Betting on Yourself: The Journey to Closing a $7.6M Seed Round (Stacy Edgar / Venteur)

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the goal is to change American health insurance, period. Five years from now, I want to see a totally different system in place. And that dream is expensive.

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There are a lot of common traits when it comes to successful founders. Some might say it's [00:01:00] that we're mold breakers, others would say it's that we're all sort of dissatisfied with the status quo. Always shooting for something bigger, always shooting for something crazier, certainly something. That I relate to. But I would go a layer deeper and say that for most successful entrepreneurs, they're really trying to make even a small dent in the universe.

And honestly, trying to make the world a better place in the process. Today's guest deeply embodies that last thought. She spent years of her career. Working for doctors without borders and the United nations living overseas and funding entrepreneurs who are making a difference in their local communities.

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It was these experiences that caused Stacy Edgar to start van tour a company that's focused on revolutionizing healthcare. Today. Ventura has raised nearly $8 million in venture funding. 120,000 of that came from a pre-seed round led by Techstars and the rest. And a seed round that closed in August of 2023. More than [00:02:00] $7.6 million led by GSR ventures. Quite the jump. When I saw this. I immediately wanted to learn more about Venter's story. Of course there are ups and downs, but after looking into Stacey's background,

it's clear as to where she got the resilience to weather the storm.

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Igor Marinelli:

basically my whole life when I think about. Money. I think of a few things. One, the fact that I've always been surrounded by entrepreneurs.

My parents are both engineers. They were, they're the type who will build a robot in the garage and, or prototype this prototype that they had a consulting business. Uh, but also both of them came from, uh, quite a bit of hardship. Uh, my mother. She's a, uh, immigrant from Taiwan, and, uh, she was actually the first person born in Taiwan of the family.

My family, um, came from China in 1949, lost everything when they moved to Taiwan, [00:03:00] and then when my mother was the first one to move to America. My dad's from Appalachia, so two worlds that really don't, don't, uh, They don't usually, they're not traditionally thought of together, but what they had in common was this attitude of resourcefulness of I'm going to make my own way even though the world is against me.

And part of that is entrepreneurship of if the door is not going to be open for me. I'm going to kick it down and do my own thing and start my own way. So yeah, that's, that's, that's been part of my whole life. And my co founder, who's actually my brother, he started two other startups before we joined together for Venteur

and, um, actually our childhood and that relationship with money is part of why we started the company. Uh, the first year of my parents business, actually, I was three years old. My dad got really sick. And, uh, health insurance all of a sudden became [00:04:00] front and center in our life in terms of it was our biggest expense as a family.

And we have a happy story, uh, in that he's still here despite all odds. And the experience also forced us to be proactive about our health insurance and think about it as part of a financial management strategy. And that's very much part of what venteur does today in our technology.

There's more to it, but The goal is basically to solve health insurance affordability in this crisis we have as in our country where it's the leading cause of bankruptcy and debt. We have never experienced that as a family luckily, but we have always been on the brink where the world could fall out.

From under you, because somebody got sick. And that's what we want no one to feel. So, that's, that's, Yeah!

background. I'd also like to, uh, just point out that it's funny that your mom is Taiwanese, your dad is from Appalachia. I'm full Taiwanese, but I grew up in Virginia. So, [00:05:00] like, kinda

You get it.

A little bit of both. Yeah. I, I know the, uh, the tag, uh, the dichotomy there, they're very, very, very different. Um, and so it does sound like they're both of your parents instilled that sort of entrepreneurial drive. so this makes sense that you would eventually make your way there. and you said that your brother had been an entrepreneur before you, but on your way to getting to this opportunity to start the company, tell me a little bit about that path.

We don't have to go super deep into that because I'd like to quickly transition to the whole idea of raising capital for the company. Tell me about how you decided to finally take the leap and maybe join your brother and the, and your parents in this wild world of entrepreneurship.

Well, the thing I wanted to do when I graduated college was see the world and hopefully make it a better place. I know that sounds cheesy. I really wanted world peace. And that took me to places like Doctors Without Borders. I worked for the United Nations for a bit. I spent over a decade in [00:06:00] Washington, D.

C. and overseas in places like Afghanistan and Myanmar. And actually was helping, uh, communities on healthcare, also helping businesses to grow in those environments and would meet entrepreneurs and finally met enough entrepreneurs overseas who we funded through these, programs that I was working on that I was, I was jealous.

I was like, I, I want to do it. I want to be you. So, uh, the whole. Arc of my career, which is all about helping people live healthier and wealthier. That's still there, just a different modality. And uh, Tim, my brother, he's more classic in a kind of startup. When you think of startup background. He spent a decade at Microsoft and then in interspersed within that decade at Microsoft as a engineer, uh, he founded two startups.

