How Coco Brown Raised $2.5M in Venture Capital for Athena Alliance (Coco Brown / Athena Alliance)

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Coco Brown:

we have had the experience of having to do that, of having to run close to the ground because we never got the like, Oh, great idea. Here's 10 million. Go grab, you know, market share. first of all, that, That hasn't happened for women. Women get really tiny checks, and we have to figure out how to make them go a long way.

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Jason Yeh: Facing rejection is a harsh reality for many founders going out to raise. It can feel like you're hitting a wall over and over and over again. But sometimes all it takes is one person willing to say yes, that changes everything. If there's one thing I know about VC it's that the domino effect is real. One, yes.

Has the ability to push all of those maybes across the finish line to [00:01:00] close out your round. Today's guest Coco brown, founder and CEO of Athena Alliance. Experienced this firsthand while closing her $2.5 million round in 2023. Not only was she able to land a lead? Thanks to that first. Yes. She actually filled her round out with female leaders from our own community customers who wanted to invest in Athena alliances vision, showing the power that comes with a strong community, committed to your success. But before we get into the specifics. I wanted to hear more about Coco's childhood, which started off on the opposite side of the world.

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Coco Brown: Yeah, well, I would, I mean, a couple of things. One, I was, I was born in Malaysia. I've, um, lived on three continents. I was, to, you know, somewhat academics. My, neither of my parents have ever worked in a corporate environment. Um, the closest my dad came was to working [00:02:00] for the UN for two years for, um, UNCTAD, which was the UN Trade and Commerce.

you know, the trade, so it was like basically economics. He, he was a PhD in economics and he, he taught, he taught economics and he was also, a super intrepid world traveler. Like, you know, hitchhiked across Russia in the sixties. Um, crazy, like went to Vietnam as a tourist during the Vietnam war. Like my dad is a little, like super eccentric.

And, um, You know, uh, I, I, I grew up In, in a, you know, undiagnosed family, but like, definitely a family with a lot of neurodiversity that, you know, that, that, um, shaped kind of, I think for me, a more fluid way of engaging with people. Like I, I I can [00:03:00] take in lots of different styles and lots of different modes of operating and lots of different ways of communicating.

And part of that I think is like the family I was a part of. And part of that was because of the family I was a part of, I also, have a huge cultural exposure, um, which is like then translated to my kids. My son is actually, Um, double majoring in psychology and Mandarin. And he's super, he's off to Taiwan for a year and he's, he's into diplomacy.

Like we are a family that sort of subscribes to this concept of one globe. one world, uh, you know, and. Um, our, we have a lot of chosen family. My chosen brother is from Hong Kong. Like, like we, you know, we have our Malaysia family that is not really our blood, but

Jason Yeh: With that sort of background, um, growing up, how, and you said you, you took in a bunch of different ways of interacting with the world and interacting with people.

Would you say as if I were to sort of box [00:04:00] you into one of two categories and you might not like this, but would you say you were an introvert or an extrovert growing up?

Like how, how would you describe your ability to interact with new people?

Coco Brown: You know, it's funny because my, I don't remember a lot of my young life and, um, but What I'm told is that for my early part of my young life, I was very much an observer, very much like, um, more introverted and, um, and very attentive to emotions and, you know, sort of the dynamic that was going on. Um, and, you know, And the logic there was like, that was natural.

I, I had, um, you know, a father who operated very much like Spock, if you will, and a mother who is very emotive and, um, you know, in some ways, like, I mean, she's Mensa, she's kind of brilliant, both of them are brilliant, but [00:05:00] also kind of, you know, in their own worlds and, and a brother who also similarly, so I think, you know, the, the description of me early life was like, having to be a very clear observer in the family.

And I was always seen as the one who kind of would pull things together, you know, kind of try to peacemake and bring things together. But then I would say once I got out into the world, I became very much an And I, someone described themselves as a socially anxious extrovert. And I was like, Oh my God, that's me.

I'm a socially anxious extrovert. That's exactly right. You know, and I get exhausted. Like I, you know, I, I'm not the kind of extrovert that just wants, like, gets all this energy from it, but I am extroverted in, in the world. And I, yeah, so I would say that it is hard to pin me down in that.

Jason Yeh: Now I usually like asking that just because [00:06:00] of the topic that we're going to talk about requires so much interaction with new people and bringing information out.

Um, Before we get there, so with an academic father, and I think you were saying maybe an academic mother as well, where did you think you would end up professionally?

Like, is this world of entrepreneurship something that was on the roadmap or something that kind of came up by surprise?

Coco Brown: Yeah. So I, um, I, I remember the first time that I actually sort of thought about that, you know, that, that I remember the first time I remember thinking about that was we were visiting my dad in, um, we were living in France and my, my dad was working at the UN in Switzerland and he referred to, um, the UN as like the halls of the great, there, there were these like, Big hallways, you know, and people would just be rushing down them.

And I remember hands waving like this as people walked and, you know, like big strides, big movements, and everyone was [00:07:00] going to lunch at the same time. And, and I went to my dad's office and I was probably in second grade, I think. Um, And so I went to my dad's office and he had all these papers, you know, and I was like, you know, like the idea of moving papers around sounded really interesting to me, a desk and like drawers and pencils and erasers.

And this was my one experience with sort of like an office ever, you know, with, with my parents. And so I, I remember being like, I want to be in business. That sounds awesome. And then I think just my general, um, You know, sort of, I didn't discover this about myself until I had my first real corporate roles.

