Down by 20? Down But Not Out... (Curastory)

Tiffany: The VC at the time that wanted to do the 3 million priced reached out to get get on the phone with me and they basically asked for valuation to be cut in half after an executed term sheet

Jason: This is a show funded by founders who raised millions in venture capital. We 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. Back in the day, I was a VC, listening to founders pitch me for money.

Like many founders, Tiffany Kelly, founder, and CEO of Curastory, entered the startup scene knowing she needed to raise money but not having a clue of where to start. So with an interesting idea, no knowledge of fundraising, some wireframes, and a really crappy deck, Tiffany went out to raise her pre-seed in 2021. With that type of intro, you'd probably guess correctly that she had a rough go at it, a really rough time. But with a lot of perseverance, she was able to actually close a really solid round. Fast forward to today in 2023, where Tiffany just closed a successful but super rocky seed round. Not surprising given today's current fundraising market.

Now, one thing that's consistent in both life and fundraising is that things don't always go as planned. Sometimes things get messy. But what really matters is what you decide to do with that mess. For Tiffany, she experienced what can only be described as every founder's worst fundraising nightmare, the ultimate startup mess. Hold on tight, this one's about to get spicy.

Tiffany: I was definitely a very fiery, passionate kid. There's a few instances I remember just in high school and growing up. I went to a very affluent all-girls high school in Baton Rouge, Louisiana. I played volleyball, so our high school, we were state champions. We were treated like football players. So, we had two-a-day practices, and the volleyball team at my school was super revered.

I think there was one practice where some of the girls were goofing off, and I just got into this militant mode. Like, I think all the data points I had as a teenager, I was like, "Okay, I'm a little bit more passionate and intense, I think, than most." As an elite athlete too, you're no stranger to hard work. Two-a-days, tell me a little bit about two-a-days. What does that feel like?

I mean, you're exhausted. Like, I just had a super rigid schedule. And I think when you have a super rigid schedule, you're actually better at time management. I think a lot of what I was taught with competitive sports and performing at a super high level, like I played in college, I mean, the youngest I could probably remember is like three or four. My dad just threw me in a pool because he was one of the first national black champions in swimming. So he just threw me in a pool when I was a baby. And I played sports until after my freshman, sophomore year in college.

So, it's really interesting, I think, just how we operate translates a lot to running a company. You just have these big momentum shifts, right? Like, you literally can't leave a game if you're losing. You have to play until the end of it. So, I think what's interesting is, if you're down, maybe like 30 points to 15 maybe, you literally can't leave the game. And maybe something happens in the game where just momentum shifts, and you have to ride off that momentum. So, I think as a founder, it's always like that next big push for me. Like, I just need a little bit of a break, and if I get a little bit of a break, I just ride that momentum out until the next big push. So, I feel like playing competitive sports, it's allowed me this mentality that I'm never down, I'm never out. There's always something that's going to break, and there's always going to be a momentum shift.

All of my friends, they're just like, "We've been waiting for you to burn out for years." And I'm just like, "It's not gonna happen. Like, I'm literally not gonna burn out. I was built for this." But also, I've been through the ringer so many different times, and a lot of the times it is mental. Just riding those momentum waves when things are in your favor for like maybe five seconds and then just getting to the next big push. So, that's how I operate. I don't look at the super big, grand scheme of things. I think that can freak people out. But it's just like, "Okay, what's the next big push? The next big thing to focus on."

Jason: So, super interesting background, and I love the little insight into how you were raised.

Tiffany: Yeah.

Jason: Dad was an athlete. Even taking the story of being dropped in the deep end, it feels like that's a recurring theme, if I had to guess. Tell me a little bit about your transition into your career. Did your parents push you into doing anything? Were they entrepreneurs themselves? Tell me a little bit about the earliest days of your career.

Tiffany: Yeah, both my parents had super steady jobs. My mom worked in government. And before she worked in government, she actually was a programmer at MIT. And my dad, a professor and a pastor. But sports was just the glue between my family. Everyone played athletics at a very high level. My dad played in college. My mom played basketball. My dad was swimming. My brother was college basketball, and I was college volleyball. So, just insane genetics. And I knew I wanted to work in sports growing up because it was just the glue between my family. I just didn't know in what capacity.

I was job shadowing the New Orleans Hornets, which are the Pelicans now, the NBA team in New Orleans, for career day my senior year in high school. And my dad dropped me off, and I was 16, 17 years old. I was job shadowing the marketing and PR team that night, and they were so busy because Will Ferrell was there. They actually stuck me with the stats guys. They were like, "We're too busy. We know you need course credit. Hang out with these guys." It's actually crazy to look back. That was the turning point for the better. Just one split decision changed my entire life path as a 16, 17-year-old. So, I was with the stats guys all night, and everyone was treating them like they were gods just because of what they had in their hands, these analytics on a piece of paper. Everyone was waiting for it. It was just a moment for me. I was like, "Who are these guys? Why are they so respected?"