And so, um, he brings the, Engineering side, he's, he's like walking AI. It's very upsetting. He's so good. And then on my side, I bring the experience on regulated, uh, [00:07:00] highly regulated markets. And that's where we came together. And it was actually what caused the aha moment. I left, My job, I was a business development director, uh, and oversaw an 18 country portfolio covering all the way from Afghanistan to the Philippines.

Um, so South and Southeast Asia and branched out on my own in 2019 and started a consulting business. And then that business actually did really, really well. Started hiring employees and the experience of buying health insurance for the first time as a business owner, I got so mad that, uh, I started a whole new company and went into a new industry and we're like, this is what we have to solve.

And we realized this is also part of our family legacy too,

that's, that's great. So the background makes a ton of sense and. A lot of times when I talk to founders about the story, we kind of talk a little bit about this idea of, when did you know that you'd have to raise money for this company?

It, if I had to guess, like when you started thinking [00:08:00] about tackling the world of health insurance, you knew it was going to be one of those. Bigger businesses, bigger ideas that isn't something you necessarily like bootstrap from the beginning. Um, but maybe I'm wrong. When we were doing our research, uh, on Venture, we saw that you did go through TechStars, uh, you know, a great program there specialized around healthcare, I think.

And so maybe you can tell me We don't have to go into the huge details about your first raise, but this idea, like you'd have to raise capital for this company. Was that something that was part of the inception of the company? Or did you hit a point of friction that required you to say, you know what?

We're not going to be able to do this without capital.

Yeah, you know, actually before we even started, we knew, and the reason why is the goal is to change American health insurance, period. Five years from now, I want to see a totally different system in place. And that dream is expensive.

So, and, uh, we did. Start out with, uh, first friends and [00:09:00] family, um, we got into Techstars that brought in institute, a few more institutional investors. We actually did, uh, Bootstrap as well. So we put in, um, probably 600, 000 of our own money. And, um, primarily Tim's that, that Microsoft stock, man. So, but also, um, partially mine as well.

And, uh, that's what led us to certain milestones that led us to, uh, our most recent raise.

Perfect. This is a great segue. This is actually what I wanted to focus our conversation around. Um. The thing that I'll point out first is a lot of people will go through the starting of a company. Some will have experience the way your brother does as your co founder.

And, um, you know, this understanding that he probably knew enough to maybe go out there and raise capital or maybe do it without an accelerator program. But there is, there is so much value in having, um, an organization that's [00:10:00] respected like TechStars. Sort of shepherding you along the way of those first, uh, few months of the program, of the program and your company, um, or at least Post joining tech stars, um, and it, and it can be very helpful in raising that first institutional round.

But as you go into the future and start making more progress, you then ran into this next aha moment or, or realization that, okay, the next time we need capital is coming on quite soon. fundraise. And so that's where I want to put us to in terms of like remembering what was going on because. It's very, it can be very hard to figure out when a company actually raised capital based on when they announced there's always this lag time.

But I have to imagine that you weren't raising in the easiest market to raise capital in. Um, you can, you can correct me on timelines, but I wonder if you could tell me a little bit about what was happening at Venture. Um, Maybe post [00:11:00] TechStars in that raise, what you guys were building towards and then what was the thing that made you know, Ooh, I think we have to go fundraise now.

Was it hitting milestones? Was it, was it a runway running out? Tell us a little bit about that.

Sure. So I think it's important to know kind of our trajectory from the product side. We came into Techstars with AI decision support tools to help an individual pick the best health insurance for themselves and to analyze it from a financial management perspective.

We learned about a new model of health insurance called Individual Coverage Health Reimbursement Arrangements, ICHRAs, which basically means an employer can provide cash and it's considered pre tax instead of needing to do a group plan. And UnitedHealthcare was the one who was part of the TechStars program we were in, who said, Hey, have you thought about this?

Have you thought about applying the technology you have to this market? And, uh, around that time, it was two [00:12:00] years ago, so about November, December, uh, 2021. Uh, that's, that also coincided with the main open enrollment season that people face. And so we made this huge product pivot, and then we had to, we had a year to build.

And to test before we would see that cycle again. So we actually had this whole year where when we went out to market right after Techstars, a lot of folks were like, okay, well you got exciting traction. What we actually did during Techstars is we sold before we built. So we knew there was demand and we're like, there's demand.