You know, so I graduated kind of, er, er, er, I was younger, on the younger side when I graduated, but I, I went right, right after college, right to work. And, and I discovered about myself that I, I am, Extremely [00:08:00] ambitious. I never knew this about myself. Like, cause I wasn't like the most ambitious student. Um, I didn't, that I didn't take to education the way I took to work.

And, and I, I waited tables. I'd always worked, but, but this sort of business world where I jumped in first to compensation analysis, and I did a lot of comp analysis and design and right from day one and super interesting stuff to me and, and, I just, I realized that I was quick to have answers. I was, you know, confident in my answers.

I was, you know, I, I operated on a certain level of like gnosis and, and so I ambitiously rose very quickly. Um, by the time I was 28, I was a VP running a very, you know, a, a fairly large piece of a business. Um, I was VP of professional services and the company was a professional services company. So, so I ended up running like two thirds of the business and all of the delivery.

without [00:09:00] any, you know, real skill to deserve that. So, uh, yeah.

Jason Yeh: So, so you, you at some point got exposed, what I heard is like to something that looked like business. And then I think that probably planted the seed and it, it sounds like, you know, business was much more of your calling and say academics. And it, and based on what I see in your profile, like you went on this long, you know, distinguished career in business.

Um, but you know, I think Athena Alliance was your first company that you were starting yourself. Is that right? Oh

Coco Brown: it depends on how you look at it. back in 1996, 95, 96. So I was Let's call it 25. I was 25 years old.

I wanted to build a product. It was early days with HTML. I built this fully customizable.

standalone employee handbook that had all of the rules and regulations built in that [00:10:00] you couldn't change. And then all the things that you could flexibly change as a company, giving you guidance for what was like the gold standard versus like normal. Like it was pretty cool.

And I built it with an, uh, an engineer, And. The VP of engineering of the company, a guy named John Naumann, and um, he introduced me to a VC.

And I literally met one VC, pitched my product, showed them, and this VC said, you know, really great product, kid, but where's your Business plan. Where are the adults? You know, like what's your go to market strategy? And I'm like, what are you talking about? I don't

even know. I was a psych major. So I was 25 and I did, you know, that was my first entrepreneurial thing.

So actually I went off, I, and I did try to keep building on this product and. Um, I ended up selling the product to a company that was early in the outsourced HR [00:11:00] space that no longer exists. I think it was called Simpata, but I sold it for like 80k and no royalties

and moved on. So actually that was the first one.

Jason Yeh: Okay. That's, that's cool that you, you dipped your toes in, but then call it, I don't know, 20. Go ahead.

Coco Brown: no, cause there was a second one.

So the second one, you know, Satya Satya Nadella calls himself a refounder of, of Microsoft, which I think is fair. So I would say I was a refounder of a company called Taos. So I became the vice president of professional services. The company grew to about a hundred million in revenue, then we, died.

We crashed to 10 million in revenue. I had to lay off, like I have the dubious distinction of having laid off like a thousand people in my career and I'm not exaggerating. I had to lay off about 700 people in that instance. And, um, and the two owners of the business came out of retirement and basically said, Hey, nice to meet you, Coco.

I didn't know them, but you know, we want you to do a turnaround. And, And you're going to become the [00:12:00] third owner of the business and we're going to make you president and COO of the company.

The entire company reported to me. So, you know, and then I ran it for the next 10 years and I grew it back up to over 50 million in revenue.

I was on the board. I was one of the three owners, you know, so in that sense, I'm a refounder pulling the, Phoenix out of the ashes and growing that business. Now we never took outside funding, so we were completely self funded. We never went for venture capital. I didn't even know really what VC was and private equity was until Athena.

Um, so now, yes, true, Athena. Mm

Jason Yeh: Okay.

So we, we almost get to the present day, but there, there is this, um, from what I can tell, maybe like a, a six ish year gap between, uh, Taos and deciding to do Athena. And you know, we don't have super accurate information. We can only go by. What's announced and stuff, but it does look like your first round of capital was announced in November of 2020, which usually [00:13:00] means like, like, roll it back a little bit, you were thinking about fundraising either right before or right after the world kind of changed. And so I wanted to ask you a little bit about. Leading into that, you know, you've decided to start this company, Athena Alliance. Did you know it was going to be something that you would have to raise capital for, or is that something that you discovered a little bit into, um, starting the company?

Coco Brown: Yeah. I started first in 2016 with a nonprofit, which by the way, I would highly recommend don't do. You know, I get really clear on what the right capital structure is for your business. And just because the business does good does not mean it should be a nonprofit. And we discovered that, I discovered that like a kind of, you know, it's a really hard thing to unwind and to convert a nonprofit into a commercial [00:14:00] company.

And so we really had to rebuild from scratch and in, January of 2021. What we did do though, is we started with a, like a little bit of a, a starting point, which was largely our reputation. I had been building a reputation with Athena as this nonprofit that was helping women get on boards. And so it's, Been this long period of time where I've been out in the market and Athena has been out in the market as a thought leader, as a partner to women, as an organization that helps, you know, achieve the last mile goals, but in terms of actually a commercial company.

We launched the commercial company January 1, 2021.