Jason: I knew from that point on, this is what I want to do with my life. Like I'm a woman that works in sports. I want to be respected. Numbers equal respect.

Tiffany: That was never part of the grand plan growing up or like you, you didn't have this image in your mind of being an entrepreneur. Tell me a little bit about when that idea crept into your mind. Yeah, I mean, I think I've always been just hungry and a problem solver, right? Like just mentioning that fiery, passionate little kid. And I got my first mini taste, I think, of entrepreneurship before I graduated college. So, I knew I wanted to be a data scientist in an NBA team, in the front office. Which is like, so small, and I mean, what, there's like 30, 32 NBA teams, and there's only 3 to 4 people that hold this position, like, so just multiply that. That's how many people exist in the world, and I'm like, gunning for that. And so, and even back in the day, I mean, there were probably a handful of women in those positions. And so really small, but before I graduated, I think it was my junior year in college, one of my really good friends, his brother was brought in for a project with the Miami Heat. And so he was just like, "Hey, you should talk to Tiff. Like Tiff loves this stuff." And I got roped in with the Miami Heat. And ended up doing the Goran Drogic trade, which is like one of the most important trades, I think, in NBA history. And I think it's just a highlight moment in my career. And then after that, I stayed really close with one of the guys, and he basically wanted to build this software, and he's like, "Hey, there's this company called Y Combinator. I think we should apply for it." And so I was like, "Okay, cool. Let's do that." We didn't end up getting accepted, but it was actually down to the wire, like the whole nine, like beyond the application stage. And I actually, like, had an offer from ESPN around that time. So I was like, ESPN or Y Combinator? When we didn't end up getting it, I was like, "Okay, of course, I'm gonna go work at ESPN." For a really long time there, I was torn between entrepreneurship, or, I go work within corporate.

Jason: Yeah. Well, so at some point you get the idea while working at ESPN, that you're going to start a company. I wonder, even with your light exposure to startups, light exposure to Y Combinator, when you were thinking, I wanna start a company, did you think to yourself, "Oh, I'm going to need to raise money for this?" Or is that a concept that hadn't really quite entered your mind at that moment?

Tiffany: I think I knew to build, I needed capital. I think that was maybe the second thing that crossed my mind as I'm building a company. Cause I didn't have savings. And also my path was a little bit interesting. It was at ESPN. I became best friends with one of my colleagues. I quit to go do a startup with her, co-founded Breakup, and then now I'm pushed to figure out what to do. When the first press story broke that student athletes could monetize, I just started going down this user interview deep hole with the creator economy for six months and then figured out what Curastory needed to be. But I don't think, if I didn't take that trajectory of being in a startup and having a co-founder breakup, I don't think, I don't know, I don't think I would probably be building right now. Cause I learned a lot through that experience.

And I also don't think I would jump from ESPN to building my own thing. Like that, then catapult me into building my own thing. But I think when I went from ESPN to startup, there was so much I didn't know. Like, I didn't have savings. And like, It was just a super risky move. And then now I'm after the co-founder breakup, am I going to go back into corporate or like, what am I going to do? And it was so funny. I had Curastory in my mind and I'm interviewing with like Facebook and Instagram and YouTube. And I'm telling them about this idea. And they're just like, "You're super smart. Like we would love for you to work here, but it just, it never made sense." I was like, "Okay, I need to build this thing." That's actually what I have to do. But once I realized I needed to build it, I think the first thought I had was, okay, what is it, what needs to be built?

And that was six months of user interviews. And then once I knew what it needed to be. The next thought after that was, okay, we need wireframes. Like, I need to prototype it out. And then the next thought after that was raise off of prototypes. Like, there was zero way, I think, with not being able to bootstrap or having savings, that I was going to be able to build what needed to be built without capital.

Jason: Great. So at some point you have this realization that you can't do much more until you put money in the bank. What was the goal at that point? How much did you think that you wanted to raise the first time you were like, I need money to even start past the wireframe stage?

Tiffany: I had zero goal of what to raise. It was... It was so interesting. So I have this idea. I'm talking to investors from my network from the previous company where I had a co-founder breakup and they told me you need a deck, and I was like, great, let me build a deck. And so built a deck and I'm getting these insane, like tier one VC meetings. Like the who's who in New York and with a really crappy deck and I get to, and this was like pre-COVID. So like in person in the office with a really crappy deck. And I get to, her name's Maisha Leek. She used to be a partner at Hume Adventures. She's on our board now. So I get to Human Ventures and I'm pitching. I love her. But after, she's like, "Okay, let me be the last VC that you talk to, actually. Because I need you to understand."

