchain two years ago, uh, people can make certain assumptions and question tangibility, but . She's been building towards something really special for a long time and she's a thought leader in it. So it's exciting to, to have her not only be a part of Wyoming, but be able to partner with her and support her.

Bert, what? What do you think? Yeah, I think the thing that really stood out is, is sort of that growth story that she'd had when we, when we came in and I, I am fortunate enough to know part of the team that she has as well, and so understanding sort of their expertise, understanding where they're headed, and seeing that growth trajectory and then.

To Gordon's earlier point, [00:54:00] that being one of those top deals that we think in Wyoming can really be the turning point, right? It can really take us from sort of this infancy level in, in the ecosystem really far, really fast. we can get that one sort of like tent pole company that helps the whole ecosystem and, and that's sort of where we're placing that bet at this point is, is on language io.

Jason Yeh: Yeah, I love it. The two things that I'll point out there that I, I say in a lot of different words are I don't think founders understand how important first impressions are. Like that first impression and that memory of Heather. In that pitch competition driving her around in the car, that, that sticks with you even three years later as you are deciding on and, and evaluating a potential much bigger deal at a much different stage and a completely evolved founder, right?

Like that, that first session is still, that first impression is still so important. And then the importance of saying you're gonna do [00:55:00] something and then actually executing on it is just so important for investors to see and, and for you to see their growth along the years. It makes a ton of sense that that would make you want to go forward with this.

The last comments I'll make and last questions I'll have for you is tell us a little bit about a couple names of founders or companies in the Wyoming area that we should be aware of. Something that maybe the listeners have funded would wanna to pick around and, and stiff. Uh, any other names you wanna share or is it kind of planted close to the vest?

Bert & Gordon: Uh, that's a great question. we are excited to share frontline wildfire defense. Um, it's a fire protection system for your home. Uh, they've been deployed across Wyoming and across California.

saved homes in Wyoming. Business Council actually provided them with a non-diluted grant again back in 2018 that helped build their first system. Which did save a home in Wyoming. [00:56:00] Um, and they've continued to prove it across the nation. So I think that's probably front of mind in terms of recent news.

Any others you'd want to add? No, I think that's, that's probably the, the one, and like Gordon said, you know, we've, we've got a couple more up the sleeve that are, are getting close to coming out as far as investments that we've made, but. Frontline's a good one.

we're excited to continue to find more and we'll, we'll look to share it, uh, with the world and hopefully they can come join us.

Jason Yeh: it

squadcaster-87cb_1_12-01-2023_113111: Thank you Jason.

Jason Yeh: Let this be a reminder to anybody listening in government or in startups that the ecosystem is always changing. So interesting to see what YBC is doing. And I wouldn't be surprised if we see more individual states launched their own VC funds. Really cool to see.

This episode was so packed with insights.

When we come back, I'll be joined by my producer page to see if she got tripped up by any of the VC lingo shared by Heather, Bert or Gordon. Let's see what she has to say.

[00:57:00] [00:58:00] all right, Paige, so very cool interview setup or something for you to listen to. I meant, I love being able to chat both with the founder and sometimes talk to their investors. So a lot for you to

react to. Is there anything that came out of, around these, uh, couple conversations that got your wheels turning?

Paige Randall: Yeah, I mean, it was definitely an insight packed episode, especially with having those other two guests on. Um, I guess I was definitely confused by all around what WVC. Was, the WVC fund. Um, and I, I had a question around it because I'm genuinely curious. Is this something that other states are doing, [00:59:00] like even states where venture capital is very prominent, like California or New York City or some of the other major, you know, areas, is this something that you also see or is it just in these states that seem to be struggling in this area?

Jason Yeh: Yeah. Um, I feel like I'm going to step outside my wheelhouse of understanding. Um, but from my, uh, my current knowledge, I don't think there are any. Maybe, maybe some, but none that I know of. That's why

when Heather started talking about, uh, I think they call it YVC or WVC, um,

Paige Randall: Yeah.

Jason Yeh: I was like, wow, that's so interesting.

And that's why I was like, I, I definitely wanna talk to them and maybe add to the, um, interview because I. It was, it's, it's so fascinating. The closest thing that I've seen actually has been in Canada. Canada has programs to support

businesses, early stage businesses that, um, you know, we'll be bringing more jobs to Canada. Um, but I, I think it's, I I think it's a fascinating [01:00:00] way to use public funds to stimulate economic growth, to stimulate

economic growth a very specific region. Um, and it makes a lot of sense because Wyoming happens to have a big ski destination that a lot of wealthy investor venture capitalist types go to, and, and why not try to stimulate a little bit more of a startup ecosystem and an investor ecosystem?