And I had been trying to fundraise for that for a while before that. Cause it took me a long time to buy, you know, to go through this process, which is a whole other story with kind of nonprofit [00:15:00] to commercial. and I really struggled with the venture world in trying to raise money because the venture world was like, well, wait a minute.

What's the nonprofit story in this? Like venture, traditionally venture, has a very formulaic way of looking at the world. And if you bring in an outlier, an odd outlier, it's like, okay, pass. Don't get it. Pass. So what I did was I actually had, and I think this is extremely important early days, when you think about it, the earliest days of raising money.

The entirety of what people are putting the money into is you and your idea. Like that's entirely what it is, right? So you really have to have a great idea and you also have to have people who really believe in you. [00:16:00] And sometimes you can find those off the street because they've been thinking about that idea too.

And then they look at your track record and they're like, Oh, Coco, wow, you built a company at over 50 million in revenue. You know, you're not a, you know, you're not new to this game. Like they might be able to buy in, but the nonprofit thing was really getting in my way. And the other thing that was really getting in my way was this woman thing.

Like, you know, like, cause most, cause if you think about it, traditional venture capital

is 40 percent of VCs come from Stanford or Harvard. 80 percent are men and 70 percent are white, right? So I'm not speaking to my audience at all, right? So, so what I did in that first period of time, it took me about two years really to raise the first 250K.

And it started with a guy, this guy, Mike Gamston, who I'm forever indebted to, who said, Coco, Why do people, why do women take perfectly good business [00:17:00] models and make them non profits simply because they do good?

Yours is a commercial company. You need to make it a commercial company and I will be your first investor.

And he was right because I was struggling so hard with this Nonprofit model and something that most people don't want to give nonprofit dollars to.

Cause it's

Jason Yeh: you actually went down the path of trying to raise from venture capitalists as a non profit.

Coco Brown: a, while I was still a nonprofit saying I'm creating a commercial company, I need funding to do that.

And look at what I've been able to do over here in this nonprofit space. That nonprofit needs to continue to exist in some form or fashion. But the commercial company looks like this. And you know, they were like, what? Complicated. No. Bye. You

Jason Yeh: Oh, I mean, Coker, that is such a good story to tell. And there's a variety of versions of this story. That I see happen all the time within fundraising. Some, I mean, it's not always the idea that the fact that a founder [00:18:00] has a nonprofit over here and is trying to do a commercial thing over here. It's that they just have, um, a complex organization to what they're doing. And, you know, you, you said it before, it's like VCs are kind of, you didn't use these words, but VCs are a bit simple minded in how they think about the world. And it's like one way. And even though you might've been able to. Like run a company and grow it with a nonprofit org and a commercial org. You know, that's up for debate, but you might've been able to do it when you go to tell that story and a VC is like. Why, two things, where, what, uh,

you know, I

have a hundred other deals to look at.

I might as well pass on this one go with one that is just a little bit, you know, easier to understand. So that's, that's very cool

Coco Brown: 100%.

Jason Yeh: you saw that. So then you, you ended up deciding to take Mike's advice, Mike, right?

Mike's advice.

Coco Brown: Mm hmm. Yeah, I mean, he wasn't, it wasn't the only, it wasn't like, [00:19:00] the only one, but it was a, you know, it was a critical moment in time of like, yes, I've been thinking about that, and you're right, and, um, And then, you know, just enough people saying, I hear you. That's right. You know, Tony Towns Whitley, who's a, uh, one of two black women who runs a fortune 500 company.

She's amazing. And I remember talking to her about this and saying, this is what I'm, you know, it should be a commercial company. She's like, absolutely. It should be a commercial. Like, so there's enough people like validating. You're right. I get why you're struggling over here and why it needs to be this, that I was like, okay, I gotta go do this.

Right. And, um, and then, you know, I, I had like five angel investors. Um, you know, so it wasn't like big money and like it was 50k checks and 100k checks. And, um, and that just got me started, you know, I closed that the, that money, um, closed for [00:20:00] me in, uh, January. It like hit the bank account in January of 2021.

Um, and enabled me to, do something else that VCs don't want to do, which is, which is, um, fund the past.

So, so a big part of the issue was I needed to pay, essentially pay the state of California for the right to do this, right? Like, because a nonprofit is not owned by the person who creates the nonprofit.

It's owned by the state of California. State the nonprofit exists in. So you kind of have to also negotiate with and work with the state. Um, it, it's sort of complicated. You don't have to, but it's the right thing to do to, um, make sure that all parties are taken care of properly. Um, and then interestingly enough, like nine months later, we got an, an, an offer to be acquired for, you know, 11 million and we didn't do the deal.

[00:21:00] Because in, in the end, I had to ask myself whether enough time had passed and enough was different to be able to really justify that now the owners of this commercial company could take this kind of a exit off the back of what had been a non profit. And so we said, no, we need a lot more distance from that.

And We We need to really grow this business and, and make it into something before, before we kind of do that.

Jason Yeh: Wow. So there is this, I mean, there is this really like jump two feet in moment where you're like. You cut, cut loose your ties to the non profit. Um, you go raise a little bit of money to then Essentially buy the rights to go fund a path forward and you've taken on people's money.

And so there's a, I mean, I think there's like a real like intense moment of now we're really doing this.

And you know, there was an offer to acquire the company even early [00:22:00] on, but it's like, no, we need to really, really go after this.