It's going to happen. It's going to happen. But you know, it's hard sometimes to tell, you know, to prove that to an investor. That's a, that's a hard case to make. Then 2022 comes around. Open enrollment, the big, the big moment. Were we right or were we not? And we went, we went from basically a hundred people on our platform to 5,000 people in our platform and less than maybe 5K in MRR to over 150K [00:13:00] MRR in 45 days and we were a company transformed and then we have kept growing ever since, and we went to market.

We were like, okay, well, wow, holy smokes, that went. Better than we thought. And then we started getting inbound and by the time we knew we needed to raise and we knew we had to do it quickly because open enrollment this year, which were, you know, fall 2023, uh, we're like, okay, that's just going to be around the corner, what's this company going to look like?

And then that's what this current raise was founded around of how ambitious can we be, how ambitious should we be, and, showing that we were a company that. Return nearly 2M in recurring revenue with 1M And so like, what would, what would happen, we raised, in this most recent round. we announced 7.6M we're like, okay, what are we going to do with that kind of money? And that's always kind of fun. So it's like, it's like where you kind of get and get [00:14:00] a bit dream bigger.

Well, well, first of all, congratulations on, I mean, we can congratulate you on the raise, but. Certainly before that raise had to happen, all that momentum and all that traction and all that success in the business is really what you should be congratulated for.

It's really cool to hear. Um, to, to double click on what actually happened, um, can you at least broad strokes tell us how much runway you had in the company as you were entering into open enrollment for 2022?

Okay, so this part, this is where Tim and I, we decided We had a really hard time in 2022 admittedly raising and because it was such a long time before basically January through September, like a lot of things could happen through then and it was hard to convince investors that, no, no.

We're going to do this. Uh, so we did have angels come in. We did have a few institutional investors write us a few, um, small checks, but that's [00:15:00] actually the reason we put in so much of our own money is we've decided this is going to exist in the world. And so at that time, I don't know that I would have admitted this then, but we were living month to month.

We were like, okay. What can we sell this, like, 401k? What can I sell in there? What can we sell in savings? And, um, and we were actually really embarrassed about having to, having to do that. It was actually our investor now, who's now part of our board. He's like, you know, that's, that's really impressive that you all.

did that. And it wasn't until he told us that we were like, Oh, okay. So it was actually this like source of shame that we're like, we can't convince others that this is, this is real yet, but we know it's real. And this is how much we're willing to bet our own. capital on it. And like, for the record, for anybody who's listening, what we did was reckless.

I don't recommend it at all, but it's like, we had made, we made a decision that this is going to succeed. And this is, [00:16:00] this is what we're willing to stake

So far, we've gotten a chance to hear about the excitement and the struggle involved in getting them in tour on investors' radars back in 2022 and hear about some of the hard decisions the team had to make in order to keep the company going. I love hearing stories like this, because I think it gives a more accurate representation of what most founders have to go through in order to get their first major round of fundraising done. When we come back, we get to hear more about how Stacy ran her fundraise. That ultimately led to a $7.6 million seed round led by GSR ventures.

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[00:17:00] That's amazing. Yeah. I've, I've, I've heard. I've seen a lot of different stories get told either first hand or second hand, um, from founders who, who aren't sure if they should share this element of their [00:18:00] story or what they did.

And a lot of times they're embarrassed. Your version is a great example of it. You're embarrassed by it, but I agree. Like if not that. You would recommend everyone do it, but when you see it as an investor, you're like, they really believe in this. Like all the reading of signals and trying to dig into people's backgrounds and hear what people have to say about Stacey and Tim, that can all be summed up in the fact that you were like, we're going to bet everything on this because we believe in it.

I had another founder who, um, At some point, uh, he found out that he dropped out of college to start his first company. He was embarrassed that he didn't get a degree. And then he, like, you know, bootstrapped one of his companies to a huge exit, like a six, uh, nine figure exit. And he was like, well, I, he's, you know, European and didn't, Didn't want to be braggadocious in a way like maybe some American investors want you to be.

And so he wouldn't ever mention that because he, he was embarrassed. And there were all these fantastic signals that I think founders are really embarrassed by, [00:19:00] including yours. So, um, thanks for sharing that. One that's, um, very impressive and also harrowing, but you got here, you're here. Yeah. Um, the, the thing that I would say that I see is.

Likely what was happening is you were telling investors, we're going to do all this stuff. And when open enrollment happens, when open enrollment happens, like, so fund us. And they're like, maybe we'll just wait until open enrollment to see if it actually happens. Uh, and so it did. Right. Um, did you, yeah. So were you prepared?

Was it hard to go fundraise immediately after Open Enrollment started being successful, or was it like, kind of like, oh, it's happening and you're like, wow, now we really have to go fundraise, um, prepare all the materials, prepare everything. Was it serial or parallel?

Uh, it was serial and not by choice.