Paige Randall: Yeah. Yeah, that's a good point. I could see why. It makes me wonder though, like if this is something that's gonna be adapted across other states like that don't have a Jackson hole per like are we gonna be seeing this type of fund in Mississippi or somewhere else, like in the middle of the south or these different areas that

Jason Yeh: If they

can show, I mean, if they can show a track record and a success, um, successes where their money, um, helps launch bigger businesses where their money helps bring more investor capital in, where their money ends up then bringing more jobs in, then I don't see

[01:01:00] why more states that don't have a bigger startup scene wouldn't follow,

um, suit.

But, you know, I think it's even though like They're showing some traction. Great companies like Heather's and and Language io in their portfolio. It still remains to be seen whether or not they drive the results that they're hoping to do. Um,

I'm definitely rooting for them.

Paige Randall: Yeah, same. It'll be interesting to see how that plays out, but

something else I, I thought was . Strange, but I'm not sure if it really was strange, is that Heather waited a few years to, you know, go out and fundraise. She was already profitable. She didn't see, see a need to, she didn't even know that really was an option. You know, like she said, she was just a engineer, um, trying to create a product she wanted.

I guess I'm wondering did she start raising because her competitor went out in Raise and maybe there was an opportunity that her competitor would potentially put her out of business or acquire her, like, I'm wondering the reason behind doing that is that [01:02:00] solely because they're trying to, you know, still compete with their competitor and not be knocked out of, the space.

Jason Yeh: Yeah, I mean, I, I don't think she was completely clear about what all the elements that drove her to start fundraising were, but

Uh, you know, I think for everyone that wants to raise venture capital, one of the elements of raising venture capital has to be that you believe there's a huge opportunity here.

Paige Randall: Mm-Hmm.

Jason Yeh: And it could have been that when she started language io, she was like, it's a bit more of like an agency. It's a bit more of a dev shop, and now we have some technology and we're very profitable. We're running a good business. And then it just so happened that the, um, stars aligned, things started maturing in market where, or maybe she's just started thinking a little bit more about a vision and was

like, oh my God, we have The elements to really own a massive market here. We could really go big here. Um, and maybe it was coincidental that a [01:03:00] competitor started raising at the same time, maybe the competitor raising opened her eyes around what was possible. Um, but, and and maybe too, she was like, look, we thought we could own this market slowly. Build a big business and own a hundred percent of it without raising capital, but now there is a competitor there who is going to invest other people's money to grow fast and take market share. We need to make sure that we do something similar and move faster with investor capital. So

all those things.

Paige Randall: 'cause

Jason Yeh: Yeah.

Paige Randall: that's what I was wondering because I, it seems like that would be a strategic move where like you notice another competitor coming to play. They just raise a huge amount of money, they're gonna be able to scale, you know, five x 10 x faster I guess I assumed that that would mean there'd be a big possibility that they could knock Heather's business out, like of that market.

And I'm wondering, is that something you see like, it's funny 'cause maybe, maybe someone creates a business and they never would expect to wanna fundraise [01:04:00] then they see a competitor come in. I'm just want, now I'm diving deeper into like just the business aspect

Jason Yeh: Yeah, just in the business aspect, I mean, there is real power in scale and there's real power in sales forces, right? Like you might have what you think is a better product, but if another team has a really great sales org and sales motion and they. Get their product installed into a customer before you do, before you get a chance to. Um,

SS some enterprise technology companies are very sticky with customers because it's hard to rip out once someone's installed a technologies. And so if you see people running after a market, then look, it's really, it's really hard to compete when once they're in there. So like, if you feel like someone is running out there using other people's capital to grow fast, sometimes you have to fight fire with fire.

Paige Randall: Yeah, that makes sense. Well, I just, I thought all around it was an interesting episode. I thought it was really cool how we got to bring on Burton Gordon. I think [01:05:00] it also helps shed light on the different things we are seeing come about within this industry. I think we're also seeing . I feel like people are kind of shifting what they consider to be like funding for their business and, and how many different avenues that can come from, and it's, I think it was a cool thing to see that reflected through what WVC Fund is doing.

Yeah.

Jason Yeh: It, it's super fun to bring on different perspectives and I know hopefully people like hearing from us, but you know, hearing that Outside party that speaks about things that we mention in their own voice, I think can be quite compelling too. So yeah, loved being able to bring all this together.

Paige Randall: Yeah, it was amazing.

All right. Till next time, Jason.

Jason Yeh: Good one.

If you're looking for more insights, strategies, and support around fundraising, subscribe to our weekly newsletter@fundedpod.com slash newsletter. Or follow me on social at JEA. That's J a Y Y E H on almost every platform. I respond to newsletter, replies and DMS. So hit me [01:06:00] up.

This episode was produced by page Randall.

Thanks also to John Ali from adamant.

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