Passing up on an offer that would have been life-changing for Coco shows the commitment she has to her work at Athena Alliance. As an investor, it's always a good signal. When a founder shows that they're in it for the long haul. Instead of just a quick exit. After the break, we start getting into the details of the $2 million round and the lead domino that changed everything.

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Jason Yeh: [00:23:00] So

Coco Brown: And that would have been life changing for me too, that, that acquisition. So I'm like,

but, but not, yeah, you make those decisions, like.

Gosh, no.

Jason Yeh: So what we're like, what I'd love to share is one, this is a good time for you to say, So what is Athena Alliance going after?

And then, you know, what are you driving towards that actually triggered this moment of, okay, we're going to raise another round of capital, [00:24:00] this most recent thing that, that, um, was announced? Um, and we'd love to hear that sort of backstory. So first, like, Athena Alliance, what are you guys doing? Uh.

Coco Brown: So, so

So we're reinventing. The way that learning experience exists for senior leaders. And we're saying to senior leaders, you can have a 40, 50 year career. And in fact, actually you may have to, or you may want to.

So we've created this incredible concept around a portfolio of impact, and then we're creating the university experience, which is

All of the dynamism around learning and achieving your goal. And then of course we have a career center, which is like a university, which, which means the outside world comes knocking on our door and says, Oh, we have incredible opportunities for the people in there. You know, can we share them with you?

so so Athena is a combination of peer groups and, and, um, courses [00:25:00] and, uh, salons and a Netflix style library. And it's, it's a real technology platform we've built from full stack engineering. And so it is this incredible, um, subscription model experience where you can add things on to that subscription that create your own program towards the goals that you have and towards filling out your portfolio of impact.

Jason Yeh: Got it. That's a, that's a broad mandate and one that I've heard a little bit about. Um, I used to work for Alan Patrickoff, who launched a firm

called Primetime Partners.

Part of his thesis is that like the, the, career and the life of, of people is going to be far extended, well beyond what we're used to.

And so things like this, where, you know, you create an opportunity to have professional and academic advancement, like in your forties and fifties makes a ton of sense to me.

Coco Brown: Yeah. Isn't he part of Greycroft

Jason Yeh: He was the

founder of Greycroft, yeh, but he, he started Primetime after that, so,

[00:26:00] um, but anyways, you know, so it's interesting that this started as a non profit, you, you essentially buy back the rights to do this and you are essentially going forward and saying we need to hit certain marks, we need to do certain things and then get ready to raise another round. you, Raised another round of capital, a little bit more money in looks like 2023, which is not an easy time to raise capital. And so I wonder if you could rewind a little bit and tell us, you know, what was happening within Athena Alliance where You look to your left and your right and you're like, this is the time to raise capital.

Was it, you were hitting, hitting certain marks? Was it, you were looking at your, your runway and you're like, we have to go out now. Um, because it was a very interesting time to raise, I think when, when you decided to go out. Mm hmm.

Coco Brown: Um, yeah. So what happened was in the late [00:27:00] fall of 2022, I did, we raised a convertible note and I had been. you know, essentially we were self funded and we definitely needed capital. I, and one thing I'm really, you know, I don't know if I'm knock on wood, don't want to mess with myself on this is, well, one thing I'm really experienced at is capital efficiency, because when I ran Taos and I had to pull the Phoenix from the ashes and rebuild the business, like we were totally self funded.

So I, I have a natural eye toward. capital efficiency, which, which also translates to like, if you imagine cash runway, I can run the airplane very close to the ground for a long time. But that's exhausting, right? It doesn't give you a lot of ability to look around and see the scenery, right? You're just like, Oh my God, I hope some bump doesn't come up.

So, so, we have had the experience of having to do that, of having to run close to the ground because we never got the like, Oh, great idea. Here's [00:28:00] 10 million. Go grab, you know, market share. Like that just, you know, first of all, that, That hasn't happened for women. Women get really tiny checks, um, and we have to figure out how to make them go a long way.

So, my board and I got completely exhausted by this, the traditional venture capital experiences, and I had, One person, I won't name them, said, you know what, I'm tired of this. I'm an LP in so many different funds too. And I keep going to the LP days and I'm just sick of it. And this, and she's a woman, I see what you're up against Coco.

Nobody gets it. And we're building a rocket ship. We're building something amazing. I personally, I'm going to write a 500,000 actually she ended up writing a 600,000 check, and it's like a big gulp for her. It was the biggest check she'd ever written, you know? And she's like, but we have to do this. And the crazy thing about that is as soon as one person says they're going to do it, The others are like, Oh, I'll write that check.

I'll write it. Not that check, but I'll write a

Jason Yeh: That's frustrating thing, right?

Coco Brown: all of a sudden, like people who are like, Hey, I'm not sure I'm sitting on the sidelines. They [00:29:00] get suddenly like, sure, I'll write the check. So getting that first anchor is so critical.

And then, and then in 2023, as you're saying, since this was a really hard time in 2023, what I did was I was like, you know what?

It is a hard time. So I'm going back to those. Sort of roots again, like who is going to write a check? It's going to be people who passionately believe in this and who are experiencing it. So I went out to our own community and I said, Hey, this is an amazing opportunity and you writing a check is going to get us to the next point.

And that's going to look like this. And don't you want to be a part of this? And so the raise. came from, you know, 80 percent of that, that raise came, came from our, um, community. You know, so like my cap table is mostly people who are members of Athena who've experienced it and if, and a few guys who have gotten their board [00:30:00] members from us, you know, like it's, that's what my cap table consists of.