Part of it was when you grow that fast. I mean, like, we were working insane [00:20:00] hours just to keep up with demand and keep up with customers, and, and we didn't have time to do literally anything else, so, uh, it took us, Three months to 1 get through that wave, and then finally find the time, like, on the weekends and whatnot to, put together materials.

we were Like, we need to raise, we need to raise desperately. We need more people to, like, fuel this. But we were also fighting, You know, when you have a customer right there in front of you, then, you know, to me, I will always put the customer first, although that said, I also recognize, you know, CEO's the CEOs main job is to keep the money in the bank.

but those were like very competing priorities at that time. And it just took longer just because of how fast we were growing, to be honest, and carving out the time of day. So having that difficult challenge of balancing, do I work in the company? Do I work in the fundraise? It's both important things.

Did that make [00:21:00] starting to fundraise feel, uh, were you scared of the fundraise? Like, did it,

Oh yeah. Oh yeah.

It didn't, so in the beginning it didn't feel like it was going to be a slam dunk.

No, not at all. No. Okay. Um, also cause we were, you know, like, to be honest, like we were, I was shell shocked from 2022.

Of honestly, just not like pulling it off and in a better environment. And so then, you know, we knew 2023, the funding markets had changed. That said, we had accomplished a small miracle in, um, growth and we're like, no, we can really, we're capital efficient. We can do this. And, but I was, yeah.

And I also, I don't know, you start to get the imposter syndromes sinks in. It's like, am I doing something wrong? Is it me? And, uh, Yeah, a lot of, it can be hard to bounce back when you've gone an extended period of time of like, things not quite clicking in that part. But we're really fortunate that they did, and It went way better than we, [00:22:00] we've ever hoped for, so.

Yeah, the scar tissue from failed fundraisers, uh, you know, that lasts a long time and, and those, those rejections and no's cut deep, especially as it pushed you to the edge and having to take on so much personal risk. Um, do you remember how many investors you had to talk to between the sort of failed first attempt before Open Enrollment 2022 and then afterwards?

So after, let's focus on the after, because I think the numbers are similar, but the process was different. So when we went out to market, we went out to market in basically April and we did have in quarter one, we did have catch up calls with folks who we had talked to in 2022. And we're like, this is what we're thinking about.

And had those initial dialogues, um, and then we talked to close to a hundred firms in April. And, we finally ran the process, you know, you read about it, but like pulling it off is [00:23:00] different. you know, putting it all in a two week period, running a good, having your data room ready to go on day one, having the follow up materials ready to go on day one, having your customer references there.

so we finally, we, we talked to about a hundred. And, um, actually the raise was done within, by April, by the end of April, we were, we, we were over, oversubscribed. And so this was the one where I was like, okay, finally, everything I've read about of what you're supposed to do, we put into practice and, ran a clean, mostly clean.

And some of it could have been, you've, you finally had. tried to raise, so you had built some materials up before, and you could kind of build on top of those, so it wasn't from, starting from complete scratch, and like you said, you were doing catch up calls, which means you didn't have to build that target list of like, 200 from scratch as well, you had those first names, and it's kind of like, people don't realize how [00:24:00] much work goes into it, and you were chipping away at it over the course of a full year, so that when you're ready to go, you know, You're adding on to it.

So, so glad you were able to finally feel what that feels like, right? Cause it, now when you go in the future to go raise, it's like, you have so many other patterns to match against and the sort of playbook to run. Whereas before you read about it and it's like, yeah, is that what it's going to feel like?

And is that really what I should be doing? And now it really makes sense. Right. Um. So, even though you had a raise that you launched really quickly and did well with, um, over the course of a month, I have to imagine not every single person you talked to said yes. You didn't get all yeses, right? That's correct.

Do you remember any of the harder points in this most recent raise? Any like, uh, particularly painful rejections or bad behavior that, that sort of still keeps you up at night?

Uh. Rejections? [00:25:00] No. There were, there were plenty, don't get me wrong. I think probably, uh, if, if we've come to the point of, alright, if it's meant to be, it's meant to be.

I know that sounds, like, but you, you don't really want somebody who's wishy washy on your cap table. You want a hell yes. And if you're not a hell yes, like, We shouldn't be working together. So that's where, I don't feel any regret. I think that, it means that I, you know, like, we're not on the same page, and If we're not on the same page, then let's give it more time or, or it just wasn't meant to be.

So on the bad behavior, I hesitate to, there was some, there was, it was actually post close, uh, where not from any of our current investors, but, uh, I would say there are, you know, like you do get interest from VCs who are, uh, diligencing somebody else and, The, I don't know, behaviors around that, I'll say, are, can be [00:26:00] interesting.