And this was before we met, actually, Jason. But she was just like, "There are signals. There are signals of things that you should be saying and not saying. And like, this needs to be more coherent." And I just don't want you to be laughed out of the offices. And so she's like, "I need you to either join a boot camp or just like get everything in line." And she's like, "I know this isn't what you want to hear right now, but. I just want you to be super strong. If you're going to get another meeting with First Round Capital, you know what I mean?" So, that was a really eye-opening conversation. I think I came home crying just because I don't know. I think the feeling that it's going to take longer kind of set in. But I'm so happy that she ended up having that conversation with me because from there I stopped talking to VCs.

And so I ended up moving from that and doing equity crowdfunding and with the wireframes and with the deck that I had at the time, just crafted a better story based off of some of the things that Maisha was telling me, and then we raised 250K in equity crowdfunding from the public in like a few months. And that was more than enough to get an engineer, to build MVP, to get first sales. And there wasn't a goal though, like, I wasn't like I need a million or I need 250K. It was just like, throw the story up and press on equity crowdfunding and like, let's just see what happens.

Jason: First of all, I wanted to say that I'm so glad you're sharing this part of the story because it's really important for people to hear this version of the story. It would be so easy for you to have your story that you tell be, well, you know, this is what I did. And like, it just be so much more polished than the reality is. It's a really important thing for people to hear because I would say 80 plus, 90 plus percent of first-time founders when they think they need to go raise capital, they don't know what to be doing. And I also think, you can't understate this enough, that the conversation that Myesha had with you was a really helpful and brave one. Like most VCs take so many meetings with first-time founders that are totally crappy. The easy thing, honestly, the easy thing to do is to just pass or ghost and not talk to them ever [00:17:00] again. And that doesn't help the founder almost at all. What helps them is a difficult conversation where they have to be radically candid with a founder and say like, "Hey, Tiffany, I really like—"

Tiffany: This sucks.

Jason: This, I mean, and obviously it sounded like she did it in a gentle way, but like, without that, well, you would have just kept going in a certain direction.

Tiffany: Yeah, I would have kept going like left and having all these meetings and nothing coming out of them and maybe VCs—

Jason: Confused, right. You would have been so, you've been like getting the message that you just weren't good rather than you just didn't know how to communicate. And then the second thing is the reality is when a first-time founder is trying to raise with very little. You do have to do whatever you can in order to get the money in order to get to the next stage so that you can tell a better story. So, not everyone has a network of friends and family, you know, that's the uncomfortable joke that people tell like friends and family, "What kind of friends and [00:18:00] family do you have?" you know, where you—

Tiffany: That I have? Exactly.

Jason: —have a quarter million dollars just to like prove yourself as a first-time founder. Kudos to you for just grinding it out to get to the point where it's like 250,000, let's get someone who can help me build and I can tell the next chapter.

Tiffany: Yeah.

Jason: So, you've actually raised, from what we can tell on Crunchbase, a couple rounds of funding beyond that 250,000 initial equity crowdfunding round. And, you know, instead of going through all the details of both raises I wonder if we could just quickly start on the first raise. You end up raising, you know, called a shade under 2 million dollars with that, that next round. Tell me how that came together.

Tiffany: Yeah, so, we were running out of the 250k, of course, because it's 250k.

Jason: 30, 30 to 15.

Tiffany: Exactly, down 30 to 15 and we just finished our MVP, [00:19:00] and our first contract was with the NBA Players Association, which is actually just crazy to say that our first year. It's like creator contracts with NBA players. So we get a few of those guys on the platform and from just that alone, we were able to get into Techstars. So I knew money was running out. I needed to raise an actual seed because I was counting that as our pre-seed. Ended up getting accepted into Techstars based off of that. But even before that, we were still talking to VCs at that point. Like, we had some traction. Did your boot camp. So, before going back out to raise again, I knew I didn't want to look stupid again. So, doing fundraising with confidence was huge.

So we did the first tranche [00:20:00] with Techstars, Lightspeed, Scout Fund, and a few other well-known angels. And then that was, I think about like 500k, 750. And then I was like, "Oh, okay guys, I've got Techstars. I don't want to fundraise during Techstars. So we'll talk to you in October or September." And so then we go through this pressurized environment with Techstars. And then. I think what's interesting and what we've talked about and what I've heard is just anchoring arrays around something. So VCs don't ghost and you kind of have this pressurized timeline and just urgency on them. And that is Demo Day, right? And so, went back out to market around Demo Day and after Demo Day and we closed up the remaining, like what, 1.6 and some change.

But it was tough there and touch and go for a minute, like just running in a circle and just like chasing my own tail with like trying to get a lead. And I'm just like, who made this up? This is dumb. Like I'm also not trying to raise five to 10 million. I think when you start to get into the upper echelon of values of what you're trying to raise, a lead makes total sense because it's just like de-risking the entire investment and them getting in your bank account and just like all of these things that leads do. It makes so much sense. But I think. When it's like a value that you could easily part out or just get a ton of angels or small checks. I don't think it really matters, and so, I—

Jason: Let's stay on this topic because this is a really interesting tactic that not many people know about. And a lot of people run into this situation where they're... Raising less than two million dollars and the traditional school of thought is that we find a lead, the lead comes in, they take more than half the round and then all the [00:22:00] follow-up funds fill out the rest of your round. But as you're going to raise, as you found out, you'll meet a lead. Tell me about your lead. We don't lead. But tell us when you do have a lead.