And so rather than beating my head against like a really bad venture, you know, in climate. And again, I would say for people raising right now, it's similar. Like what I did with my board, Was in, cause we are raising now too. And so what my board and I did was we first went on a VC listening tour and we went out to a bunch of different VCs and we said, what are you investing in?

Even the ones that are in our, you know, where the core thesis might map to us. And, and then we also ask questions like, how do you feel about the flagship in our area? Right? Like the flagship in our category, if you will, is a company called chief and they're not doing well. So. What are you thinking as a result of what's going on with Chief?

And so we just like built a, you know, first we did the listening tour. What are you investing in? What does it have to be? What are the metrics that you [00:31:00] insist on? And how do you feel about the flagship in the category? Um, and I call them the flagship because they are the Goliath, but they are not the winner in the category right now.

So, so based on that, then we got together as a board and we said, do we believe we can raise right now from that environment based on what they're telling us? And we're like, Maybe not. It's not, you know, it's not a good time to raise from venture right now,

Jason Yeh: Yeah.

Coco Brown: given, what we're seeing about what venture wants to invest in and what venture thinks about the category, the anxiety venture has about the category, right?

So then, okay, so how would we raise differently then? Who would be? Because, because we as a business are an incredible bet right now. Our ARR is great. Our LTVDCAC is great. Our like, our growth rate's great. Like all these things are great, but we still believe that we would have to go out and talk to, to a hundred VCs to get one yes, right?

Like, so [00:32:00] do we have the time for that? Do we have the energy for that? Because otherwise I could just spend my time and energy on, on revenue, right? Cause I'm super close to breakeven. So just. Focus on revenue. Like you've got the trade offs, right? So, but at the same time, we also have ambitions around like, if we could get more injected into sales and also our roadmap, there's a component of AI enablement that is super interesting right now in our model because of all the data that we have, right.

And, and what it could do to fast track to insights and connections and things like that. So I want to raise right now. So who do I get that money from? And so. I'm starting with, okay, the family offices, the high net worth individuals, like that's where I've got to go because there's passion there for the story.

Jason Yeh: The, uh, the thing that I want to highlight, which you just described is very smart and strategic when it's like, what is [00:33:00] the audience of venture capitalists that we would probably be talking to look like, and how are they thinking today? And the thing that I wanted to call out is what you did in a very specific environment, which is like, You know, not the best fundraising environment outside of AI. Also not the best because of what you said, a flagship company, maybe not doing well, but your thought was like, what is the psychology of investors right now? And how do we fit into that? Right. And I want to call this out cause it's like a very smart way to be thinking about, because whether or not you are in a, I'll just, for lack of a better term, a challenged category within venture capital's eyes, whether that's that or something else. I think in order to be great at raising capital, you do have to do that always. You have to be like, what is the environment? Who are the VCs? What are they going to be looking for? And do we fit what they are looking for?

If not, we can do two things. We can try to change what we are, [00:34:00] or we can be a little bit more measured about it, like you've been in say, This might not be the path for us right now. So what is, like, who are the types of investors out there that might be interested in what we're doing, given great ARR, given great cacti LTV ratios. And so I love that as like just a model to hear about, um, because you're, you're sort of avoiding banging your head against the wall, just hoping that you'll change a psychology that is pretty baked right now.

Coco Brown: Yep.

And I think the, the, a big thing that I'm learning about traditional VC, right? Like, and this is the other thing where I'm on my own podium about is to the extent that it's true that traditional VC comes very concentrated from two Ivy league universities, very concentrated in one gender and very concentrated in one race, you know, um, then the, and, and on top of that, they, VC [00:35:00] has a formula.

Like over and over again, VC has a formula. There's the rule of 40. There's the, like, there's always a formula, right? And they, because like you said, they, you know, I talked to one that's like, we, we deploy a billion dollars and obviously these are later stage, but we deploy a billion dollars a year to 17 companies, right?

Like, look at what the VCs do. They don't deploy a lot of, you know, they, they, North, Northwest Venture, North, Northwest Venture Partners has 250 companies in their, So just think about like the odds, the odds are not great. So it's really important for, entrepreneurs who have very little time, you know, to waste.

It's very important for entrepreneurs to say, how do I increase my odds by making sure I'm spending my time in the right places when I go after funding and, and, and get creative too. Like what are the alternative sources of funding? Should I be going and funding through Clearco? Should I [00:36:00] be, you know, um, cause one thing that's not available, this is another thing that's crazy for, underfunded entrepreneurs, which is, If you have VC funding, you can get venture debt.

If you don't, you can't, like, it's almost impossible to get like sort of different debt vehicles, like a, a term loan. It's so hard. So you have to figure out there's, there are lots of systems out there that you can tap into.

Like, go dig into that and get more targeted in, in terms of your approach.

Jason Yeh: Yeah, Coco, like, given the story that you've told, like, it seems like a lot of twists and turns as you're flying close to the ground and, you know, getting capital to raise up and giving yourself some breathing room. Um, are there any, like, particularly challenging memories or difficult memories about fundraising that, that you're, you're willing to share anything that like still kind of, uh, cuts deep.

Coco Brown: Oh, yeah. I mean, it, [00:37:00] one of the, one of the hardest things I think about fundraising is that as an entrepreneur you have to hold two truths. One is this dogged belief that what you have is incredibly valuable and you need to hold on to that optimism and that excitement and that, and, and all of that because you are the number one sales person for the company, right?