We'll leave it, we'll leave it at that. I think that's probably the most prudent thing to do. But I totally hear you and I unfortunately know that story too well, um, have heard it too many times. So, uh, we're glad you were able to navigate that. Um, and I, you know, I always put founders in kind of a weird headspace when I asked them, you know, what was the worst thing that happened to you during the fundraise?

But I don't like leaving you there, um, because I always like asking. So, GSR Ventures led the round, is that right? Do you remember where you were when you got the note that they wanted to lead you around, either a call or an email? Do you remember what that was like?

I think it was both. It was a call and an email.

And, uh, it was in my apartment. And, yeah. and then

we actually, um, we did have multiple, we, that was the first, and we did have a few others express interest following that. I don't know, we, but it was this huge sigh of relief of like, [00:27:00] okay, all right. It's kind of like that feeling of like, okay, I'm going to college. I don't, you know, like your first college admission.

You're like, it's, it's going to happen, right? Like, cause up till then you could be like, it really might not happen. You, you don't really know, right? Um,

yeah, absolutely.

What did you and Tim do, after you got that first term sheet?

Oh, we kept fundraising. So we were like, yeah, like that's, I think that's why I'm like, well, I don't know, where was I?

Cause I think we were still. In the very much in the middle of the process and I think something we have come to appreciate about fundraising. It's not done till it's done till it's like, it's like done, right? So, we had made that mistake previously and we were, um, never again.

So, I think I can't remember it that I remember where I was, but it doesn't, it's not this like huge moment. It's over yet. Cause it was like, let's just get back to work. So, yeah.

What about, what did you, did you guys do anything when the money was finally wired and you were like, okay, [00:28:00] now it's done? Or was it just like a second of, this is great.

And then that feeling that a lot of founders get, which is like, oh shoot, now we have to do this.

I think it was the latter. It was like, now that I'm saying this out loud. Man, I should go celebrate. I was too belated to celebrate.

I was going to say, I don't, I don't know if it's the Taiwanese side of you, but like that, that is that, that feeling of, for me, when I had that money hit for a second, it was like amazing.

And then I had this feeling of, it wasn't like guilt. It was more like responsibility that it was like, God, I have to do what. My responsibility like calls me to do and because I know what that feeling feels like I just want to tell you that yes You and Tim, you know, it's been five six months seven months since you did it It's worth a you know, a dinner out and maybe just like a reflection on what you guys were able to accomplish

This is a very sad story He bought a new pair of shoes.

I do remember that and That's [00:29:00] important because Christmas last year. I remember my mother asked me she's like Are you guys okay? And we were like, yeah, we're fine. What are you talking about? And he had asked her, he was home for Christmas, and he had asked her to help him buy superglue. And then when she asked, why do you need superglue?

And he's like, oh, well, it's cheaper than a new pair of shoes. And his shoes were like, like talking. So that's, uh, we really freaked our family out. So we, we're, uh. That, so I think it's like some of the things where we're like, okay, I can, um, I can like afford a new pair of shoes now. So like, those are kind of things that, uh, it was, it's kind of like a return back to normal.

So love that. Awesome. Well, the story is incredible and I'm so glad you were comfortable enough to share, like what it meant to not get it done in early 2022. And then what you guys had to go through. Um, but also just. Talking through and [00:30:00] articulating that feeling of like, we tried to raise before, we did it without really running that mythical process so that in 2023 when we did it, we were like, we want to do it that way.

And just the feeling and your own approach just being so different is great for people to hear. I always tell people, it's like, I can advise people to do that. run a process or whatever. And for whatever reason, if I don't say it the right way or they don't believe me or they don't see themselves in me, then when I say, do this one thing, it can be hard for them to follow, but it's really helpful to hear a lot of different people say it in a lot of different ways and their own experiences.

So I think sharing is going to make a difference in someone's world. And when I think about fundraising, so when you think about, uh, Open enrollment for 2023 and Thanksgiving. Do we have exciting, um, goals in mind? What do we think is happening here?

We do. So we are, uh, that's all we've been doing since November 1st.

Enrolling people in [00:31:00] health insurance, talking to people about their health care. Uh, and also saving businesses a huge amount of money in the process and saving families a huge amount of money. we are mid process. The thing that we're trying to do, push, we're trying to push ourselves to see, like, okay, how far can we go?

How far can we go? Scaling's really hard. and it's just a matter of, like, what's the multiple on growth? That works. It's, it should, we should see a similar year. Like we did last. Well, I know last year going from zero to one is different than, but, um, we're looking at anywhere from, three to five X in top line growth.

So fantastic.

Before the episode ended, I asked Stacy what it's been like working on Ventura with her brother, Tim.

