Then I had to fire a really senior executive. And though it had no linear relationship to taking investment, it was a pretty gnarly experience that drove home the fact that if I was going to be a CEO (which I already was) and run a really big, fast-growing company (which I already was), I was going to have to do some stuff I didn’t like. I grew some balls and finally decided to answer some of those calls. I headed up to Silicon Valley to meet with investors.
In San Francisco I picked up my friend Diego, a fellow entrepreneur and one of the smartest people I know. He’d already been through the process of raising venture capital, so we powwowed in the car as I picked his brain. It was my crash course and I needed it: I was in and out of six meetings that day, all with different firms.
This time around I knew that I had nothing to lose: Nasty Gal was kicking ass, profitable, and had money in the bank. Either way, we were going to be fine. While most entrepreneurs meet investors with a presentation on what they plan to do with their business, I, being my PowerPoint–challenged self, arrived empty-handed. It turned out that Nasty Gal’s strongest selling point wasn’t what we were going to do, but what we’d already done.
“We’re going to do one hundred million dollars this year.”
“No, I’ve never borrowed a dime.”
“No, I didn’t go to college.”
“No, I don’t have previous experience running a business.”
I got pretty accustomed to saying all of those things, and as I knocked down meeting after meeting, something pretty shocking dawned on me: Holy shit, these people are impressed.
Sand Hill Road is the legendary venture capital hub in Menlo Park between Stanford University and Silicon Valley. The people who sit in those offices operate in a very different paradigm than I do, spending their days talking business models and IPOs in a way that I never will. It was strangely encouraging for me to come out of nowhere with instant respect from people I felt were an entirely different species. Some of them wanted to be friends and others tried to appeal to my edgy side (and FYI, “edgy” ranks right up there with “twerk,” “yummy,” and “ridonkulous” on my list of least favorite words). One investor left me a strange late-night voice mail and then apologized for it on the phone the next day. “Sorry about that,” he said. “I was all messed up on Percocet and Jack Daniels.” I’d be freaked out if a friend said something like that, so needless to say, I did not go with that firm.
It seemed most of the venture capitalists I met with had recently and unanimously “discovered” that women liked to buy things online. They were super-stoked on the idea of a female-run business that sold things to women. I happened to check a lot of the boxes that they were excited about at the time, but they had no idea why Nasty Gal was special. It was obvious to me that their ideas weren’t their own. One person asked to call my former COO, Frank, to talk about the business. I said sure, and gave him Frank’s number. I later found out that he asked if I had a “spending problem.” When I heard this, I thought to myself, Dude: I built a multimillion-dollar business out of $50 and no debt—does it look like I have a spending problem?
The only person I liked was Danny Rimer. Danny’s company, Index Ventures, was based in Europe and had just opened their U.S. office far from Silicon Valley, in San Francisco’s SoMa neighborhood, where the start-ups were. Danny had also already been investing in great fashion companies since before the other guys knew what fashion was—like ASOS and Net-a-Porter—so I knew that he was interested in Nasty Gal because he truly got us, not because we were the hot ticket. Danny had a brand—and I get brands. Index has chosen to surround itself with the best entrepreneurs and the best companies. I realized that, just as all department stores are not created equal, all investors are not created equal. Danny was my flagship Barneys.
After our first meeting, Danny called me and said, “You have a community. I get it.” And I knew it was a match made in heaven. He also seemed to inherently understand the challenges we were facing. At this point in time, we still didn’t have a head of finance, so we couldn’t answer half of the questions other firms were asking us. Danny recognized this. He didn’t ask us to go through due diligence (a term for digging through the company’s receipts and financials). Realizing that I’d never used PowerPoint, Danny also had an associate from his team put together an investment deck for me to present to the partnership. When it came time to negotiate, it was like haggling at the flea market. He said, “I would like to buy X percentage of the company for X amount of dollars,” and I said, “No, X percentage for Y dollars.” And then we were done. It was a small investment—$9 million is not a small sum, I know—but it is atypical for a company of Nasty Gal’s size. Yet I was new at this and Danny knew it. Instead, he leaned in and suggested we shake hands on doing something small now with the goal of doing another, bigger investment if we both still liked each other in six months.
Had I not found Danny, I probably wouldn’t have taken investment. But his contrarian way of thinking, as well as his instant understanding of what I was building, made me love him. Index passes on investments that a lot of these guys drool over. I liked that. For Index, investing in a business is not just a mercenary transaction. Index wants to be involved and they want you to be exciting. They’ve passed on good financial investments because they simply didn’t like the entrepreneur. And I respect them for that.
What I really learned from this entire experience is that people want to invest in businesses that don’t need money, and that your ability to execute has to be just as strong if not stronger, than your idea. And, just like how I want to buy that item behind the counter at the vintage store that isn’t for sale, venture capitalists want to invest in businesses that also “aren’t for sale.” Human nature tells us to want what we can’t have. A desperate business is not a good look, and most investors won’t touch that with a ten-foot pole.
Even if you have no plans to ever find yourself sitting across from a venture capitalist with a pitch in your hand, getting this far in #GIRLBOSS training should have taught you to rule nothing out. Perhaps someday you will have a business that’s the next big thing (I hope you do!), so it doesn’t hurt to be prepared. Here are a few tips for sparring with investors that you can also apply to other areas of your life.
Turn-ons:
Good people: This is the number one thing that distinguishes one start-up from another. Investors, like employers, look for people who are excited about what they’re doing and have the integrity to keep their promises. They also want to see that you have a smart, creative team with diverse experience. The concept of “good people” should apply to every part of life. Surround yourself with people who are engaged, honest, and confident enough on their own quest to support you on yours. There is no time for losers.
Scalability: Ultimately, the market, technology, fashion—whatever it is that is at the core of your business—is going to change, so investors as well as employers need to know you’ll be able to change with it. Or even better: Stay ahead of it. Most investors are looking to make a return of at least five to ten times what they invest, so you have to demonstrate that your company can achieve that growth.
Evidence of demand: Have something that a lot of people are going to want. By the time I was talking to Index, we already had hundreds of thousands of rowdy Nasty Gals the world over, so it was very easy for us to prove that there was a more than viable market for our brand. When you’re applying for jobs, it’s best to be employed while doing it. You want the world to know that you’re not lollygagging between gigs, but instead have a lot of choices in front of you and are actively charting your own path.