So you're out there selling, getting revenue, pumping up your team, all of this, while the other truth is you're getting knocked down on a constant basis by these people who are like, nah, it's not that great. You know, nah, gonna pass. Nah, you know, so you get knocked down. Well, this ratio, actually, we would have expected to see more of this and more of that.

So you're like miserable. It's like Jekyll and Hyde, you know, like, or bipolar, I don't know, but you're like miserable on the one hand, and yet you have to maintain incredible excitement on the other. [00:38:00] And that is exhausting. And that's what, you know, this one person saw me dealing with and she happened to be a board member of mine and she saw me dealing with this.

Like I am breaking down, you know, I'm in tears. Like I can't, I, maybe I don't have anything. Maybe it is worthless, you know,

Jason Yeh: Yeah. Yeah.

Coco Brown: when I know that it's not right. Like, so I would say it's not like there are definite moments where you're like, I can't do another, you know, where in the middle of the day you like lie down and you just have to take a nap.

You know, you know, like you're just exhausted and it is so hard. It

is so

Jason Yeh: you know, and I, I don't like leading, leaving the founder and the interviewee on that note. I usually like trying to juxtapose that. And I, I do want to hear like, do you remember where you were when that board member was like, I'm so frustrated alongside you. Like [00:39:00] I wanna, I'm going to commit, you know, 600, 000 to give you some breathing room.

Do you remember that feeling?

Coco Brown: 100%. I mean, you might've even seen it in me

just now. Like I, that, that like, it's like, like catching your breath, you know, it's like that, oh my God, it's almost brings me to tears right now. Like, it's like, thank God. Okay. Thank you.

Jason Yeh: yeah,

Coco Brown: And you know, um, because it, because ultimately like what it says to you in that moment is.

Someone is willing to do this. And also, like, the feeling for me is it's about effing time, right? Like someone had to do it. And thank you for it being you that did it. And someone should have. Someone should have. And that's what she said. You know, it's like someone has to do this.

Someone needs to do this.

Jason Yeh: Well, [00:40:00] Coco, I mean, they sort of, um, wrapping up the interview on this, um, on this roller coaster ride. And it, it is very, typical of the founder journey, especially the venture backed, the investor backed founder journey, where it's these really high highs and really low lows. And you, you get all this whiplash, um, um, But like, even seeing the look on your face around like, what you're working on, um, what you have in front of you, it's like, it's, it's very obvious that it's worth it, and that like, that one glowing bit of optimism still shines bright, and I think, you know, being able to share this with other founders of like, If you're experiencing this, of this like, I know I have this confidence in what we're doing, but I keep getting told this stuff.

I can, and keep getting knocked down that like, we're all in it to keep pushing forward and finding that one believer. And that one believer then ends up being a lead domino. And so this is very encouraging, very inspiring. Um, we're excited to see what you're able to do in these next [00:41:00] few seasons at Athena Alliance, but it, it seems like one of those companies where. Once you get past that escape velocity, it's like, you know, the sky's the limit. So Coco,

thanks so much for finding time for us. Um, it's been great.

Coco Brown: Thank you. You've been fantastic. It's been fun talking to you. Really appreciate it.

​

Jason Yeh: That was my interview with Coco brown, founder and CEO of Athena Alliance. The leading community for women leaders unleashing their impact. I hope this episode showed you that even if you don't fit perfectly into venture capital's standard box. You can still get funded.

Next up, I'll be talking to my producer page to hear what she thought about what Coco had to go through. To get her round across the line.

​

Paige Randall: [00:42:00] Hi there, Jason.

Jason_Yeh: Hey P, how are ya?

Paige Randall: I'm good. Uh, I am always excited to sit down and do these because I think it kind of adds a little bit of a layer of a different perspective or someone who is, you know, I do listen to a bunch of this stuff now, but I still don't know that much and there's still a lot of things that come up and there was a few things in this episode that were a little bit confusing to me.

So I'm very happy I get to have my clarification on them.

Jason_Yeh: Hey, this is, this [00:43:00] is why we do these, right? I think you, you're like, I know some stuff, but I don't know everything. And honestly, I think you know now more than a lot of first time founders or aspiring founders, and they're just a little bit too shy to ask. So that's why we do these. I'm glad we're here.

Paige Randall: Yeah, I'm very happy I can do that for them. Uh, this episode was cool because I've never heard of, so far at least, of a non profit transitioning into a commercial company and then raising funds, so I feel like it was an interesting start hearing of that. I don't, let me ask you quick, like have you ever seen any other examples of this where a non profit has made this transition?

Jason_Yeh: Uh, definitely not. I definitely have not. And um, not something that I would, I would expect to happen, but also, you know, once it's explained to me, I can see how it might happen, but certainly not coming.

Paige Randall: Yeah. Okay. That's what I thought. And she also had a super, she had a background [00:44:00] that made sense in terms of where it ended up leading her. Uh, and it was a lot of things I didn't even, I don't know, like just a lot of crazy things that she accomplished that we might have not even picked up on before the interview started.

Like she ended up building a HTML, like customizable employee handbook product and had her first like, Run in with a VC and pitching a vc. And then she ended up selling that for 80 k. And then she also ended up working at a company called, uh, Taos for about like 10 years. And she experienced, uh, that company kind of crashing down to 10 million in a RR and ended up becoming COO and building it back up to $50 million in annual recurring revenue, which I just think is like, what a playbook, you know, to lead you.