Well, I mean, we have this long history of working together, maybe not professionally, but You mean you've known him his whole life? Literally. Yeah, literally. Yes. Uh, actually, during our Techstars interview, uh, we do tell the story about us growing [00:32:00] up, and then, uh, there was a follow up question of, uh, how do you know each other?

And I was like, Stark, I was like, from birth? Like, what are you, what am I supposed to say here? That's funny. We've, like, we've built things together. We were, we actually did, um, I used to dance and Tim followed me for a few.

years there's photos of this we have tap dance duets So, uh, yeah, we've, we've got a lot of experience working together on different projects. Love that.

That was my conversation with Stacy Edgar co-founder and CEO of mentor, a company, helping businesses provide their employees with personalized health insurance at a fraction of the cost.

After the break, I'll be sitting down with my producer page to pick her brain about this episode.

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Jason Yeh (2): [00:33:00] Paige, how are you doing?

Paige Randall: I'm doing well. How about you, Jason? I

Jason Yeh (2): in this interview was, was describing a, a pattern or a cadence within fundraising that feels a little bit different. And the whole time I was thinking to myself, I wonder what Paige is going to think. So let's jump into it.

Paige Randall: have some thoughts, for sure. Um, I mean, first off, I thought it was, this is just a random thought, but I [00:34:00] thought it was cool how she also had a Taiwanese background. Like, I know

Jason Yeh (2): Yeah, I was not ready.

Paige Randall: Yeah.

Jason Yeh (2): not ready for that with the last name Edgar, but, um, the mutual affiliation with Taiwanese people is always strong.

Paige Randall: I also thought this was a interesting storyline like you were mentioning with fun in terms of funding because You know, so she had her tech stars in 2021. They raised like a couple, uh, a hundred thousand and then fast forward to 2023 and they're raising a 7.

7 million seed round, which is that like, that's a big jump, right? That's a, that's a big jumper. Is that something you see? I don't

Jason Yeh (2): No, it's a, it's a massive jump. Um, and considering by the time she did raise the seed round, we were already into challenging. Market conditions for fundraising. So, um, those two things together make it even more of a massive jump. Um, you know, we can, you're curious on my thoughts on how that happens or, or do you have thoughts on your own?

Paige Randall: I [00:35:00] actually am a little bit curious on, on how that happens. Like, because. I don't know, it just seems like, um, in terms of valuation or like, that means a huge valuation jump as well, right?

Jason Yeh (2): It should mean a huge valuation jump as well. Yeah. I mean, I think the thing to consider is, is your instincts are pretty correct. It's like, you don't usually see that kind of a big of a jump. It's usually staged out, right? You raise. A tiny little pre seed round like she did, 000. And the idea is that you use that money to get to another milestone.

And once you get to that milestone, then you raise the next round. Maybe that's between, call it 1 and 3 million. And then after that, a round that would look more like the round that she raised, 7 to 8 million round.

Paige Randall: okay.

Jason Yeh (2): but if you'll remember, That wasn't necessarily her choice, right? Like I think she would have rather raised around in between and kind [00:36:00] of more comfortably built the company.

Um, what ended up happening was that she wasn't able to. And a lot of times when you, when you hear a story like this, or when I see something come up, I'm quick to encourage founders that, you know, This could be a blessing in disguise. And for her, what ended up happening is because she has so much, actually, my read on it is that because her business is so tied to the cycles of signing up for health insurance, open enrollment, she wasn't able to get that fundraising before one of her open enrollment runs. And then she just tightened her belt, sucked it up. They built the company as much as they could. And they were able to get to such a big milestone that the next set of investors were excited. And they were like, you know, this shows us that you're, you're much further along.

Paige Randall: Yeah, speaking of that hard time raising in 2022, like I think she raised an angel [00:37:00] around or got some help from outside investors, um, but I thought it was really cool in the episode she was talking about how she wanted to, like her and her brother, obviously they co founded this company. And they had that hard period of time where they couldn't raise, even though they were getting some like crazy traction and things just working out.

So they started pouring a lot of their own capital into it, and she was talking about how she was trying to show investors that they were willing to bet on themselves. Which I thought was really badass, and I'm wondering if like that's one of those things that's a green signal to an investor that's like, hey, they're willing, I mean I guess maybe not always, but they're willing to dump.

All their capital into this. She was saying we were month to month, like right on the, there was not much wiggle room, you know, I just thought that was pretty badass.

Jason Yeh (2): No, I meant, um, It is a great signal. And you know, it's not the only signal that a founder needs in order to attract capital. But I do remember my time at Greycroft [00:38:00] early on in my career. Um, you know, we would discuss every deal and I remember one of the investors. Mentioning, um, characteristics of a certain founder who very successful founder in our portfolio, who, um, happened to have a nice car and happened to have a nice house.

