VC Minute – quick advice to help startup founders fundraise better
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Curt Nichols:
I was able to grow the business to, I think, about half a million dollars in revenue, really just using credit card debt. It became clear over time that the funding strategy was not a long-term solution. I had grown to be sort of a known commodity within the ski category, enough to be on the radar of angel investors, institutional investors, and other people within the category who are familiar with investing in outdoor products.
I start poking around a little bit to sort of figure out the landscape. What was really important to me at the time was the fact that we were profitable, so I could continue growing the business of the clip I was, but it was going to take me a really long time to get to where I wanted to go.
I wanted to make sure that in any fundraising activity I was doing, I was aligning my capital strategy with my growth strategy. What I mean by that is the fact that because we are a highly seasonal business in the ski category, we’re selling a consumer good, so there can’t really be an expectation of venture-scale returns.
I wanted to make sure that in any fundraising activity I was doing, I was aligning my capital strategy with my growth strategy. What I mean by that is the fact that because we are a highly seasonal business in the ski category, we’re selling a consumer good, so there can’t really be an expectation of venture-scale returns.
If I ever wanted to have a meaningful exit for myself personally, I wanted to make sure that I didn’t need to grow the brand to $100 million or $200 million in dollars for that to happen. What that meant was that I needed to go look for non-dilutive financing.
For most consumer brands, that takes the form of some highly predatory debt. There are lots of e-commerce lenders out there, and when you do the math on them, it’s a raw deal, to put it bluntly.
I poked around a lot of those lenders, and there are places like Shopify Capital, ClearBank, and WayFlyer that certainly have helped propel a lot of consumer brands, but my concern there was just how expensive that debt was.
The inflection point for Glade and for me was a pitch competition that was put on by the Greater Colorado Venture Fund here locally in Colorado.
Prior to this, I had never thought that a venture fund like GCVF would be someone that I would ever partner with because of that capital strategy and growth strategy misalignment that was in my head.
My assumption was that if I entered this pitch competition, at the very least, I would get in front of a lot of really smart startup founders and a lot of really smart investors here in Colorado. I can expand my network. Maybe I’ll get a few customers out of this as well.
And after going through the whole process, I made it to the final list of five people. And I did the whole finalist thing. We got on Zoom, and it was pushed out to the larger startup. Community here in Colorado, which was a really strong experience.
That said, when the announcement came to say who won and how much investment they won, we were not investable from a venture capital standpoint, so we did not win the pitch competition.
But Jamie and Mark met up with me and said, “We’re interested. We think you are sharp. We think that the business has legs. We want to try something with you.” And that was what ended up becoming the Indie VC-style revenue-based investment model that I went forward with them.
At the time, this was very new to them. It was new to me. I was slightly familiar with Indie VC. I was lightly familiar with the revenue-based investment. It took a lot of education, to be frank. Jamie had to walk me through a lot of the deal terms and help me be clear on what I was actually getting and what I was expected to return.
But it was really a win-win for both of us. If you do the math, we ended up growing so fast that I think they got a phenomenal return on their investment here. But what was great for me at the time, and looking back on it, I still would have made this decision, was the fact that it really capped my downside.
We’re selling ski goggles and helmets. It’s a highly variable, highly seasonal business. There are times in the summer when our revenue is just really low. For a traditional term loan, that’s really hard on cash flow.
And as I mentioned before, there is an emotional element to taking on debt in a business. That’s very direct and consumer-based.
The other element that I really liked about this investment was the fact that I was able to take on non-dilutive funding, but I was able to add Mark, Jamie, and Corey to my cap table. They were all of a sudden vested partners in the success of Glade for as long as we were paying back the equity portion of this. This meant that I got access to them, I got access to their network, I got access to their portfolio founders, and I was involved in all of their founder retreats.
They really added a great sounding board and layer of sophistication to our business that, if I had taken capital from Shopify Capital, that’s not a thing that I would have had access to.
About Glade Optics
Glade Optics designs premium ski goggles, helmets, and sunglasses from their headquarters in Breckenridge, Colorado. Winner of Ski Magazine’s Goggle of the Year, Freeskier’s Editor’s Choice Award, and Blister’s “Best of” Award, Glade’s equipment is designed with the best materials and construction available—at an unbeatable price point. See what all the hype is about at shopglade.com.
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