Jason_Yeh: Sure. I said this before we even started recording, but I'll just say this. And I don't think Coco would be insulted if she heard this, like when I [00:45:00] first started doing research on the company before, you know, getting into an interview with her at first blush, I was like, ah, this is the type of business where I'm like, If I don't know more about it, it is something that an inexperienced founder might do, you know, that she, they, they just want to support women or they want to support a certain path, but haven't thought through all the business implications.

And then you get into digging into Coco's past and it is extremely sophisticated. It has a ton of experience, which actually probably lends itself to being great for her fundraising story because of exactly what went through my mind, which is like, Uh, I would, I wouldn't really want to invest in a business that looks like this, but then you see the background of the founder and you're like, is there something she knows that I don't know?

Like she wouldn't be doing this and she wouldn't be raising capital if she didn't see, actually see something, which creates so much more intrigue. [00:46:00] And, uh, I think intrigue might be one of the more powerful emotions that you can stimulate within an investor's lizard brain. Uh, so she does that quite well.

Paige Randall: I liked that call out that you just made of like your first assumptions because and how you were able to actually like be curious enough to explore past that and be like, Oh, there's something here because something that she talked about, she really struggled with was every investor just kind of stopped at that for a while.

They were like, Oh, there's something here. I don't get it. You know, it doesn't fit in the status quo. Um, you know, you said too, you don't see a lot of nonprofits making this transition, like it's hard for an investor to wrap their head around. So it definitely took a lot of grit and perseverance. And the thing that ended up kind of pushing them over the edge. wasn't really AVC at all. It was actually a female LP. She didn't say who, um, who was, you know, an LP in multiple funds. And she basically was like, Hey, this needs to get funded and no one's doing it. So [00:47:00] I'm going to put down, this is the biggest check she ever wrote, like a 600k check. And the funny thing is, which we always see this happen, as soon as someone says, I'm all in, I'm gonna, I'm gonna, this is huge for that woman. Everyone else is like, Oh, I'm in, I'm interested. And then she was able to, um, I think it was, uh, Leona's Capital then ended up, um, being the main VC firm to lead it and other people piled in as well. And it's just one of those things that's like,

Jason_Yeh: The domino, the domino effect is undefeated. If you will. Um, I will say it is, it's just a, so it's a funny thing around human psychology, investor psychology. The thing that I will highlight here is that when we're making these investments, when, when venture capitalists are going in there, they are betting on a very uncertain future.

It really doesn't matter. How experienced the founder is, how much has been built to date, whatever you are investing in is, is, is about the future, right? And the future is, [00:48:00] um, unwritten. It's not, it's not etched in stone. So it's all these guesses, which means that any investor, if they're the first investor is going to be like, I don't know, I don't know.

And everyone considering it is going to be like, I don't know. I don't, I don't know. But the moment one person has the courage or conviction to be like, I do know. I am going. Then everyone who's hanging around the hoop then gets to go, Oh my God, yeah, I thought that too. And then as they have the like conviction that comes from seeing someone else credible lean in, then they start digging into the story a little bit more and they start connecting the dots in their head, right?

They start justifying, they start creating stories for themselves that make sense and they're like, Oh my gosh, yeah, well, you know, page invested. And then they're like, they look at Coco's background and they're like, Ah, you know, she did all these things. She is experienced. She must, she must see something.

Yeah, definitely. Let's do this. And then, then the [00:49:00] snowball starts really rolling.

Paige Randall: that's why people like this LP are so important. I feel like in this world, because it's obviously with anything that's Like, you know, society is always changing and things like that. But with anything, you always need someone to kind of take the first step. And there is a lot of businesses that maybe in the past would have been considered like non venture backable.

And it's really cool to see people that will be like, no, let's push the limits. Like let's, let's actually. Evolve and try something else. And I like how she was able to give, um, Athena Alliance that same shot. That was really cool.

Jason_Yeh: Yeah, totally. You know, one thing I will say is we want as many people building businesses as possible. Um, and we want, We want investors coming to the table, trying to back as many types of businesses and as many founders as possible from different backgrounds, give people a shot that they deserve. But everyone also needs to understand that Coco had to have a vision [00:50:00] about an actual venture scale business.

This isn't to say that you should start a random small business and then think that you should go after venture capital style dollars. That's not what we're saying here, but it is nice to see that. When people do have Big ideas that don't look like what everyone's used to seeing, that there are people like this, you know, initially domino for cocoa that will push the ball forward and get things started Yeah.

Paige Randall: Another thing I kind of pulled out that I noticed was a huge green flag that I'm sure some investors ended up recognizing is they actually, Athena Alliance earlier on got offered, uh, to like someone wanted to acquire them, um, for, I'm assuming a very nice life changing amount. And. That was one of those things too, where she and her team decided like, no, we really want to build this out.

We don't just want to take the easy exit. And that is just

something that totally is like an amazing signal for [00:51:00] investors, whether it's the next round or for this round that she had closed of like, Oh, they're not looking to just. You know,

Jason_Yeh: Yeah.

Paige Randall: and turn a quick dollar.