And there was open discussion internally. About like what that said about the founder and this one investor said, um, you know, I kind of love when I see a founder who is stretched a little bit thin, um, is really attached to the business, invest his own money. So in this particular case, all of these things were going together.

He, um, you know, he had spent money, his own money on like, And he also invested his own money into the company and he, he was like, it just shows a certain level of [00:39:00] confidence in himself, a certain level of commitment and attachment to the business. And he's like, I love all those things being put together.

And while this wasn't the case for Stacey, she wasn't like spending money on material things. Um, seeing a founder like her betting their own money on the company and showing how much confidence they have in the business. Really says a lot, right? Because at the stage of, of investing that they were going out to attract, there, there weren't a ton of very specific traction points that they could point to.

So, um, showing an insider's view and an insider's level of confidence, um, I think probably did do a lot to convince investors that this was a good bet.

Paige Randall: Yeah, and she, I mean, she did have a pretty crazy traction point after open enrollment. Like, she said they went from 5k to 150k in MMR, MRR. And I wasn't sure, I don't know if the timelines were a little bit messy, but I was [00:40:00] wondering if she had, um, like open enrollment had happened and then she still had a hard time raising.

I wasn't clear on that, I was trying to figure that out. Or if it was like before Open Enrollment and they hadn't had that big traction burst yet. So that was something I was pondering and I wasn't sure. Maybe I'm wrong. I'm messing up the timelines. But I thought that, she was saying she was still having a hard time raising while getting that crazy traction during Open Enrollment.

And I was like, what is going on?

Jason Yeh (2): Yeah, I mean, certainly that, that was a, it was a pop. I think there can, there can always be There can always be like a bar that keeps getting raised by investors. And for whatever reason, if they're not, if they're not convinced, they might say like, Oh, it would be great to see more, but then once they see that you can always.

I think it's important to sort of rationalize or make excuses for why that number, why it was an exception or why it was just a pop that won't continue. And you know,

Paige Randall: hmm,

Jason Yeh (2): I [00:41:00] think like there are a lot of different reasons why Stacey might've run into problems. not matching the sort of pattern matching that a lot of, a lot of investors look for.

Uh, but whatever the case may be, I do think not raising. when she initially wanted to, probably ends up being a blessing in disguise. She gets to raise more at a much higher valuation and keep more of the company. Um, but yeah, it did mean that there was about probably over a year of fairly stressful times tapping into her own savings accounts, tightening their belt in order to get the company ready for the next open enrollment period.

Paige Randall: Oh yeah, and she was talking about the balance of like trying to focus on the customer and grow the business and fundraise, like, I can't even imagine what that dynamic in that experience is like. And then she started talking about her seed round, the 7. 7 million seed round, and how she was able to, she was like, you talk about, you know, the perfect fundraising process and then you actually do it.

And [00:42:00] it's crazy, like, it's a lot of work, you know, but that experience of, she pulled it off in a month. she literally said she started in April, and by the end of April, she had wrapped up that round, which I thought was absolutely insane, especially because it was in 2023. Like, last April, that was when we were starting to see, it just wasn't, fundraising wasn't as easy.

Um,

Jason Yeh (2): Yeah. I mean, there is a huge collapse of the, the banking system for, for a hot second. Um, no, but I love hearing that. Right. And

Paige Randall: hmm,

Jason Yeh (2): I want to, even though you and I love talking about the importance of the process and process being important. And I love that Stacey talked about how much work it was to get that ready.

And then the result was this very quick process. Um, but I also want to point out that the fact that she had, Gone out and talked to investors. A year prior and actually not gotten a full round together. That can't be overlooked [00:43:00] as part of the prep process. Right. Um, I wouldn't wish it upon any other founder in terms of like part of your prep is failing at it for first round at failing at around and then successfully doing it later, but part of preparation is making sure that.

Investors are aware of who you are so that they can keep an eye on you so they can see your progress. And, um, you know, it's just a good way of calling out to all the founders out there as they prepare for their own future fundraisers. Just making sure that there's awareness, making sure that they get on people's radars will help grease the wheels for a future fundraiser.

Paige Randall: Yeah, she was able to loop back around, like I think you guys touched on this, that she was able to loop back around to all those investors that had passed in 2022. A similar thing happened with Joanna Strober, a previous guest, where she was able to loop back around and that's how she actually ended up closing her round.

