Speaking at Internet Week in New York (IWNY) on Tuesday, Mona Bijoor shared her experiences and tips in getting venture capital funding for her …
Speaking at Internet Week in New York (IWNY) on Tuesday, Mona Bijoor shared her experiences and tips in getting venture capital funding for her start up JOOR, a B2B online marketplace for wholesale fashion buying used by retailers and brands like Neiman Marcus and 3.1 Phillip Lim.
Fashion tech start-ups are a hot commodity at the moment with sites such as The RealReal and Poshmark securing $40 million and $25 million respectively in the last month alone. There’s never been a better time for entrepreneurs in the fashion tech space yet judging by the packed audience at JOOR founder Mona Bijoor’s speaking event this Internet Week, not everyone knows where to get started on the funding runway.
Bijoor who founded JOOR in 2010 has worked within buying departments at some of the world’s top retailers and consulted for brands such as Chanel and Elie Tahari. She saw first hand the enormous challenges faced by the industry when it came to the overall wholesale process and created JOOR to solve one of the industry’s biggest pain points. Since then she has raised three rounds of financing which include $2.5 milllion in 2011, $3.75 million in 2012 and $15 million just last year which she says is still sitting in the bank.
Read on to see why Bijoor still has that $15 million in the bank and other tips on how to court funding.
1. First of all why should you even want VC funding?
According to Bijoor venture capital funding is currently ‘cheap’, meaning there’s a lot of it to go around right now in the fashion tech space but most importantly VC firms bring knowledge, connections and industry expertise. VC investment also gets you industry attention and lets you grow: “We wanted to accelerate growth, but we grew faster than initially projected. The first reason I raised the money was to get credibility because we serve big retailers and the number two reason was that I wanted to hire the best talent possible so I needed the capital.”
2. When should you seek funding?
When it came to seeking out financing, Bijoor who thus far has completed three rounds said of the process: “I didn’t want to raise outside funds until I knew I could show revenue numbers on it and that it could be monetized. I first wanted to show that it’s a huge untapped market and that I had a story to tell.” In terms of the time that elapsed between each round of funding, Bijoor advised that the industry standard is typically 18 months and is a good benchmark to go by. “We had enough money in the bank in the first and second round to keep going but we raised when we were at the next inflection point. The metrics are the driver.”
3. But what is an inflection point?
An inflection point for a company is measured by an increase in the revenue or usage metrics, which can be spurred by a number of contributing factors. Bijoor explained to the packed IWNY audience that this is when you can actually see on a graph that change happening: “It’s what gets a business turned up, it’s when your growth gets geometric and not just numerical.”
She also advised that you want to try and source financing right before this point as for when that is she said: “It’s in your gut, you have to decide what are the different dynamics in your space that are going to make it go off. We’ve had several, the most recent was that we just signed one of the industry’s biggest retailers and they’re rolling out the platform to all their buyers. We also just pulled onboard another 4 major retailers.”
4. What are VCs looking for?
An important point made by Bijoor about venture capital funding was that it’s very sexy right now, especially if it’s in the tech space however she warned there’s an art to courting it. A number of things that VCs want to see in your pitch are product market fit, customers, revenue or usage metrics leaning towards an inflection point and who the target audience is. They also like it when a start up business already has a proven model: “JOOR was self-funded for a year, so they knew we could make money.” They also like to invest in trends like ‘women in tech’ or ‘on demand’, so it’s good to know what those are and align yourself if it’s the right fit, then to go after those VCs already investing in the space.
5. How to close the deal
Once you’ve found the right partner its important to close the deal, according to Bijoor this is much like the back and forth of dating. “You can’t come off as too desperate but can establish a sense of urgency by using things like competition to push the deal through with reasoning for instance like, if you don’t invest then someone else will.”
She also warned that VCs might not like your team, which is something they can poke holes in to bring down the value of your company. Something they might say is that since you don’t have a COO they don’t see your company scaling. Bijoor advises: “You should focus on product market fit, you can always hire the best team with that capital in 3-6 months so that shouldn’t deter your investors. VCs are looking to realize a return that’s 7-10x what they invested, my job is to build value in our business so that we’re-valued at that much money, the best way to do that is to be profitable.”
6. Once you’ve got funding where should your money go?
First up Bijoor warned her audience on where their money shouldn’t go, naming perks like happy hours and swanky offices (ping pong tables come under that remit) as wasteful. “People feel more rewarded when they’re given more responsibility and more money and by having a culture that doesn’t keep them late in the office.” On the flip side of that she advised that strategic vetted hires are important as well as having an emergency fund, which is the reason why that $15 million is still in the bank. She also recommends investing in features that perhaps your competitor already has and customers are demanding.
7. Tips on early stages hiring
In the early stages as Bijoor was doing her first hires some of the things she looked for included: “Hustlers that would pound the pavement and who were resilient, assertive, willing to do everything it takes and who had sheer will. Now I just look for people that are really smart but humble, very focused on forward movement and change.” Bijoor also recommends seeking legal advice when it comes to salaries but that you should be looking for employees interested in equity:
“Salary is short term, equity is when you’re in it for the long haul. You have to layout to your employees whether they’re optimizing for salary or equity and that’s what I’m looking for in people, when you give them that choice you always want them to choose equity. Obviously earlier employees should get more equity as there’s more risk for them.”