Tiffany: I've also seen it, not to cut you off, someone leads, and they're just like, who's gonna follow? And I'm just like, oh my god, this, it's just a never-ending cycle.

Jason: When we come back, Tiffany will tell us how she ended up closing her seed round, and we'll hear how one tiny move by a VC firm nearly destroyed Curastory. If you're a startup trying to sell into enterprises, I'm sure you've been dreading getting some sort of certification like SOC two or HIPAA. I know I did when I ran my last startup, and it cost us a lot of important deals. Well, you're in luck because not only is there an awesome solution called Vanta that makes the process dead simple, but our funded listeners get a thousand dollars off their service just by going to vanta.com/funded. Check it out.

Jason: Yeah, so it's challenging on both ends, right? You do have to herd cats, if you will, and you have to be a strong, passionate voice in order to get these investors to commit and actually move. So, this is a bit of judo that I talk a lot about in terms of fundraising, because you can have these situations where you have a lot of verbal commitments or interested parties. I wonder if you could talk a little bit about, do you remember what you did to then decide? You were articulating it already. You were like, why does it have to be like this? Why don't we just, blah. Like, what did you do to start getting people to put checks in?

Tiffany: Yeah, I mean, it really was scouts and angels that, like, Lightspeed Venture Partners is not worried about 100k, 50k, like that's chump [00:24:00] change for them. So, when we got that commitment, I, with their approval, I was like, can I use the Lightspeed name? And they were just like, yeah, totally. And so, I mean, it's a tier one fund. I'm not saying that they're leading, but I'm saying that they're in the round. And so that actually helps.

Jason: Did they set the cap with you? Did they set the valuation cap with you?

Tiffany: No. So there wasn't. It's typically when, I mean, you're getting into bigger check sizes that conversation is had. So no, it was really just like, this is what I think. Just a party round. Yeah, literally. And obviously Techstars is a little bit different, but it's like if you raise above this amount, we can talk about these terms, and if you raise below this amount, then it's more rigid, then we can talk these terms.

Jason: So that was the first tranche. And then... Once I closed up the First Tranche and started doing the Techstars program and not [00:25:00] raising, I was like, we can talk in September. Then of course valuation changed. So just cause we'd done so much in a three month. Pressurized environment. You set that value, you set that next Tranche. Yeah.

Tiffany: Set the valuation next one as well.

Jason: Love it. That's what I wanted to help sort of illuminate in this situation. Cause I get this question all the time and how do you do it? The high level is that when someone says they want a lead or who's the lead, it's because they don't have, is this the right word, the courage to set valuation or the courage to be like, I'm committing, right? And so it's not necessarily that they need a lead. They just need a credible stamp that this is a good deal and they need a valuation that is defensible.

Tiffany: Yeah.

Jason: Isn't crazy and is defensible. And so if you can manufacture those two things, like you did, then you can pull together a party [00:26:00] round. And the other thing that I'll call out, which is great is either instinctually or through things that you learned. You did the first tranche and then as Techstars was coming online, if people wanted to talk to you, you were like, not good. No. Right. And I think the most attractive thing that a venture capitalist can hear is no, in terms of what, yeah, is what'll get them going. So, I'm sure there are tons of other stories and details from that first race, I'm sure. But what I'd love to talk about is your next couple million, right? And I think this one, it gets a little spicy, right?

Jason: So, tell me a little bit about what's happening at the company before you say, you know what, we want to go raise our next round of capital.

Tiffany: Yeah, running out of runway, yet again. Market was a little wobbly at that point. And [00:27:00] it just didn't make sense to do a Series A. This was in the spring of 2022. And so, I just, I started doing some research talking to our board and a seed extension made the most sense. That's what they were seeing a lot of founders doing in the market. A lot of people were having flat valuations, things like that. And so I was like, okay, let's do a seed extension. And so I didn't do the kind of cold, warm outreach that I think a round should have. It was a reach out from Elysian. And around the time that I'm literally thinking that I need to pivot from Series A to seed, like around the time where I'm like, okay, we're going to run out of money. I got a ping from Elysian and I knew I wanted to [00:28:00] raise about 3 million, and Elysian didn't get the full 3 million, so we had to essentially get follows, right? So it's been, and just from market, it's been a crazy year. and just, it's not the normal two month close that a hot 2021 market was. It's very grueling and different and We had maybe like half just wired and committed of the 3 million that we needed. And I'm still out in market raising and. We get a term sheet for literally 3 million and an additional 3. At, yeah, so that would have kept, put us at what, like 4 or 5? at the price that Elysian set, and it was going to be a priced [00:29:00] round, just to clean up our cap table.

Jason: Well, you must have been super excited.

