Founders Factory Startup Bulletin #2 (September 2021)
From investor rejection to exit, learnings from OLIO’s Tessa Clarke & more
“Created for founders, by founders”
👋 Welcome to the Founders Factory Startup Bulletin. Each month, we bring you a round-up of startup and investment stories, key learnings from founders, and insights from the Founders Factory team.
In this month’s newsletter:
Honest Health’s tale of resilience—from getting turned down by 186 investors, to being acquired by the market leader
Lessons for CEOs from OLIO co-founder Tessa Clarke
News of the latest fundraises and acquisitions from our portfolio
Our monthly reading list - from China’s current tech crisis, to winning the speedy grocery-delivery war at all costs
💡 Key learnings for founders
After Honest Health launched their first product—Freshman, a hair loss treatment for men— in 2019, they were turned down by 186 different investors. It took until November 2020 to raise their seed round, and just six months later, they were acquired by market leader Hims & Hers Health, Inc (NYSE:HIMS).
After pulling off a successful exit, co-founders Pavlo Maherovsky and Sam Gluck reveal in their words some of the key decisions they made while bootstrapping the business and operating on a very limited budget:
We launched the product into market early on
Even when you have just the bare bones of a product, there’s tremendous value in getting it out in the open.
Customer revenue will start to fund the business
Favourable conditions may reward products that are already out there. For us, COVID triggered a huge rise in demand for telemedicine - we wouldn’t have reaped those benefits had we not launched
We reevaluated how we were engaging with investors
Clearly something wasn’t working in those early conversations. During our time at Founders Factory we learned that:
You need to understand where you fit in the ecosystem before you talk to investors. VC is fractal: there are big investors and small investors; there are VC funds and there are angels. There’s no point aiming for everyone, so it’s worth working out where you fit in the fundraising landscape and who you need to talk to
Investors prefer dots to lines. Don’t be disheartened if you hear, “We need to see more traction.” Few founders receive funding after one meeting, so make sure you stay on their radar (e.g. via regular, monthly updates) and show that you’re moving in the right direction. You’ll be surprised how many investors will start following your progress and reaching out with meeting requests.
Momentum is everything. Getting your first cheque is hard: but once you get that, everything falls into place. By the end of our seed round, we were turning away investors.
When it came to marketing, we were as resourceful as possible
Given our limited funds, we realised there was a lot we’d need to do ourselves with the resources we had available. Here are some of the things we learned:
Make the most of free information
The internet has a wealth of resources that you can use to inform your marketing strategy
e.g. as simple as Facebook’s Ad Library, where you can look up almost any company in the world and see what ads they’re running
Small incremental changes can make a big difference
Tweak the language on your call-to-action, move the subscribe button, change the timing between follow-up emails. Never stop trying, and testing
Each change can lead to small improvements, which in turn can build a powerful conversion and retention engine
You don’t need to reinvent the wheel
Take inspiration from how other businesses are doing things - it’s likely the result of hours and hours of rigorous A/B testing that you can learn from and incorporate into your own strategy
Read the full story of how Honest Health went from 186 rejections to a successful exit in less than 30 months.
🧠 Founders Insights
At OLIO, what started out as a food waste solution has turned into a sustainability revolution. Tessa Clarke, OLIO co-founder, believes that sharing should be at the centre of society’s response to the climate crisis.
Excerped below and in her own words, here’s some of the lessons Tessa shared when we sat down with her last month:
Growth and engagement should come before monetisation
We knew that for OLIO to work, we had to reach a certain scale and level of engagement - and this meant prioritising that over monetisation
Having prioritised growing our community, we’ve been able to better understand the full landscape of where we’re creating value, which allows us to understand how and what to monetise
Not prioritising monetisation created additional challenges for us when it came to seeking investment, especially as female founders. Here are three tips for overcoming investor bias:
Answer ‘prevention’ questions with ‘promotion’ responses - navigate away from questions on pitfalls or failures by focusing on successes and ambitions
Over index on commerciality - place any numbers or data up front in your pitch deck
Display your seals of approval - shout about your achievements and qualifications where possible
Changing consumer behaviour is a long, thought out process
The biggest driver of behaviour change is thinking everyone else is doing something else
We send out constant signals and visual cues to our users to convey how many people are using OLIO, to show that they’re part of something that’s becoming the norm
Don’t be distracted by unintended consequences of your product
We’ve often been pointed towards tackling food poverty. Food poverty is a huge issue, but unfortunately isn’t one that can be solved by food sharing, for example
Always focus on your “North Star” as a founder - the fundamental reason behind your product
Tessa’s top recommended reads & podcasts
The Mom Test by Rob Fitzpatrick
This Changes Everything by Naomi Klein
The Great Disruption by Paul Gilding
The Twenty Minute VC
You can read the excerpt or watch the full unedited video of Tessa’s fireside chat here.
🐦 Tweet of the month
📚 What we’ve been reading
Gorillas: The New WeWork? (Sifted)
At the centre of the speedy grocery app war, Gorillas positions itself as one of the potential forerunners—but at what cost? Exposing the toxic working culture and potential financial challenges that the company may be facing
Compounding Crazy (Not Boring)
Are technological developments and financial investments increasing faster than ever? Or have things always been this crazy?
What tech does China want? (The Economist)
A dive into China’s tech crackdown, and what it could mean for different companies and sectors
An exact breakdown of how one CEO spent his first two years of company-building (First Round Review)
CarDash and Levels founder Sam Corcos offers a peek behind the scenes about what the life of a CEO is actually like
Learnings for corporates on launching new startup ventures, written by Founders Factory Head of New Ventures Sahil Sachdev
💸 News from the Founders Factory portfolio
3D machine learning technology startup Monolith AI raises £8.5 million in a Series A round led by Insight Partners
🗓 Opportunities for founders
Power to LGBTQ Founders (London, October 5th) - For LGBTQ+ founders to meet top VCs and investors, and to take part in masterclasses run by the FF Operations team
Founders Factory Sustainability Showcase (virtual, September 16th) - For investors to hear from founders of a number of startups tackling sustainability challenges
Dream Factory (London) - Join the first content creation house for founders
See you next month 👋
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The Founders Factory Startup Bulletin brings you a round-up of startup and investment stories, key learnings from founders, and insights from the Founders Factory team.