For startups, securing venture capital is often seen as a big win, setting them up for the next growth phase and offering validation for the business model. We don’t often hear, however, about the journey they take to get there, or the emotional connections founder forge with their backers.
At Pause Fest in Melbourne today, a founder and one of her investors opened up about that very experience, offering a glimpse into one of the roughest times in the startup journey.
Olympia Yarger is founder and chief executive of Goterra, a startup using technology and an insect farm to decentralise management of organic waste and turn it into livestock feed.
Last year, Yarger secured seed funding, of an undisclosed amount, from investors including Giant Leap Fund.
Get business news first
Sign up to SmartCompany’s daily newsletter
Speaking at Pause Fest, Yarger said she decided to raise VC capital to help get the business to a point where it could generate enough revenue to start scaling. However, it was also because “I was getting out of my depth”.
She’s a “creative thinker” with a background spanning both agriculture and marketing.
“I’m not a scientist and I’m not an engineer,” she said.
And, as the sole founder, “I was knocking against the boundaries of my own capabilities”, she added.
Crisis of confidence
Once Yarger started trying to raise, she admits “I failed a lot”.
When there are a lot of aspects to a business — in her case live insects, hardware, software, agriculture and waste disposal — “it gets difficult to understand what your story is”.
She describes one pitch as the “worst performance of my life”, and after this, she started suffering from stage fright for the first time in her life.
“It challenges your confidence,” she says.
“What finally got us across the line was the first meaningful engagement with an investor who … just wanted to unpack the story.”
That investor was Jeremy Kwong-Law of Grok Ventures, the VC fund of Atlassian co-founder Mike Cannon-Brookes.
“He just wanted to talk,” she says.
He helped her get the story of the startup down, and “that process gave me all the confidence”, Yarger says.
“By the time I was done, I didn’t have any questions about who I was as a company.”
Kwong-Law acted as a champion for Goterra, helping Yarger better understand her own story, and spreading the word.
Also speaking at Pause Fest, Will Richardson, head of venture capital at Impact Investment Group, which manages Giant Leap Fund, said he was never approached by Yarger directly.
Rather, several people came to him to tell him about what she was doing.
Richardson admits he was wary at first.
“Insect deals often don’t work commercially,” he said.
“But all these people we trusted kept pestering us, saying ‘you need to look at this’.”
And when she eventually pitched Goterra to Giant Leap, one thing in particular stood out to him.
“We see 600 deals a year. This was the first time someone had asked for feedback at the end of a pitch,” he said.
“One of the things we look for in founders is that insatiable curiosity, a desire to understand and constantly learn and grow, and a willingness to hear and integrate constructive feedback,” Richardson said.
“No one has all the answers. It’s so critical to surround yourself with smart people who are going to tell you the truth,” he added.
“I could not find an answer”
Suddenly, Yarger found her raise unexpectedly oversubscribed, and was trying to whittle down her prospective investors.
While still spending 10 hours a day farming and working on the startup, “I didn’t have time to deal with it all”, she said.
All the investors were a good fit, and she got to a point where she was “desperate for a reason for somebody not to be”.
Finally, Giant Leap Fund discovered a minor conflict of interest, whereby a member of the Impact Investment Group had invested personally in an insect farm.
This was the reason Yarger had been looking for.
“I was quite firm, I said ‘no thanks, I’m done’,” she said.
Until she got a phone call from Richardson, trying to understand what had happened.
“This felt like it was out of sync,” Richardson said.
“It was all well and good if you wanted to walk away for some other reason, but I would not let you walk away challenging our integrity,” he added.
Then he laid his cards on the table.
“Every VC will tell you they can deliver the world for you,” he recalled telling Yarger.
“That’s in the good times. It’s about the hard times, and who’s going to be there with you in the hard times.
“When you’re there struggling as a solo founder and you’re looking into the void, I will be there for you.”
And Yarger promptly hung up on him.
Yarger explained, from her point of view, she felt under pressure to either accept an oversubscribed round, losing more equity than she had hoped, or to choose one investor over another.
“I could not find an answer,” she said.
But Richardson’s speech helped show her someone believed in Goterra, and wasn’t afraid to fight to secure a partnership.
She called him back, “ugly crying”, she said, something he calmly informed her wasn’t all that unusual. Of course, she ended up accepting Giant Leap’s offer, after all.
For Yarger, it was emotional, but this experience changed her perception of the fundraising process, and of the VCs.
When she started the process, going to VCs was “like going to visit a shrine”, she said.
“We go, we pay our homage, I dance the dance … and they give me the sign. But they’re human, and that was really revealing to me.”
After the conversation with Richardson, she knew her backers were emotionally invested too, which was what she wanted.
There would be a point she would have to go to them with bad news, Yarger said.
“Now I have an investor I can go and cry to, and that’s so powerful,” she added.