Tiffany: So excited. I mean, it would have been the biggest check in the company at that point. It was a term sheet. It was a priced round. It was all the things I'd never gone through before. And so...

Jason: Yeah.

Tiffany: We executed on the term sheet at the valuation that I wanted. And I'm like, oof, we're about to be flushed with cash, can do all the other additional things that we needed to do. And our lawyers, Loewenstein, they started Confirmatory Due Diligence, like they were getting all the information. This is also around the SVB bank crash, by the way.

Jason: Super fun time to be...

Tiffany: Super fun time. I was on a plane when that happened. That was wild, but sorry, I digress. So we're getting confirmatory due diligence together, like all of our investors are checking to make sure we're okay. And so the VC at the time that wanted to do the 3 million priced, reached out to get on the phone with me [00:30:00] and they basically asked for the valuation to be cut in half.

Jason: Wow,

Tiffany: and

Jason: the deal.

Tiffany: After an executed term sheet. Yeah. Like as we are in the middle of pulling final docs for confirmatory. So I'm racking up legal fees and also. They're asking for a valuation from our last round when we have, I mean, about 10 million in ARR, like signed for the year in sales. And so I was just like, wait, what? And we have a pro forma. So I can clearly see, black and white, how much ownership they would have. They would have gone from 9 percent to like 28 to 30 percent ownership in the company. And I'm sitting here thinking, do I walk away knowing that runway is ending [00:31:00] before our 10 million in ARR starts? Or do I say yes, have a partner on the board that would do all these just like frustrating things and give them basically like 10 percent away from just the ownership that I have in the company.

Jason: Before you move on, Tiff, I just wanted to emphasize something you glossed over. This is not just a commonplace occurrence; it's a frightening horror story. People need to recognize it as a real and serious issue. Term sheets are not legally binding documents. There's no recourse for a founder if a VC firm issues a term sheet, signs it, and then decides to back out. You can't sue for that money. A term sheet merely indicates an intention to do something. The only risk the VC has is reputational. Reputation is crucial for them, but at the end of the day, if they want to pull out of a signed term sheet, they can. So, I always tell founders, "It's not over until it's over."

Tiffany: Until it's wired.

Jason: Yeah, exactly. The money needs to be in the bank. Too often, people celebrate prematurely and stop pushing.

Tiffany: That's literally what I did.

Jason: Right, it's not your fault, but it's essential for people to understand this harsh reality. It's a possibility they need to be aware of.

Tiffany: Yeah, absolutely. It was really tough. After talking to our board and realizing we had significant sales coming in, which would be our biggest cash flow in history, I felt cornered. If the situation were different, I might have accepted the valuation cut. However, given our circumstances, I walked away. I sent a newsletter to update everyone, current and prospective investors. I was candid and open about what happened. A VC tried to back out without valid reasons, citing the lack of confirmatory due diligence.

They couldn't point to anything untrue in the paperwork. The response to that email was overwhelmingly positive. Every top-tier VC fund, and anyone listening probably knows them, reached out to me. They all said the same thing: they would have advised their founders to do the same. They empathized with my situation and assured me we would succeed. Getting that validation was incredibly helpful. I wasn't crazy for turning down a $3 million term sheet due to their post-agreement actions. After the email, we received additional investment for the current round, at the same terms set by Elysian. That helped. It was tough for a while. We were late on payroll, but I called our board, and they reassured me that we would get through it. It was a scary moment, but we did.

Jason: Looking back at all this, you've been through various situations, seen different behaviors from people, including yourself, and prepared for different fundraising scenarios. What are some lessons you've learned along the way that you plan to apply to the next fundraising round?

Tiffany: I aim to secure multiple term sheets. Having that leverage is incredibly helpful. Also, I will conduct thorough due diligence on the fund. I don't mean just checking if they have dry powder; I'm talking about talking to other founders. Have they pulled term sheets before? It's something people rarely discuss. However, when I sent out that email, some VCs admitted to having done it in the past. So, that's something I'll focus on. With the term sheets in front of me for Series A, I'll be more aware of any red flags. Those are the two things I plan to do differently in the upcoming round.

Jason: Shifting gears to something more positive, tell me about the experience when the sales contracts started coming through, especially during the college football season. How has that impacted the company?

Tiffany: It's been amazing. We're operating from a different perspective now. We've transitioned from relying solely on VC capital to generating revenue through sales. Every company and founder eventually need to focus on cash flows. That's the business you're in—cash flows, not just managing runway and planning for the next VC round. This situation forced me to shift my mindset. VCs weren't going to save us with unfavorable terms, so we had to concentrate on the cash flows ourselves.

Jason: It's a total blessing in disguise. Getting through this and learning that hard lesson, forcing you to shift gears—it's going to pay off in your Series A and beyond.