Someone who was, who was kind of interested in her last round but didn't want to do it, they ended up leading. So it's crazy how, how that works. Like you said, like sometimes you have to [00:44:00] go through a rough round or something doesn't You know, you can't actually get the round together and then time goes by and, and things change if you're able to showcase growth or traction on some level.

But she did say that for this, uh, seed round, she was oversubscribed. I have no idea what that means, so if you could just help me understand

Jason Yeh (2): you asked. Uh, and, and by the way, that it's just an, an, Add a cherry on top to what she was experiencing. And before we get to the oversubscribed mark, the thing that came to my mind was, before you kick off any fundraise. Um, whether or not you feel like overly confident about your ability to do this or slightly nervous or extremely scared, um, I think everyone goes into a fundraise with anxiety levels at a, at a relatively high mark, right?

you're about to enter something that definitively will be a success for, or a failure. Like you are setting yourself up [00:45:00] for a very scary black or white binary outcome. And it's like, Failing doesn't feel great. And so you get into it and you. You, you hope and wish that you've done everything you can to set up a great fundraise.

And I can, I can tell what it probably felt like, you know, she essentially hit go on her fundraise and then the momentum started and she's like, it's working, you know, it's working. And it finally worked. And the cherry on top is not just that she got the term sheet that she wanted, but that she was quote unquote oversubscribed.

And I'm glad you asked the question. It's funny that that term hasn't come up yet. Um, but oversubscribed essentially means you have more demand for your fundraising round than you can take on or that you've decided to take on. So essentially you're saying, I want to raise 6 million and. There is enough demand, there are enough investors who want to write checks [00:46:00] where 9 million dollars could be invested in a round.

That is what, uh, we refer to as being over subscribed.

Paige Randall: Interesting.

Jason Yeh (2): Yeah, and so for her,

Paige Randall: that's a, that's a good thing. Yeah, that's a

Jason Yeh (2): people want this and I'm not willing to take their money. It's a very great outcome.

Paige Randall: Why wouldn't you want to take their money? Now I have like a bunch of questions. Like,

Jason Yeh (2): Great follow up question. Um,

Paige Randall: wait, let me guess my answer. Does it dilute something?

Jason Yeh (2): Yay!

Paige Randall: No way.

Jason Yeh (2): Good job, Paige. As you take on more money, your valuation, um, your post money valuation, especially, especially if the round is pegged at a post money, that means the more money you put into it, The more dilution you take on and, um, you're, you're ending your, your post money valuation doesn't change.

This is a bit of a technicality. Um, but even if you were [00:47:00] to, um, peg it at a pre money valuation and maybe we will do a added segment on this in the back channel to talk about pre money and post money, but whether or not it's pegged at a post money or pegged at a pre money, taking on more money means more dilution.

And you might think to yourself, well, more money right now won't get me to the next milestone any quicker or whatever. So why take the money now? You can always take the smaller amount that you originally intended on, build your company, and then later on raise more money at a much higher valuation, which is how you engineer a fundraising cadence that minimizes dilution.

Paige Randall: Damn. Yeah, we should do it. We should do a TBC episode on that so I can listen to it.

Jason Yeh (2): Yeah, no, no, that's good. But you did ask the right questions and your instincts were correct. It is, one of them is about dilution. Um, and then the, the other one, which is kind of a [00:48:00] art and a soft skill is sometimes over capitalizing a company and pushing it, even if you weren't able to push the valuation higher, doesn't necessarily get you to a better place.

In fact, It might get you to an uncomfortable spot where your valuation is too high and it makes it hard to quote unquote grow into that valuation. And then sometimes having more money means just spending money more inefficiently. And it can, it can drive people to thinking that They need to spend money faster.

Um, and people just end up making bad, bad decisions. It doesn't feel like that would happen. Like as a founder, you're like, no, I would never do that. But time and time again, you see companies with more capital than they need, spend money faster than they need to, and then get into a difficult situation later.

Paige Randall: That's interesting. That's an interesting dynamic. I think that's, I mean, I feel pretty good about this. [00:49:00] I, it's kind of cool to see like, you talking, it's not like a second language anymore. So, I mean, there's definitely still some things.

Jason Yeh (2): no, the other thing is that you keep thinking that. It'll be the exact same story, and it's essentially the same process, but every time we talk, there's a slight little variation, and it creates new opportunities for you to ask questions and get a little bit more nuanced with your understanding, and like I always said, uh, no dumb questions, and if you have the question page, I know a bunch of other founders out there are baking it till they make it and not asking the questions, so they are stoked that you asked the questions.

Paige Randall: Mm hmm. I will do it for them. Find me on social and I will ask any question you want me to, so you don't have to.

Jason Yeh (2): Awesome.

Paige Randall: Alright, until next time. Bye.

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