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 

Honest Health’s tale of resilience

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.

  1. Customer revenue will start to fund the business

  2. 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

Lessons for CEOs, from OLIO co-founder Tessa Clarke

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:

  • 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

  • To read…

    • The Mom Test by Rob Fitzpatrick

    • This Changes Everything by Naomi Klein 

    • The Great Disruption by Paul Gilding

  • To listen…

    • Traction

    • The Twenty Minute VC

    • Pivot

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

💸 News from the Founders Factory portfolio

  • Family lending platform Tembo Money raised £2.5 million in a funding round led by Aviva

  • Sharing platform Karshare, the latest innovation from Car & Away, raised £3 million in a pre-series A round

  • Travel startup Byway has launched slow travel holidays in North Wales, in partnership with Go North Wales DMO

  • Childrenswear resale platform Dotte has launched its Resale Collective, partnering with sustainable kidswear brands to offer a resale proposition

  • 3D machine learning technology startup Monolith AI raises £8.5 million in a Series A round led by Insight Partners

  • Dr Kyle Grant and Tom de Wilton, founders of sustainable laundry company Oxwash, are set to appear in four-part documentary ‘Founders Changing the World’, released on September 3rd

🗓 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.