Tiffany: Definitely. Before we end, as a huge sports fan, I have to say, I was excited to ask Tiffany about the craziest things Curastory has been a part of. I'm not sure if her answer made me happy or jealous. I mean, the current Heisman winner, Caleb Williams, it's incredible what some of these players are achieving. There are undoubtedly seventeen-year-olds out there walking around as multi-millionaires with ease.

Jason: That's actually cool. I respect it, and I think they should be paid. And go through Curastory. That was my conversation with Tiffany Kelly, founder and CEO of Curastory, where people ranging from professional athletes to top creators can create, distribute, and monetize their videos everywhere. When we come back, I'm interested in seeing Paige's thoughts on the interview and all the problems that TIF encountered in Concord. A ton of founders I meet know that dilution when fundraising is something they should be careful about, but beyond that, they don't really know what goes into it.

And that's a problem because not knowing how your ownership is affected when you raise different amounts of capital at different valuations can be quite damaging. If you're even slightly unsure about it, head over to adamantventures.com, click on tools, and grab my free dilution planning tool. That'll run you through the basics of dilution, show you an ownership sensitivity table, and even help you see the impact of multiple rounds of fundraising on your final ownership levels. I hope that helps. If you have any questions on the topic, feel free to hit me up.

Paige: So, Jason, a lot happened in this episode. I don't, I honestly don't even know where to start because some of the things I can't even believe have happened to her along this very long fundraising journey. So there are definitely things I want to touch on, things I'm confused [00:40:00] by of what happened, but maybe I can just hear your first thoughts on the episode since you were there.

Jason: Yeah, I mean, so I've known Tiffany for a while and have heard bits and pieces of this story along the way. And so getting her to sit down and really pull back the curtains and talk about all the little details was fascinating. I'm confused, honestly. Like, I'm confused that some of this stuff would happen to her, but it was really neat. I hadn't ever actually heard her backstory and how it all ties together. And so, yeah, a lot of the demonstrations of grit now make a lot of sense for me. But yeah, I would be curious what really stood out for you.

Paige: No, a hundred percent. And before I ask you what stood out, I just wanted to say that I really liked this emphasis on competitive sports that she built going into it. You know, anytime someone plays up until their college years in any sport, you know they're a dedicated human [00:41:00] being because that takes a serious amount of grit to get that far with sports. So I thought that really allowed me to see why she was able to not give up with what she was going through.

I was honestly shocked that she kept pushing through. So this leads me to my first question, which, she started off kind of at a rocky start with her first fundraise. I feel like she had this really awesome idea, and she just didn't know much about fundraising or the process at all. And I thought it was really cool how that one VC stopped her in her tracks and showed her the right direction to go in, but I was confused by what equity crowdfunding is and why that was perfect for her situation. I don't know, I just don't really understand how that led her to be able to close that round. So if you could...

Jason: Yeah, no, it's the whole start of the conversation and how messy it was. [00:42:00] I'm glad we had someone to finally tell this story because I think it's too easy to glaze over the stuff that you're embarrassed by as a first-time founder. It's like, actually, most founders, I feel like if they didn't have some connection into the venture capital or startup world beforehand and they were just working on a product and realized they needed to raise money, probably would do something very similar to Tiffany.

But you just don't hear those stories. So she was vulnerable enough to share that. She was like, well, I just knew I needed to try to raise money and heard that you should create a deck and talk to venture capitalists. So that's what I did, and obviously, I did that terribly. I think in particular, you're just fast-forwarding into why she wanted to go after equity crowdfunding. So, I'm going to butcher timelines and dates, but the ability to raise from crowdfunding is a relatively new phenomenon, probably in the last seven years, is when it [00:43:00] became an option for people to raise for their startups.

And I think equity crowdfunding can be perfect, or as she put it, at least a good fit when you have a product that speaks to consumers, as in like individuals, not deep technical venture capitalists that are looking for new technologies that most people on the street would never have heard of. So for her, she was working in sports and media. And so if you talk about sports and media to a lay person or a person that's just interested in sports, they have a better chance of encouraging them to put a little bit of money in. So for her, she wasn't raising that much money, which is another good reason for equity crowdfunding to be a fit. It's like, you don't expect to raise millions and millions of dollars from there. So if you can somehow put together a hundred thousand dollars from equity crowdfunding, that's a good fit. And I think that's what she was going after at first.

Paige: And that's... I guess I'm still a little confused. And that's public? Like, did [00:44:00] she announce this publicly? Because I know there are certain laws in place that make this kind of tricky.

Jason: Yeah, there are laws in place about accredited investors and who can actually invest in private companies, but new regulations, like I said, around seven years ago, made that available so that you could go on sites like Crowdfunder and Republic in order to post. I mean, you essentially post it like it's a social media post. This is Curastory. This is who I am. A lot of times, there'll be a video. And it's like, do you want to invest in my company? Here's who I am, and here are the terms. And it's just like another social media page.