Jason_Yeh: There are, there are a lot of like close cousins to that, but anything that you see where a founder is trading. You know, trading, um, definite dollars for future uncertainty a huge signal. It's like anything, anytime you see a founder making a sacrifice for the business, for the future of the business, that's what you want to, that's what you want to see.

So it can be, I mean, this is a big one, right? Turning down an acquisition, uh, for dollars today, for sure. But it's also like when you see a smaller version, this is when you see founders walking away from high paying jobs. When you, when you see founders stepping away from a cushy lifestyle, when you see founders investing their own money, putting those things at risk.

So putting their own money, their own opportunity costs at risk. To [00:52:00] do the business, that's a, those are these sacrifices that VCs look for as a signal of like, Oh, there's something that they really believe in here. This isn't just a, a tourist stopping by or someone doing it because it's the cool thing to put on their resume.

Paige Randall: Yeah. And something just popped into my mind that kind of pulls the conversation back to what we were talking about before with the female LP. I'm curious. I don't know if I fully understand how, so an LP, uh, you know, invests in a firm to hopefully get returns, but they're

also able to

invest in other side.

Is that considered like an angel? Like, what would that be considered? No, it's not.

Jason_Yeh: you just don't have to blend the two. It's like the same way as you could be a podcaster and you could also work a full time job, right? And just kind of pulling examples there. So an LP, a limited partner is just the investor in a fund. Um, [00:53:00] And that person has access to capital. They can also do direct investments as angels into companies.

They're just different ways of investing, um, that happen to have different titles. Of

Paige Randall: convertible note. She mentioned that they had a convertible note, I think it was in 2022. And I just, I've heard this so many times, but I still don't understand what it truly is. So maybe if you could just shed some light for me.

Jason_Yeh: course. So, um, you've heard of the idea of equity investing. Equity investing is kind of this common, more, uh, structured way that investors will put money into companies, um, through, through equity investing, you take actual ownership and shares of a company and in order to do so, there are. A number of legal steps and corporate structure that needs to be put into place in order to actually execute all that.

So actually, [00:54:00] when you're doing a formal equity investment, there's a lot of time that needs to be spent. There's a lot of dollars with lawyers that need to be spent in order to like stand all this up. Many, many years ago, like, 10, 20, maybe even 20 years ago. We've referenced this in the past, so I should have this factoid off the top of my head.

People realized that, um, there was a need for a faster way to make an investment in a company, um, where they didn't have to stand up all this, like, infrastructure in the company, corporate infrastructure, legal infrastructure. And so the first version of that is something that was called a convertible note.

So it was a way of investing in a company that was much quicker, and it looked a little bit more like debt. And it was called a convertible note because, um, this note, a note is another term for debt, um, would convert into equity. when the next, when the [00:55:00] next round of equity actually came in. So if I invested today on a convertible note in two years, if someone said, I want to invest and I actually want to invest in equity, my note, my debt would then convert into equity.

And we'd all be owning kind of like the same type of shares more or less. Um, but there were small things about the fact that it was technically debt that made that vehicle have some issues on the margins. For example, If you think about debt, accrues interest. That's how most debt actually becomes something that investors want to invest in.

And there's usually a, um, maturity date as in after a certain amount of days, months, years, it becomes mature as in you need to pay me back. Um, The convertible note was never meant to actually fully be paid back. It was always like, well, we're investing now [00:56:00] and the maturity date is like four years out. We assume that we will raise a round of equity by then and everything will convert.

And that's what we're expecting, but it turns out on the margins, sometimes that happened. And sometimes I totally screwed over companies and I've actually was. A party to, or privy to seeing this happen where people had investors on convertible notes, assuming they would never ask for, to be paid back.

And someone who was owning it, holding a convertible note was like, no, I need you to pay me back legally. You have to pay me back. And they didn't have the cash to pay them back. So while the company was actually doing okay and, you know, progressing towards potentially raising the next round of capital, uh, they to pay this company, this investor back.

So. It went under.

Paige Randall: So

be careful,

be careful who you allow to give

Jason_Yeh: always be, I mean, this is a great story. Great, great call out, which is like, always be careful who you're going into business with and whether or not they. They have the same expectations as you, that [00:57:00] you're on the same page. We're drawing the story out, but I will tell you where it fits into modern day investing and what most people know today.

So people solve these issues with convertible notes and actually Y Combinator, YC, uh, took steps to. Improving on this and addressing this. So they came up with an investing vehicle called the SAFE, um, which is essentially the next version of a convertible note. It removes Is it.

Paige Randall: Is it more safe? it Is it more safe? Good joke. Uh, it is definitely more safe for founders.

Okay, good. That's a good name then.

Jason_Yeh: Um, so the fact that, um, Cocoa was on a convertible note, you didn't know what that was, it didn't, it didn't mean that they've completely eliminated convertible notes. Like some people will just say, this is how we're raising money. And so it might've happened because. [00:58:00] An investor said they would invest, but they wanted to invest on a convertible note.

And those things still happen. It's not the worst thing in the world. You just have to understand what a convertible note is, who's investing with you on the convertible note and what the terms are so that you're aware of these things as they come up.

Paige Randall: Wow.

Jason_Yeh: Ending this debrief on a very technical I was just

Paige Randall: gonna say, that is definitely the debrief because I need to absorb everything that you just

Jason_Yeh: you need to take a nap. That's the debrief.

Paige Randall: Yeah, that is the debrief.

Awesome.

​

[00:59:00]

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