Even the most successful founders are far from perfect. They make mistakes just like the rest of us. When it comes to fundraising, there’s plenty we can all learn from their mishaps—so we decided to chat with Arielle Loren, the founder of100K Incubator, the first business funding mobile app for women. She’s helping 100,000 early stage women entrepreneurs get funding for their businesses and scale to 100K+ in yearly sales. She is also a graduate of Harvard University, where she holds a master’s degree in Management and graduate certificate in Strategic Management. Loren also holds a graduate certificate in International Business Management from Georgetown University and a bachelor’s degree in Social and Cultural Analysis and a certificate in Producing from New York University. All of that’s to say, she knows a thing or two about the fundraising process—including what and what not to do. Read on to find out what she’s learned from founders and through her own experiences raising money.
Girlboss: What were some of your early learnings when you first started fundraising?
Arielle Loren: There’s more than just 2-3 ways to fund your business. However, the media tends to focus on venture capital, angel investors, and business loans from big banks. There are over a dozen more sources from government-backed Small Business Association loans to business grants to personal loans (for those businesses that haven’t established enough revenue or proof of concept) to business lines of credit to business credit cards, and so much more. I tell women that it’s time that we get educated about all of our options and leverage other people’s capital the way that men have been doing for centuries.
Girlboss: What’s a mistake that you made while fundraising early on? What did you learn and how have you avoided similar mishaps?
AL: I realized that raising capital is a marketing campaign. It doesn’t matter if you’re speaking to a loan underwriter, a board member voting on your business grant, or an investor who is considering purchasing equity in your company—your numbers matter and so does perception. The more you can show proof of concept, that you’ve been able to test your ideas on the market and generate a small return, even if it’s just turning $5,000 worth of capital into $10,000, those are the metrics that capital decision-makers want to see. And not only do they want to see the numbers, but they want to see that you understand your numbers and can explain how these numbers set your company apart from the crowd. At all times you’re representing and selling your company, whether it’s to a consumer or to a funding institution.
Girlboss: What do you think every small business or entrepreneur should have before considering seeking funding?
AL: Every business owner should know their numbers before going after large amounts capital. Start small. What can you do with $5,000 worth of capital? Can you take 10% of that ($500) invest it in an ad campaign and turn it into $1,000? Can you test and see how much it costs to get a customer? Can you see how much it costs to get a customer lead? Can you begin to calculate the lifetime value of your customer? How quick they go from making their first purchase to the second purchase? Can you put a sales funnel in place to systematize you customer acquisition process? Too many entrepreneurs get caught up in creating the perfect business plan, instead of testing their ideas in real life and using that data as leverage to get the capital, information, and process they really need to scale. Not every business can start small, but the vast majority can. And that’s what we always recommend in the 100K Incubator app.
“Know your numbers. Know how much it costs you to get a customer. Know how much it costs you to get a lead. Know your sales. Know your expenses. Know your profit.”
Girlboss: How do you know that VC funding is the right choice for you and your business? What are the pros and cons, as well as alternatives?
AL: If you’re looking to build an eight-figure business and make an exit, then it might be worth going after VC funding. But we strongly recommend exhausting all other funding avenues first, because VC and investor money often is the most expensive money. In the short term it feels great because in most deals, there’s no requirement to repay the investment immediately. But if you talk to most founders who’ve taken on VC funding, they talk about the pressure that they put them under to scale at a rapid pace, so that they can get 5-10 times the return on their money (500-1,000 percent interest). When most businesses could easily have taken on a government-backed business loan or even a private business loan that would’ve cost them less than a 1.3X factor rate (less than 30 percent interest). So again, before we start considering VC funding, let’s thoroughly research and understand the funding options available to us.
Girlboss: What are some common mistakes you see entrepreneurs making when looking to secure funding? How can those mistakes be avoided?
AL: The biggest mistake we see most entrepreneurs make when going after funding is not taking the time to get educated on all of their funding options. When women first enter the 100K Incubator app, we put them through a 50-video bootcamp on how to prepare for funding, what their funding options are, and how to use funding to scale to their first $100,000 in sales. But even women who are already earning over $100,000 in sales find extreme value in the curriculum, because it breaks down funding and scaling in a way that most have never heard. The videos are super short, but the curriculum is extremely detailed to make sure that women understand that this is a full process. Getting the funding is actually the easy part, but learning what drives and scales your business, that’s where your true talent, grit, and creativity is tested as an entrepreneur, and it’s not an overnight process.
Girlboss: When meeting with a potential investor, what questions do you need to make sure to ask to ensure that you’re a good fit?
AL: It’s more so about having an honest conversation about what they expect in terms of a return on their investment, how fast they want it, and how much control they expect to have over the business. Then it’s making sure that those terms are put in air tight contracts, so that there are minimal misunderstandings down the line. But again, most small businesses don’t need investors, they need access to capital, a deep understanding of their customer acquisition and retention process, and how to scale into six and seven figures with healthy profit. The media has made getting an investor and VC funding sexy without telling the full story of how much it really costs most founders, so we have to a better job at educating and having louder conversations about more than just those 2-3 types of funding.
Girlboss: What advice do you have for those pitching their business idea for the first time?
AL: Know your numbers. Know how much it costs you to get a customer. Know how much it costs you to get a lead. Know your sales. Know your expenses. Know your profit. Your business idea and personality can get you in the room, but only your numbers will keep you there and allow you to take the elevator to the next level of access to capital.
“Being an entrepreneur is always a turbulent ride, there’s nothing smooth or cute about it. But it’s an incredible experience that will teach you more about people, behavior, needs, and money than most jobs ever would.”
Girlboss: With just 2.2 percent of VC funding going to women in 2018, what about the fundraising process do you wish that more women knew going into such a male-dominated space?
AL: I want to see more women get educated about their funding options beyond VC funding, angel investing, and crowdfunding. There’s so much more out there for us, and funding spaces that not enough of us are in. Government-backed business loans, business grants, business lines of credit, government contracts, using collateral to go after low-interest personal loans and home equity lines of credit (which have better interest rates and payback terms than most business loans), we just have so many options and we teach them all in the 100K Incubator app to make sure you not only get access but also get connected to the funding partners that are going to approve you for the capital you need, while we help you scale your business to a minimum of $100,000 in annual sales.
Girlboss: What traits do you think every startup needs in order to be successful at securing funding?
AL: The most successful startups are analytical, numbers-oriented, and confident. It’s not about being a perfect business or the perfect founder. But it is about paying attention to your mistakes, learning fast, and being quick to pivot to where you’re seeing traction and success in your business. Being an entrepreneur is always a turbulent ride, there’s nothing smooth or cute about it. But it’s an incredible experience that will teach you more about people, behavior, needs, and money than most jobs ever would. So whether you become the next Sara Blakely or if your company never makes it past a couple thousand in sales, it’s worth it, and you have to be in it because you’re committed to learning more about yourself and the business world.
Girlboss: If you could go back and give yourself one piece of advice knowing what you know now about the fundraising process, what would it be?
AL: To relax (and to tell your clients to relax too). Whether you raise $10,000 or $1,000,000, what you learn along the way is far more valuable than the headline saying how much you raised. And that while helping women get access to funding is rewarding and an accomplishment in itself, it’s far more exciting helping them use that capital to create real sustainable 6-7 figure businesses that change their lives, their families’ lives, and their futures. The joy is being catalyst and a witness to more women understanding the complete cycle of entrepreneurship, and that getting access to funding is really just the first step.