Paige: Yeah, that's kind of interesting. Yeah, clearly, that VC who helped her out knew what she was doing, and then obviously loved what Curastory was about because... No, she's literally on her board. So, yeah, I think that was very noble of her to kind of show her the way. Because she didn't have to do that, you know? She didn't have to tell her, "Hey, listen, if you keep going out here, you're just [00:45:00] gonna keep being put in chaos and you're going to get no's." Like, she decided to go out of her way to help.

Jason: I mean, I said this live to Tiffany, but it's like, that is highly unusual for an investor to go out of their way and to like pull someone aside because it's like, as noble as a venture capitalist might be, it's like, you get tons of deals and founders that come across your desk every week that aren't good and need coaching and need more time. And it's like, you want to help everyone. The noblest of VCs want to help everyone, but just really don't have the time to do it.

And knowing that, like, you spend a little bit of time with a founder or anyone and it like snowballs into the amount of time that you're going to have to spend with them, right? It's like if you give a mouse a cookie kind of thing. And so for her to take the time to give difficult feedback, right, to say something that isn't going to feel awesome at the moment, to spend extra time to put [00:46:00] someone on a better path, like just this is a huge thing for her to do for Tiffany way back then.

Paige: I guess it's just an example of that founder-investor fit. That it just clicked. Like, I don't... She must've known something that she was like, I see it. You might have not explained it that well or shown, but I see it, and I'm in, so I think that's...

Jason: I think, you know, the other thing to call out was, if I had to guess, it was 95 percent what she saw in Tiffany, not the idea. Like, ideas are a dime a dozen. And at that earliest stage, she must've just been like, look, this is a fighter. This is someone who's passionate about it. I like her background. And we were talking a little bit about the sports background before. There are some VCs who, and I'm actually a fan of this too in investing and in hiring, but there are some VCs that will explicitly say, if you were a college athlete or above, like, that is a huge, huge vote of [00:47:00] confidence in my book because of what we know it takes for you to get there, the amount of hard work, the amount of dedication, the amount of grit, the amount of suffering that you have to go through. It's not too dissimilar to what...

Paige: Two a days.

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Jason: Yeah, two a day is exactly. It's not too dissimilar from what you're going to have to go through in order to be successful in the startup world. So a lot of them love backing former athletes. I wonder if that was the case here, but certainly, I think the bet was all on Tiffany.

Paige: No, I totally agree. She said it herself. If she's down 15, or she's down 30, she's still not out. And she was talking about how all of her friends are wondering why she's not burned out. She's built for it, so.

Jason: Yeah. And like, I think this is a good topic to pull the thread around. So not all listeners and people trying to raise capital, and very few actually will relate to Tiffany's background and be able to say, like, I was an elite college athlete and can talk about that grit. But, you know, it is something that investors are looking for, explicitly looking for and trying to understand whether or not a founder has that fight in them. And if you happen to be a college athlete, that's going to be something that you'll be able to talk about. But if you're not a college athlete, there's got to be something else in you, your background, your recent experience, and your way back when experience that gives an investor the confidence that you do have that similar level of fight, that you know what it means to put in hard work in order to get to a goal or achieve something. So, whatever that is, we all have to be looking for that when we go out to raise capital.

Paige: Yeah, it's so important to be able to look at your life and figure out how you can showcase that grit or that motivation, like what in your life, what story, what something, anything that you can then take and shape into being a good storyteller. But I do have something else that I'm, obviously, I do want to dive into, kind of the spicier part of the episode. Number one, because, wow. And number two, because I'm just confused on how this was legal and if it is. So I don't know if I'm stating this correctly, but why would pulling out or, in her case, the VC, changing the valuation after an executed term sheet be legal? How far is an executed term sheet done, or is it close? I just want to understand the timeline better.

Jason: Yeah, so, right after I did the interview, I was like, did I misspeak? And I had to actually go back and ask some friends and do some searching. Because I think I was very explicit around saying that term sheets are not legally binding contracts. And what I found is that it depends. Like there are some term sheets that are written in a way that are legally binding contracts, and some that aren't. You have to look at how they're written. But in my understanding, in my experience as a venture capitalist, they're not actually considered legally binding term sheets, legally binding documents. They are kind of like intents, like a written intent to do something, to actually write the full documents in the legally binding contract to be part of an investment round. But either way, well, first I'll tell you what the timeline is, because that's what you asked about. The timeline of a deal happening is initial conversations with a bunch of investors, deeper conversations with a handful of investors that are interested, and then getting down to the wire of negotiating terms and talking about the idea of actually doing a deal together. And when we get to that level, in order to memorialize or fully articulate this interest in a company, an investor will write a term sheet in which it's usually a one or two-page document that outlines the high-level, most important terms that are going to go into the investment round. Usually, that takes into account valuation. Some other big things are like board seats that they are going to expect. Sometimes it's like if we need a refresh on the employee option pool. And they're not written in fully detailed legalese. It's just like one page of being like, here are the things that we discussed. We can sign it and be like, yeah, we're into it. We're into it.

Paige: So...

