Opinion Women Who Lead

The COVID-19 Crisis Should Make All Entrepreneurs Think Smart About Funding. Here’s 4 Ways To Do So

Funding

In this Op-Ed, Erin Bury CEO and Co-Founder of Willful, breaks down 4 ways business owners can be smarter about money when looking for capital funding.

As a former tech journalist, I was always covering and embracing the excitement around funding rounds. Funding rounds are a point of celebration in the technology community, and I enthusiastically wrote dozens of funding announcements from companies across Canada during that time.

Now that I have my own company, I recognize that while funding is a milestone to be celebrated, it’s ultimately a reflection of giving up a piece of your company in order to grow. Many startups get excited about the funds, and often go with an investor that isn’t completely aligned. 

Finding The Perfect Match

FundingWhile a new round of financing should be a celebrated step in growing your company, raising funding needs to be with a partner who is completely aligned on value and mission, otherwise your partnership may be more about outcomes than mutual purpose – and when a pandemic or crisis hits, you may just be left in the lurch. 

At Willful, my husband, who is also a Co-Founder, and I initially raised some funding from friends and family to get the company started (including from both of our moms). We then sourced from angel investors and startup accelerators like FounderFuel as we grew. With every cheque we received, we were excited about the growth, but we knew we were giving away a small piece of the company although it was essential in order to help us get to the next level.

After becoming cash-flow positive in September 2019, we set out to raise a seed round that was less about funding the operations and more about strategically investing in key areas like business development, marketing, and growing our team.

Slow and Steady Wins The (Funding) Race 

We didn’t want to raise from just anyone. We had heard the horror stories of companies who got on the VC (venture capital) hamster wheel and had to grow at all costs in order to provide a massive return to investors who were banking on them to be the next Facebook. Entrepreneurs want to scale quickly and raising external funding is often the best way, until it’s not. 

While we were participating in FounderFuel’s summer program in Montreal, we met Tactico. They understood our business, they had experience building a B2C fin-tech in Canada (they’re also investors in Mylo), and most importantly they were a non-traditional VC. We signed a term sheet at the end of February. Then COVID hit Canada.

Expect the Unexpected and Adapt As Your Money Does 

Immediately, we moved to remote work and adjusted to the new climate.

Because they were a non-traditional VC that supplements their own investment through their network of investors, Tactico didn’t have a traditional venture fund sitting there. So we went from having a signed term sheet, to hearing that we might not be able to raise after all because of the COVID-19 pandemic.

While this was all happening, COVID-19 caused many Canadians to think about their emergency plans. Willful was spiking and we saw an influx of demand for online wills – at its peak we experienced a 600% increase in sales.

Tactico learned about the influx in demand and used that to go back out to investors, telling a story of a company that could thrive through a crisis. The pendulum then swung the other way, and our seed round went from being on the brink of collapsing to being oversubscribed in a matter of weeks. Due to the increase in revenue, we decided to partially fund through revenue and raise a smaller amount, knowing we didn’t necessarily have to give up as much equity as planned.

We closed our official seed round in May, and had more demand than we could manage.

Funding
Funding

The Moral Of the Story 

While I still get excited every time a founder raises a round of funding, I’ve learned through raising in a pandemic that many startups often miss the importance of triple-checking why you’re raising funding in the first place and who you’re raising that funding from.

Every entrepreneur, including me, needs to thoughtfully guard their equity and understand the power of revenue over glorified growth. If it’s necessary to raise funding, all technology founders should look for investors – whether angels, strategic investors, or venture capitalists – who are aligned with the mission. Then, when a crisis or pandemic hits, it’s a collaborative effort to repair and refocus – and sometimes, you just might come out on the other end with a better deal.