Jason: It's not like, okay, if we break this here, you go to jail, or you break this here and you are liable for X, Y, and...

Paige: So, what you're saying is, if you get an executed term sheet, keep running your process.

Jason: Keep pushing, keep running the process. It sounds like such a trite and just old wives' tale of, you never know what happens and push till the end. And it sounds like that until it happens to you. And then every other time you do this, you're going to be pushing until you see dollars hit your bank account. So, yes, you've got to push all the way to the end. And you know, so the timeline goes, sign term sheet, and then usually there's confirmatory diligence is what they call it. It's like, okay, we said we're going to do this, but we need to check on the last few details. And once we check on the last few details and like we're good, we then create what are called definitive docs.

Those are like the 20 to 30 plus pages of legal documents that outline everything. Those get signed and then we put money in the bank. The reality is, even if that signed term sheet is a technically legal document, the recourse that a founder has if you back away from it or say you're not going to move forward is so little. Like it would take more time, effort, and money to pursue some sort of legal action or sue a firm for backing out on a term sheet. And like at the end of the day, like it wouldn't be worth it.

The biggest risk a venture capitalist has around backing out of a term sheet, the way Tiffany experienced, is the impact on their reputation. And that is a massive impact, but one that a lot of VCs, especially during the correction and the crash of 2022 when stuff was going crazy and no one knew what valuations were going to be. I feel like venture capitalists felt like, look, if there's any time to pull a term sheet or to renege on a deal, it's now because of the market. If I had to explain it to anyone, I'd be like, look, we signed a term sheet at this right in the middle of the crash of the markets. And we had to pull out for X, Y, and Z. We've never done that before.

We'll never do it again. Like it'd be easier to explain, but regardless, really tough thing to go through. And I think we talked a little bit about this, but like, if you have a process going on, a lot of people are talking and then you sign a term sheet. Usually, you talk to everyone else who is interested and say, look, we're going with this term sheet and this investor. Appreciate you being interested. Maybe, you know, maybe next time. And so everyone leaves.

And so you sign the term sheet saying you're going to go with the one person that you thought you were going to go with and they retrade the deal. They pull the term sheet or whatever. It's really hard to go back to everyone else and be like, Hey, just kidding. Like, can we still talk about this? Cause they've already lost. They're curious why the person pulled the term sheet or why they changed the deals. Is it like, do they know something that we don't know?

Paige: It's too late.

Jason: Yeah, it just like, there are too many question marks and now you've lost every option.

Paige: So, again, just to restate, you keep running your process until that money is in the bank.

Jason: Yes, keep pushing.

Paige: You have to. And I'm sure, like, going through this, Tiffany now will never be like, This is the one, alright, I'm done, bye guys. She's gonna keep her options open and it's gonna end up making her an even stronger founder, so, Who knows? And she still, because she bounced back quick, cause she's a competitive person.

Jason: Competitive as heck.

Paige: Yes, she is, and she was able to bounce back and get some investments under her belt from deciding to go about the situation in an open and honest way. She sent that email out and she was able to reap some benefits from it. So, all power to her. And I'm excited to see what Curastory does.

Jason: Yeah, and I think a good point to wrap up on it is like, in life, and in fundraising, I feel like there are things that happen to you that, in the moment, are like, terrible. They like, objectively are just, I cannot believe that thing happened to me. I can think of more than a handful in my life both in fundraising and other things, but almost all those tend to look back on them and you're like, huh, it seemed terrible at the time, but wow, like, blessing in disguise. You know, if we had done this, if we had done that, if this had happened, like, would I be where I am today? You know, like, just like, butterfly effect and, you know, the benefit of 2020 hindsight is just, is crazy. So I talked a little bit about it with Tiffany, but the fact that she could get further on less money because she wasn't able to take that firm's money. Amazing. Like that means she's going to get to a different level and be able to potentially raise more money at a lower dilution.

Paige: Yep.

Jason: And then like, like we talked about, you know, I think that that firm probably showed their true colors and it's like, well, even if we had signed at the terms that we had initially agreed upon, like. If they were going to do that then, what would they have been like to work with, you know? So another dodged bullet there. So, I'm also extremely excited to see what Tiffany does. She's entering a big college football season. Deion Sanders, Coach Prime, Colorado, who they're working with is like, you know, doing a lot for media, the media rights that she influences. And so, yeah, I think we're definitely going to be doing another episode checking back in on this because it's a great story.

If you're looking for more insights, strategies, and support around fundraising, subscribe to our weekly newsletter @ fundedpod.com/newsletter also find me on social. I'm at JayYeh. That's J-A-Y-Y-E-H on almost every platform. I respond to newsletter replies and DMS. So hit me up. This episode was produced by Paige Randall. Thanks also to Jon Lee from Adamant, and thanks to Tiffany Kelly for her inspirational stories on how to always come back down in the fourth quarter. Or whatever it is you do in volleyball. As always, one last thanks to our fantastic sponsor.

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